Customer acquisition and customer retention in a competitive industry

Lianos, Gerasimos and Sloev, Igor (2016) Customer acquisition and customer retention in a competitive industry. In: Rediscovering the Essentiality of Marketing: Proceedings of the 2015 Academy of Marketing Science (AMS) World Marketing Congress. Petruzzellis, Luca and Winer, Russell S, eds. Developments in Marketing Science: Proceedings of the Academy of Marketing Science . Springer, pp. 541-552. ISBN 9783319298764. [Book Section] (doi:10.1007/978-3-319-29877-1_111)

Abstract

We study optimal customer acquisition and retention strategies in an infinite-horizon model of dynamic competition. We find that acquisition expenditures constitute the larger share of the marketing budget, when the customer profit margin is either low or large, but for intermediate profit margin values, firms spend more resources for customer retention. If customer profit margins rise for exogenous reasons, we find that the share of customer acquisition expenditures in the marketing budget increases in markets with high profit margins, whereas it decreases in markets with low profit margins. The impact of entry of new firms in the market on the optimal strategy depends on the effect of the entry on profit margins and absolute levels of profit margins. A similar phenomenon may also appear in a single segmented market: the impact of higher competition on the luxury and mass- consumption segments of a market would be different.

Actions (login required)

View Item

Statistics

DownloadsShow export options

Export as CSVXMLJSON

Activity Overview

6 month trend

1Download

6 month trend

269Hits

Additional statistics are available via IRStats2.