Impact of Brand Equity on Customer Acquisition, Retention, and Profit Margin

Journal of Marketing, Vol. 76, No. 4, pp. 44-63

Posted: 12 Oct 2012

See all articles by Florian Stahl

Florian Stahl

Mannheim Business School

Mark Heitmann

University of Hamburg

Donald R. Lehmann

Columbia Business School - Marketing

Scott Neslin

Dartmouth College - Tuck School of Business

Date Written: October 11, 2012

Abstract

The authors investigate the relationships between brand equity and customer acquisition, retention, and profit margin, the key components of customer lifetime value (CLV). They examine a unique database from the U.S. automobile market that combines ten years of acquisition rate, retention rate, and customer profitability data with measures of brand equity from Young & Rubicam’s Brand Asset Valuator (BAV) over the same period. They hypothesize and find that BAV brand equity is significantly associated with the components of CLV in expected and meaningful ways. For example, customer knowledge of a brand has an especially strong positive relationship with all three components of CLV. Notably, however, differentiation is a double-edged sword. While it is associated with higher customer profitability, it is also associated with lower acquisition and retention rates. The authors also find that marketing efforts exert indirect impacts on CLV through brand equity. Simulations show that changes in marketing, or exogenous changes in brand equity, can exert important effects on CLV. Overall, the findings suggest that the “soft” and “hard” sides of marketing need to be managed in a coordinated way. The authors conclude with a discussion of these and other implications for researchers and practitioners.

Keywords: brand equity, marketing mix, return on marketing, marketing strategy, customer lifetime value

Suggested Citation

Stahl, Florian and Heitmann, Mark and Lehmann, Donald R. and Neslin, Scott, Impact of Brand Equity on Customer Acquisition, Retention, and Profit Margin (October 11, 2012). Journal of Marketing, Vol. 76, No. 4, pp. 44-63, Available at SSRN: https://ssrn.com/abstract=2160316

Florian Stahl (Contact Author)

Mannheim Business School ( email )

L 5, 2
Mannheim, 68131
Germany
+496211811563 (Phone)

HOME PAGE: http://quantmarketing.bwl.uni-mannheim.de/

Mark Heitmann

University of Hamburg ( email )

Allende-Platz 1
Hamburg, 20146
Germany

Donald R. Lehmann

Columbia Business School - Marketing ( email )

New York, NY 10027
United States

Scott Neslin

Dartmouth College - Tuck School of Business ( email )

Hanover, NH 03755
United States

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