The story of Cadillac and BMW with customer equity

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The story of customer equity between BMW and Cadillac
BMW hasn’t got a good market share like Cadillac but, BMW Focuses on customer equity and the lifetime value of its target audience

Once upon a time in the 1970s and 1980s Cadillac had the most loyal customer in the automotive industry within the United States, Cadillac was the definition of American luxury.

In 1976 Cadillac reached a 51% share of the luxury car market (definitely awesome) but actually there was a huge problem that Cadillac didn’t notice, the problem is that average customer lifetime value was failing and Cadillac customers were getting older (average age 60), although Cadillac’s market share was brilliant, it’s customer equity was not.

What?! Customer equity? What is this word?  And what is the difference between customer equity and market share?

Customer equity: the total customer lifetime values of all customers (current or potential)

In a simple way the more loyal the company’s profitable customers, the higher its customer equity.

Market share: the comparison between total sales of specific company in a specific time period and the industry total sales.

So, from the two definitions the conclusion is Cadillac is giving more and more focus for market share without giving any focus for the customer equity and the lifetime value for its customers.

Compare what Cadillac did with what BMW did, we will figure out that:

In the 1970s and 1980s BMW hasn’t got a good market share like Cadillac but, BMW Focuses on customer equity and the lifetime value of its target audience so, BMW target segmentation was young people (younger than Cadillac clients).

BMW starts to invent a youthful car design more than Cadillac’s design, they also start to build a youthful image for BMW as a youth brand, they also make a marketing message for the youth and young people and the result is higher customer lifetime values so, in the years that followed the 70s and 80s BMW’s market share increases.

That’s remind us how Facebook was so serious in trying to buy a Snapchat for $3 Billion in cash to stop bleeding from the declining engagement among its teenage users. (Especially less than 13 years)

In November 2014, Business insider magazine has uploaded a video named “We asked kids what they think about Facebook, and Mark Zuckerberg should be worried”, you can see the video from this link.

Conclusion:

As a brand focus on customer equity and lifetime values the same as market share to make your target audience smaller so your brand will have more loyal customers lifetime.

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