Research Handbooks in Business and Management series
Edited by V. Kumar and Denish Shah
Chapter 1: Drivers of customer equity
The ‘service revolution’ has shifted the core of exchange between firms and customers from products to the provision of service (Vargo and Lusch, 2004). Long-term one-to-one customer relationships have come to the fore while customer transactions, the hallmark of a product economy, are being increasingly de-emphasized (Peppers and Rogers, 1993). While firms can’t ignore the need for attracting new customers, the retention of existing customers has become more crucial to long-term profitability. Innovations in information technology further accelerate such structural changes in the economy as true interactivity between firms and customers, customer specific personalization, and real-time adjustments to a firm’s offerings are becoming reality (Rust and Lemon, 2001). Such trends that define today’s economy necessitate the fundamental rethinking of business and strategy around the customer.