IDEAS home Printed from https://ideas.repec.org/a/kap/mktlet/v24y2013i1p1-11.html
   My bibliography  Save this article

Budget allocation for customer acquisition and retention while balancing market share growth and customer equity

Author

Listed:
  • Hsiu-Yuan Tsao

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. Copyright Springer Science+Business Media New York 2013

Suggested Citation

  • Hsiu-Yuan Tsao, 2013. "Budget allocation for customer acquisition and retention while balancing market share growth and customer equity," Marketing Letters, Springer, vol. 24(1), pages 1-11, March.
    • Handle: RePEc:kap:mktlet:v:24:y:2013:i:1:p:1-11
    DOI: 10.1007/s11002-012-9217-y
    as

    Download full text from publisher

    File URL: http://hdl.handle.net/10.1007/s11002-012-9217-y
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11002-012-9217-y?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Berger, Paul D. & Bechwati, Nada Nasr, 2001. "The allocation of promotion budget to maximize customer equity," Omega, Elsevier, vol. 29(1), pages 49-61, February.
    2. Leeflang, P.S.H. & Wittink, Dick R., 2000. "Building models for marketing decisions: past, present and future," Research Report 00F20, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
    3. Uncles, Mark D. & Ehrenberg, Andrew S. C. & Goodhardt, Gerald J., 2004. "Reply to commentary on "Understanding brand performance measures: using Dirichlet benchmarks"," Journal of Business Research, Elsevier, vol. 57(12), pages 1329-1330, December.
    4. repec:dgr:rugsom:00f20 is not listed on IDEAS
    5. H-Y Tsao & L Pitt & C Campbell, 2010. "Analysing consumer segments to budget for loyalty and promotion programmes and maximize market share," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(10), pages 1523-1529, October.
    6. Ehrenberg, Andrew S. C. & Uncles, Mark D. & Goodhardt, Gerald J., 2004. "Understanding brand performance measures: using Dirichlet benchmarks," Journal of Business Research, Elsevier, vol. 57(12), pages 1307-1325, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sun, Yang & Garrett, Tony C. & Phau, Ian & Zheng, Bing, 2020. "Case-based models of customer-perceived sustainable marketing and its effect on perceived customer equity," Journal of Business Research, Elsevier, vol. 117(C), pages 615-622.
    2. Chang, Shuhua & Zhang, Zhaowei & Wang, Xinyu & Dong, Yan, 2020. "Optimal acquisition and retention strategies in a duopoly model of competition," European Journal of Operational Research, Elsevier, vol. 282(2), pages 677-695.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hsiu-Yuan Tsao & Lucy M. Matthews & Victoria L. Crittenden, 2012. "Balancing Market Share Growth And Customer Profitability: Budget Allocation For Customer Acquisition And Retention," Organizations and Markets in Emerging Economies, Faculty of Economics, Vilnius University, vol. 3(2).
    2. Gauthier Casteran & Polymeros Chrysochou & Lars Meyer-Waarden, 2019. "Brand loyalty evolution and the impact of category characteristics," Marketing Letters, Springer, vol. 30(1), pages 57-73, March.
    3. Dawes, John, 2022. "Factors that influence manufacturer and store brand behavioral loyalty," Journal of Retailing and Consumer Services, Elsevier, vol. 68(C).
    4. Nardi, Vinicius Antonio Machado & Jardim, William Carvalho & Ladeira, Wagner Júnior & Santini, Fernando, 2020. "A meta-analysis of the relationship between customer participation and brand outcomes," Journal of Business Research, Elsevier, vol. 117(C), pages 450-460.
    5. Hanna Górska-Warsewicz, 2022. "Consumer or Patient Determinants of Hospital Brand Equity—A Systematic Literature Review," IJERPH, MDPI, vol. 19(15), pages 1-36, July.
    6. Anesbury, Zachary William & Talbot, Danielle & Day, Chanel Andrea & Bogomolov, Tim & Bogomolova, Svetlana, 2020. "The fallacy of the heavy buyer: Exploring purchasing frequencies of fresh fruit and vegetable categories," Journal of Retailing and Consumer Services, Elsevier, vol. 53(C).
    7. Trinh, Giang & Wright, Malcolm J., 2022. "Predicting future consumer purchases in grocery retailing with the condensed Poisson lognormal model," Journal of Retailing and Consumer Services, Elsevier, vol. 64(C).
    8. Dawes, John, 2020. "The Natural Monopoly effect in brand purchasing: Do big brands really appeal to lighter category buyers?," Australasian marketing journal, Elsevier, vol. 28(2), pages 90-99.
    9. Trinh, Giang & Dawes, John, 2020. "A comparison of brand loyalty between on the go and take-home consumption purchases," Journal of Retailing and Consumer Services, Elsevier, vol. 53(C).
    10. Graham, Charles & Khan, Kamran & Ilyas, Muhammad, 2019. "Estimating the value of passing trade from pedestrian density," Journal of Retailing and Consumer Services, Elsevier, vol. 46(C), pages 103-111.
    11. H-Y Tsao & L Pitt & C Campbell, 2010. "Analysing consumer segments to budget for loyalty and promotion programmes and maximize market share," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(10), pages 1523-1529, October.
    12. Banelis, Melissa & Riebe, Erica & Rungie, Campbell M., 2013. "Empirical evidence of repertoire size," Australasian marketing journal, Elsevier, vol. 21(1), pages 59-65.
    13. Nenycz-Thiel, Magda & Sharp, Byron & Dawes, John & Romaniuk, Jenni, 2010. "Competition for memory retrieval between private label and national brands," Journal of Business Research, Elsevier, vol. 63(11), pages 1142-1147, November.
    14. Martina Zámková & Stanislav Rojík & Martin Prokop & Simona Činčalová & Radek Stolín, 2022. "Czech Consumers’ Preference for Organic Products in Online Grocery Stores during the COVID-19 Pandemic," IJERPH, MDPI, vol. 19(20), pages 1-14, October.
    15. Jung, Sang-Uk & Zhu, John & Gruca, Thomas S., 2016. "A meta-analysis of correlations between market share and other brand performance metrics in FMCG markets," Journal of Business Research, Elsevier, vol. 69(12), pages 5901-5908.
    16. Koll, Oliver & Plank, Andreas, 2022. "Do shoppers choose the same brand on the next trip when facing the same context? An empirical investigation in FMCG retailing," Journal of Retailing, Elsevier, vol. 98(4), pages 576-592.
    17. Trinh, Giang & Khan, Huda & Lockshin, Larry, 2020. "Purchasing behaviour of ethnicities: Are they different?," International Business Review, Elsevier, vol. 29(4).
    18. Mecredy, Philip & Wright, Malcolm J. & Feetham, Pamela, 2018. "Are promoters valuable customers? An application of the net promoter scale to predict future customer spend," Australasian marketing journal, Elsevier, vol. 26(1), pages 3-9.
    19. Vipul Pare & John Dawes, 2012. "The persistence of excess brand loyalty over multiple years," Marketing Letters, Springer, vol. 23(1), pages 163-175, March.
    20. Tanusondjaja, Arry & Nenycz-Thiel, Magda & Dawes, John & Kennedy, Rachel, 2018. "Portfolios: Patterns in brand penetration, market share, and hero product variants," Journal of Retailing and Consumer Services, Elsevier, vol. 41(C), pages 211-217.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:mktlet:v:24:y:2013:i:1:p:1-11. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.