Customer-Based Corporate Valuation : Integrating the Concepts of Customer Equity and Shareholder Value

Bauer, Hans H. ; Hammerschmidt, Maik

Document Type: Article
Year of publication: 2005
The title of a journal, publication series: Management Decision
Volume: 43
Issue number: 3
Page range: 331-348
Place of publication: Bradford
Publishing house: Emerald
ISSN: 0025-1747
Publication language: English
Institution: Business School > ABWL u. Marketing II (Bauer 1993-, Em)
Subject: 330 Economics
Subject headings (SWD): Marketing , Shareholder-Value-Analyse , Unternehmensbewertung
Abstract: Purpose Synthesis of the customer lifetime value and the shareholder value approach in order to develop an integrated, marketing-based method for corporate valuation. Design/methodology/approach|Discussing the limitations and assumptions of existing methods to estimate customer value components. Examining the limitations of the shareholder value concept. By linking the customer equity and the shareholder value approach we develop a formal model to calculate corporate value. The Discounted Cash Flow (DCF) method is used for modelling the profit streams. Findings Provides formulas for the estimation of both the individual lifetime value of a customer and customer equity. Provides a comprehensive model to estimate corporate value based on customer-related cash flows and traditional financial metrics. Introduces typical cases, in which the use of a customer-based valuation seems beneficial. Illustrates how our approach can be applied by using a simple case study on M & A in the telecommunication industry. Gives suggestions on how to obtain the necessary data, partially even from publicly available sources. Research limitations/implications Advancement of the quantitative techniques for modelling the customer value components would allow for relaxing some restrictive assumptions. The explicit modelling of the future growth of the customer base (the acquisition rate) would increase the applicability of the model. Additionally, taking into account heterogeneity within the customer cohorts is a task for future research. Finally, our model needs to be applied more extensively using real data for the input variables. Practical implications: A customer based valuation approach can guide marketing investments and helps to avoid misallocation of resources. Based on an example in the field of M & A we demonstrate the usefulness of the approach for obtaining a realistic indicator of firm value. It helps to assess whether an acquisition is economically sensible.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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