Allocation of marketing budgets to customer acquisition and retention spending based on decision calculus

Abstract

Article information:To cite this document: Hamidreza Koosha Amir Albadvi , (2015),"Allocation of marketing budgets to customer acquisition and retention spending based on decision calculus"Abstract Purpose -The purpose of this paper is to allocate marketing budgets in complex environments, where data are scarce and management judgment is available. In this research, marketing budgets are allocated, to maximize customer equity as a long-term profitability measure. Design/methodology/approach -The researchers provide a model for allocation of marketing budgets based on both decision calculus and econometric models and combine it with the concept of Markov chain model to cope with data scarcity. Dynamic programming is used to find the optimal solution. Findings -The authors examine the model in telecommunication industry. Applicability of the model is supported by an illustrative example. To allocate marketing budgets, researchers consider three strategies for each period: do nothing, retention-focused strategy and acquisition-focused strategy. The results show the applicability and effectiveness of the model to find the best strategy. Research limitations/implications -As the suggested approach is based on management judgment, it is useful in situations, as the authors have experts or experienced managers to achieve reliable data. In situations which the authors do not have access to experienced managers, the results may be unreliable. Practical implications -The suggested approach is useful in situations of data scarcity, where experienced managers are accessible. The researchers have focused on telecommunication industry cases; however, the model is useful in other industries like the insurance industry. Originality/value -The main contribution of the research lies in the suggestion of a new approach to allocate marketing budgets in data scarcity situations in multi-period planning horizons. The researchers use both decision calculus and econometric tools to find the transition matrices of marketing plans.

Switching costs impact on customer retention in telecommunication

“…In previous articles, researchers did not agree on a unified customer retention definition, thus, different variables were used to measure the customer retention based on the industry (Eberle et al, 2016; Gerpott et al, 2001; Koosha and Albadyi, 2015; Li, 2015; Steiner et al, 2014; Tawinunt et al, 2015).…”

“…Customer retention was defined by previous papers as being the activity that a company undertake to maintain its relationship with its customer base and encourage them to keep on doing business with them, it was also mentioned that this construct is seldom confused with other relational marketing concepts such as customer satisfaction, customer loyalty, customer trust, and customer enthusiasm (Eberle et al, 2016; Gerpott et al, 2001; Koosha and Albadyi, 2015; Li, 2015; Steiner et al, 2014; Tawinunt et al, 2015). The previous findings were confirmed in the Lebanese market among top managers working in the telecommunication industry.…”

“…Customer retention has been addressed by scholars and marketers since the mid-19th century and is still a relevant topic as part of relational marketing discipline (Eberle et al, 2016). Although there is no general agreement on its interpretation, most of the previous authors described it as a set of processes and actions that an enterprise designs and implements to maintain a good relationship with its customer base and encourage them to keep on doing business with them, thus preventing them from seeking other providers and switching to other vendors (Eberle et al, 2016; Gerpott, Rams, & Schindler, 2001; Koosha and Albadyi, 2015; Li, 2015; Steiner, Siems, Weber, & Guhl, 2014; Tawinunt, Phimonsathien, & Fongsuwan, 2015).…”

Application of calculus function and value chain analysis method in the quantification of financial flexibility management indicators

“…Koosha h believes that the goal of value chain accounting is to provide real-time value-added information to help managers optimize and reconstruct the value chain, make management decisions and improve management efficiency. They also said that in order to achieve this goal, value chain accounting has the basic function of real-time evaluation and reflection and the core function of multi-dimensional control [3]. Based on the value chain theory and accounting management theory, Suleiman discusses the specific constituent elements of the value chain accounting management framework, expounds in detail the internal relationship and operation mechanism of the system, the similarities and differences of the unified accounting, and highlights the essence and characteristics of value chain accounting from the aspects of connotation, objective, function, subject and accounting scope [4].…”