Budget Allocation for Customer Acquisition and Retention to Balance Market Share Growth and Customer Profitability

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Title:	Budget Allocation for Customer Acquisition and Retention to Balance Market Share Growth and Customer Profitability
Authors:	Tsao, Hsiu-Yuan
Contributors:	淡江大學企業管理學系
Date:	2013-03-01
Issue Date:	2013-01-19 09:03:03 (UTC+8)
Publisher:	Springer US
Abstract:	Following the Blattberg and Deighton (BD) model, we incorporate market share growth to explore links between acquisition and retention. We then devise a method for nonlinear programming using a spreadsheet to balance the objectives of market share growth in the short term and customer equity in the long term. The aim of this approach is to determine the optimal spending allocation for customer acquisition and retention and, by applying this allocation to the numerical example used in the original BD model, to balance these objectives. We demonstrate that the differential unit cost of marginal effects, ceiling rate, efficiency, and allocation of spending on acquisition and retention to achieve market share growth can maximize customer equity. We also develop a criterion to help firms decide where to place spending emphasis, that is, on retaining existing customers or on gaining new ones, while keeping the objectives of market share growth and customer equity firmly in mind.
Relation:	Marketing Letters 24(1), pp.1-11
DOI:	10.1007/s11002-012-9217-y
Appears in Collections:	[Graduate Institute & Department of Business Administration] Journal Article

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