In this research, the authors present a modeling framework for balancing resources between customer acquisition efforts and customer retention efforts. The key question that the framework addresses is, “What is the customer profitability maximizing balance?” In addition, they answer questions about how much marketing spending to allocate to customer acquisition and retention and how to distribute those allocations across communication channels.

Stable, healthy growth is built on the profitability of customers, not on their raw numbers or their loyalty. New techniques allow companies to focus their marketing dollars precisely where the profits are. Clearly, companies that focus only on customers who are easy to acquire and retain are not allocating their resources as efficiently as they might.