Journal
JOURNAL OF MARKETING RESEARCH
Volume 45, Issue 1, Pages 48-59Publisher
AMER MARKETING ASSOC
DOI: 10.1509/jmkr.45.1.48
Keywords
customer equity; customer acquisition; word of mouth; customer lifetime value; resource allocation
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Companies can acquire customers through costly but fast-acting marketing investments or through slower but cheaper word-of-mouth processes. Their long-term success depends critically on the contribution of each acquired customer to overall customer equity. The authors propose and test an empirical model that captures these long-term effects. An application to a Web hosting company reveals that marketing-induced customers add more short-term value, but word-of-mouth customers add nearly twice as much long-term value to the firm. The authors illustrate their findings with some dynamic simulations of the long-term impact of different resource allocations for acquisition marketing.
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