Abstract: One of the most efficient criteria for achieving an optimal balance of resources among customer acquisition, retention and expansion efforts is the maximum customer equity. In this article the author proposes a new solution for the customer equity maximization problem. The proposed solution takes into account two elements not considered in the majority of customer equity models in the literature: the customer expansion concept and acquisition, retention and expansion floor rates. The article presents a double-phase model that employs a variation of the Lagrange multiplier method to solve this balancing challenge. Its main contribution consists in providing a more comprehensive framework for optimizing the balance among customer acquisition, retention and expansion investments. The new approach contributes also for improving customer relationship management (CRM) decisions. Additionally, it represents appropriately the complexity of relationships among the customer equity core variables.
Publication Year: 2012
Publication Date: 2012-01-01
Language: en
Type: article
Indexed In: ['crossref']
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