Measuring Customer Equity in Noncontractual Settings Using a Diffusion Model: An Empirical Study of Mobile Payments

Abstract

Customers are important intangible assets of firms. Customer equity (CE) and customer equity sustainability ratio (CESR) cannot only provide a crucial basis for measuring the growth potential of firms but also provide managers a reference standard to allocate the marketing resource. This empirical study discussed the CE measurement of a mobile payments aggregator. With the rapid development of mobile payment in China, it is very meaningful to calculate the CE of these aggregators as an emerging business pattern because calculating CE cannot only help the mobile payments aggregator evaluate its future business development but also help it to provide value-added services and generate service fee from its clients, i.e., the retailers. The main purpose of this paper is to calculate CE of a mobile payments aggregator generated from a specific retailer from the perspective of technology diffusion. Based on the Bass model and Rogers’ theory of innovation diffusion, we calculated CE and CESR for five segments, namely innovators, early adopters, early majorities, late majorities, and laggards. The results show that it is the early adopters and the early majorities who generate most of the profit and it is also these two segments that have the greatest growth potential in the future.