Customer Acquisition and Retention: A Fluid Approach for Staffing

Abstract

W e investigate the trade-off between acquisition and retention efforts when customers are sensitive to the quality of service they receive, that is, whether they get timely access to a company's resources when requested. We model the problem as a multi-class queueing network with new and returning customers, time-dependent arrivals, and abandonment. We derive its fluid approximation; a system of ordinary linear differential equations with continuous, piecewise smooth, right-hand sides. Based on the fluid model, we propose a novel approach to determine optimal stationary staffing levels for new and returning customer queues in anticipation of future time-varying dynamics. Using system accessibility as a proxy for service quality and staffing levels as a proxy for investment, we demonstrate how to apply our approach to two families of time-varying arrival functions motivated by real-world applications: an advertising campaign and a clinical setting. In a numerical study, we demonstrate that our approach creates staffing policies that maximize throughput while balancing acquisition and retention efforts more effectively (i.e., equitable abandonment from each customer class) than commonly used near-stationary methods such as variants of square-root staffing policies. Our model confirms that acquisition and retention efforts are intimately linked; this has been found in empirical studies but not captured in the operations literature. We suggest that in time-varying environments, focusing on either alone is not sufficient to maintain high levels of throughput and service quality.

The Effect of Digital Marketing Strategy, Social Media Use, and Service Quality on Customer Loyalty at E-commerce Companies in Jakarta

“…By focusing on customer satisfaction, companies can build long-term relationships and increase brand loyalty (Ayuningtyas et al, 2023;Trebicka et al, 2023). Implementing pricing strategies, product diversification, and maintaining customer satisfaction are key factors in retaining customers (Furman et al, 2021;Polat, 2022). In addition, digital marketing activities play an important role in creating loyal customers, and businesses should focus on subcultures such as young people, women, and internet users to attract and retain customers (Kanodia, 2020).…”