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)


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.

Item Type: Book Section
Additional Information: The 18th AMS World Marketing Congress, Bari, Italy, July 14-18, 2015
Research Areas: A. > Business School > Economics
A. > Business School > International Management and Innovation
A. > Business School > International Management and Innovation > Corporate Social Responsibility and Business Ethics group
A. > Business School > Marketing, Branding and Tourism
A. > Business School > Strategic Marketing, Consumer Behaviour and Branding/Identity group
Item ID: 26613
Notes on copyright: © Academy of Marketing Science 2016
Useful Links:
Depositing User: Gerasimos Lianos
Date Deposited: 16 May 2019 15:47
Last Modified: 16 May 2019 16:30

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