Hospital industry in Indonesia has been progressing along with the issuance of various regulations and laws aimed at encouraging investment and creating better conditions for business and services of the hospital. The increase in investing hospital business and community demand on better healthcare has accelerated hospital development in Indonesia.
Dynamic environment change at both local and global levels has led to shifting paradigm in managing hospitals either public or private hospital. Hospital management is required to understand the needs and desires of consumers at which patients are positioned as a strategy in retaining hospital's customers. Competition among hospitals in attracting consumers is no longer limited to functional attributes of products services rendered, but rather it is related to a brand or an image of customer health service. Brand equity can create value for the company and customers. Value is the key of the relationship between the consumer and company. Value Equity is defined as the objective assessment based on the perceptions of what is received by consumers. The value formed on consumers will affect the level of customer retention associated with the profitability of the customer lifetime value (Aaker, 1991).
Customer Lifetime Value (CLV) was defined about forty years ago as the value obtained at the time from future profits during the trade with the customer (Kotler, 1993). CLV has an important role in performance measurement or customer assessment, the determination of target, customer retention management and segmentation (Rust et al., 2004; Haenlein et al., 2006; Benoit and Van Den Poel, 2009). However, the development of customer lifetime value used to understand the value of retaining customers has not been widely explored. On the other hand, the retaining value of consumers as an asset of the service provider is varied for each industry. This study aims to determine the comparison of the development model of Customer Lifetime Value (CLV) in public and private hospitals in Makassar, South Sulawesi, Indonesia.
Customer Lifetime Value
The concept of Customer Lifetime Value (CLV) was first introduced by Blattberg and Deighton (1996) in the Harvard Business Review and since that time the concept was becoming popular. Customer lifetime value has different definitions. Gupta and Lehmann (2003) in their research defined CLV as the present value of all future profits generated from a customer. Pfeifer et al. (2004) defined customer lifetime value as the difference of income and costs incurred at the time of the occurrence of the relationship process with the customer during a certain period of time. CLV is the net profit or loss of the company for all transactions that take place between the customer and company (Jain and Singh, 2002). In some studies, CLV has a different term such as Life Time Value (LTV) (Kim et al., 2006), the customer equity and customer profitability (Jain and Singh, 2002).
Gupta et al. (2006) in Gookeh and Tarokh (2013) stated that there are several reasons the development of CLV research methods in a variety sectors, such as marketing accountability, the inefficiency of matrix finance and the improvement of information technology that allows companies to collect a customer's information.
Brand Equity is a concept that emerged in the 1980s. The American Marketing Association defines a brand as "a name, term, sign, symbol, or design, or a combination all of them, which aims to identify the goods or services of one or group of sellers and differentiate from competitors". Brand equity is the added value on products and services. Brand equity is also defined as a set of assets (assets) and obligations (liabilities) of the brand associated with a brand, name and symbol that can add or reduce the value provided by a product or service to a company or customers of the company. Aaker (1996) classifies Brand equity into brand loyalty, brand awareness, perceived quality and brand associations.
Value equity is the objective assessment of the customers on the usefulness of the bids based on the thoughts about the benefits then compared with the costs. Elements of value equity are quality, price and comfort. Zeithaml and Mary (2000) define value into four kinds as follow:
Value is low price or cheap. Consumers perceive that a product or service will be worth if you set a low or cheap price.
Value is everything the customer wants in products or services. The...