What all needs to be considered while determining customer equity test?

Question

Quizplus · Accepted Answer

All of the options given (A, B, and C) are critical considerations in determining customer equity. To calculate customer equity, companies must factor in each customer's expected contribution to offset the company's fixed costs over their expected lifetime. Additionally, expected contributions to net present value must be discounted, and all of the discounted expected contributions across all of the company's current customers must be added together. Therefore, all options given are necessary for an accurate and comprehensive customer equity test. In order to estimate this amount, a firm needs to first measure each customer's expected contribution to offsetting the company's fixed costs over their expected lifetime. Then, expected contributions to net present value are discounted at the rate set by the company as its target rate of return for any marketing investments, and finally the company adds together all of the discounted expected contributions across all of the company's current customers.

What All Needs to Be Considered While Determining Customer Equity