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Customer Acquisition and Retention Spending: An Analytical Model and Empirical Investigation in Wireless Telecommunications Markets

Customer Acquisition and Retention Spending: An Analytical Model and Empirical Investigation in... Strategic resource allocation in growth markets is always a challenging task. This is especially true when it comes to determining the level of investments and expenditures for customer acquisition and retention in competitive and dynamic market environments. This study develops an analytical model to examine firms’ investments in customer acquisition and retention for a new service; it develops hypotheses drawing on analytical findings and tests them with firm-level operating data of wireless telecommunications markets from 41 countries during 1999–2007. The empirical investigation shows that a firm's acquisition cost per customer is more sensitive to market position and competition than retention cost per customer. Furthermore, whereas firms leading in market share, on average, do not have a cost advantage over other firms in retaining customers, they have a substantial cost advantage in acquiring customers, and this advantage tends to increase with market penetration. The study results provide guidelines for firms’ strategic resource allocation for customer acquisition and retention in competitive service markets. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Marketing Research SAGE

Customer Acquisition and Retention Spending: An Analytical Model and Empirical Investigation in Wireless Telecommunications Markets

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References (41)

Publisher
SAGE
Copyright
© 2016 American Marketing Association
ISSN
0022-2437
eISSN
1547-7193
DOI
10.1509/jmr.14.0170
Publisher site
See Article on Publisher Site

Abstract

Strategic resource allocation in growth markets is always a challenging task. This is especially true when it comes to determining the level of investments and expenditures for customer acquisition and retention in competitive and dynamic market environments. This study develops an analytical model to examine firms’ investments in customer acquisition and retention for a new service; it develops hypotheses drawing on analytical findings and tests them with firm-level operating data of wireless telecommunications markets from 41 countries during 1999–2007. The empirical investigation shows that a firm's acquisition cost per customer is more sensitive to market position and competition than retention cost per customer. Furthermore, whereas firms leading in market share, on average, do not have a cost advantage over other firms in retaining customers, they have a substantial cost advantage in acquiring customers, and this advantage tends to increase with market penetration. The study results provide guidelines for firms’ strategic resource allocation for customer acquisition and retention in competitive service markets.

Journal

Journal of Marketing ResearchSAGE

Published: Oct 1, 2016

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