Essays on customer equity and product marketing

This dissertation aims to expanding the customer equity (CE) framework to the product-marketing (PM) domain. While the CE concept guides managers to build strong and profitable relationships between the customer and the firm, managers in many industries still use product-based metrics such as sales volume as barometers of business performance. My work fills this gap by developing and testing quantitative models that can infer the impact of marketing efforts on CE, especially in the PM industries such as consumer durables and frequently purchased consumer goods (FPCG).; Three essays will be presented in the dissertation. In the first essay, the impact of marketing-mix efforts on CE is investigated by the dynamic relationship between marketing actions and acquisition/retention rate, two core elements of CE. A vector autoregressive (VAR) model is developed to disentangle the short- and long-run effect of marketing on CE. The model is applied to the automobile industry, where I show that companies' marketing efforts do not necessarily enhance CE, even if they are sales effective.; In the second essay, I apply the CE framework to FPCG industries. By equating values from customers and those from product sales, acquisition/retention rates are obtained. The proposed model is applied to the ketchup and yogurt categories using scanner panel data. The empirical illustration shows that price promotions rarely have favorable effects on CE even though they are sales effective. In addition, the firm's CE is affected by not only marketing actions but also spontaneous interactions among customers such as word-of-mouth.; The dynamic nature of impulse responses is investigated in the third essay. Dynamic impulse response functions (DIRF) based on a varying parameter VAR model are developed, and maximum likelihood estimation based on state space model specification and the Kalman filter recursions is proposed. The model is tested using an empirical illustration in the yogurt category. The results show that DIRF can be used to investigate over-time changes in the impact of one variable on a multi-variate system. For instance, sales responses of Nordica, a newly introduced brand to the shock of own price decrease over time.