Research Handbooks in Business and Management series
Edited by V. Kumar and Denish Shah
Chapter 10: Customer acquisition strategies: a customer equity management perspective
Firms can employ multiple strategies to increase customer equity (e.g., Rust, Lemon, and Zeithaml, 2004) and subsequently firm value (e.g., Gupta and Lehmann, 2003; Kumar and Shah, 2009). The most commonly considered strategies are to increase cross-buying, customer retention or to systematically win back lost customers. Since Reichheld’s (1996) claim that loyal customers are much more profitable, increasing loyalty has been the dominant mantra in many industries. Also, cross-buying (e.g., Kumar, Venkatesan, and Reinartz, 2006; Kumar, George, and Pancras, 2008; Kumar, Venkatesan et al., 2008) and win-back have been shown to produce substantial returns (e.g., Tokman, Davis, and Lemon, 2007). Indeed, Gupta, Lehmann, and Stuart (2004) show that retention efforts have the strongest effect on customer equity (e.g., Gupta and Zeithaml, 2006). When evaluated in isolation, customer acquisition seems to be the lowest-yielding activity along the customer life cycle, while requiring substantial investment per new customer and specific campaign. Does this still hold when accounting for customer heterogeneity, long-term dynamics, employing new media like social networks, or cross-media efforts and related synergies? Specifically, employing one-fits-all or even to some degree targeted but isolated campaigns may result in higher cost per acquired customer due to the lack of appropriate customization with respect to media preferences, timing, and so on.
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