Customer acquisition and retention spending: An analytical model and empirical investigation in wireless telecommunications markets

Sungwook Min, Xubing Zhang, Namwoon Kim, Rajendra K. Srivastava

    Research output: Contribution to journalArticlepeer-review

    24 Scopus citations

    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 1S99-2007. 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 sen/ice markets.

    Original languageBritish English
    Pages (from-to)728-744
    Number of pages17
    JournalJournal of Marketing Research
    Volume53
    Issue number5
    DOIs
    StatePublished - Oct 2016

    Keywords

    • Acquisition cost
    • Customer relationship management
    • Market dynamics
    • Retention cost
    • Wireless communications industry

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