Acquisition and Retention Management
While customer acquisition and retention programs are important in their own right, the firm needs to manage acquisition and retention in a coordinated fashion. This chapter addresses how companies should allocate their efforts to acquisition and retention. We discuss the models that are relevant to this task, and then optimize several of them to demonstrate their value and gain insights on when the company should allocate more resources to either acquisition or retention. We show for example that the adage, “It's cheaper to retain than acquire a customer, so we should spend more on acquisition,” needs to be sharpened considerably before it can be used to guide acquisition and retention spending. We conclude by introducing the “Customer Management Marketing Budget,” a tool for planning acquisition and retention expenditures over time.
KeywordsMarginal Cost Retention Rate Average Cost Acquisition Rate Customer Base
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