Drivers of customer equity in the South African truck rental industry

Abstract

ABSTRACT The corporate truck industry in South Africa has been plagued with price-cut pressures, little discernable differences between competitors (competitive parity) and stagnation as the industry matures. Managers need to find sustainable ways of growing market share under such challenging circumstances. Customer equity is a concept initially coined by Blattberg and Deighton (1996) as the complete sum of a firms combined customer lifetime values. The essence of the concept describes a worldwide shift from a product-centric focus on brand equity and/or products toward a more customer-centric focus on customer equity. This study is not concerned with the numeric calculations surrounding customer equity, but rather on the key drivers and sub-drivers that can be levered in order to boost the value of this intangible asset. The aim of this study therefore is to test which drivers and sub-drivers of customer equity were dominant in the B2B truck rental industry in South Africa, by applying the so-called driver model as proposed by Rust et al (2000). Through delivering insights on the varying dominance of each driver and sub-driver, truck rental managers can better allocate their financial and human resources toward greater efficiencies, thus potentially creating a degree of competitive advantage that can aid in unlocking shareholder value under saturated market conditions. The quantitative study achieved a total of 86 respondents through distributing a web-based survey to current customers in the industry, the results of which were analysed using simple descriptive statistics applications. The findings suggest that relationship equity has the greatest effect on overall customer equity with a mean score of 6.77, whilst value equity as a driver delivers substantial impact with a score of 6.28 and brand equity carrying the least weight with a mean score of 3.96.The findings deliver a useful toolbox that educates truck rental managers on what drives a customer’s purchase decision and influences their loyalty and retention probability. The study examines the sequence of drivers to be met by relating the concept to Maslow’s idea of ‘hierarchy of pre-potency’ introduced in 1987, and suggests this relationship be further explored in future research efforts.