Publication Type

Journal Article

Version

submittedVersion

Publication Date

10-2016

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.

Keywords

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

Discipline

Marketing | Strategic Management Policy

Research Areas

Marketing

Publication

Journal of Marketing Research

Volume

53

Issue

5

First Page

728

Last Page

744

ISSN

0022-2437

Identifier

10.1509/jmr.14.0170

Publisher

American Marketing Association

Copyright Owner and License

Authors

Additional URL

https://doi.org/10.1509/jmr.14.0170

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