Question 1:

Explain the three components of customer equity.

Answer-The customer equity of a firm is defined as the present value of the

total revenues that the customer base of the firm will generate in its lifetime. A
company with higher equity is valued higher than the one with lower equity.
Customer equity is inherently long-term oriented. It should be thought of as an
asset, and this asset can go up and down in value based on how current actions
affect customer attitudes. The greater the customer equity (CE), the more
future revenue in the lifetime of its clients.

Three drivers to customer equity are as below:

1. Value Equity: This measures how the customer perceives the firm in terms of
the product the quality, price and convenience. This is parallel to the concept of
“value for money” .In short it can be said what the customer assesses the value
of the product or service provided by the company to be.
2. Brand Equity: This measures how the customer feels about the firm. This
includes brand awareness, brand recall and the emotional connect of a
customer with the firm. In other words it can be summarized as - What the
customer assesses the value of the brand is, above its objective value;
3. Retention Equity: This measures the tendency of a customer to be loyal to the
brand. This can be measured by the loyalty programs, its reputation etc. It is the
tendency of the customer to stick with the brand even when it is priced higher
than an otherwise equal product.
Question 2:
Explain the product life cycle with an example.

Answer-The Product Life Cycle is an important concept in marketing. It

describes the stages a product goes through from when it was first thought of
until it finally is removed from the market. Not all products reach this final
stage. Some continue to grow and others rise and fall.

There are the following four major product life cycle stages:

1. Market introduction stage:

This is the stage in which the product has been introduced first time in the
market and the sales of the product starts to grow slowly and gradually and the
profit received from the product is nominal and non-attained. The market for
the product is not competitive initially and also the company spends initially on
the advertisement and uses various other tools for promotion in order to
motivate and produce awareness among the consumers, therefore generating
discerning demands for particular brand.

2. Growth stage:
In the growth stage, the product is visibly present in the market, the product
has habitual consumers, and there is quick growth in product sales. More new
customers are becoming aware of the product and trying it. The customers are
becoming satisfied with the product and are buying it again and again. The ratio
of the product repetition for the trial procurement has risen. Competitors have
started to overflow the market with more appealing and attractive inventions.
This helps in creating increased competition in the market and also results in
decreasing the product price.

3. Maturity stage:
In maturity stage, the cost of the product has been decreased because of the
increased volume of the product and the product started to experience the
curve effects. Also, more and more competitors have seen to be leaving the
market. In this way very few buyers have been left for the product and this
results in less sales of the product. The decline of the product and cost of
attaining new buyers in this level is more as compare to the resulted profit. The
brand or the product differentiation via rebating and discounts in price supports
in recalling the outlet distribution.
4. Saturation and decline stage:
In this stage, the profit as well as the sales of the product has started to decline
because of the deletion of the product from the market. The market for the
product in this stage started to show negative rate of growth and corroding
cash flows.

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Assignment Submitted By:-

Sourav
Reg No - 18125740149