Statistical Methods in Customer Relationship Management

5.2 Acquisition and Retention

Customer acquisition and customer retention are two processes that are essentially correlated. Researchers have modeled these two issues both separately and together. Lewis [5] investigated whether shipping fees differentially influence customer acquisition and retention. In a system of simultaneous equations, the author examined the effects shipping fees and other marketing variables on the number of new customers acquired the average order size for new customers, and the number of daily orders and the average order size for established customer. The models were estimated in a system because the dependent variables were possibly correlated. Furthermore, to account for the possible correlation between various equations and the possibility of endogenously determined explanatory variables, the author estimated the equations using three-stage least squares. Lagged measures of the endogenous variables, such as prices and average order size, were used as instruments in the estimation.

In another study, Lewis [6] investigated the influence of customer acquisition promotion depth on customer retention, including repeat purchasing and the time being a customer. In an online retailing setting, the author adopted a logistic regression to model whether the customer makes subsequent purchases within the next three quarters using acquisition discount as an explanatory variable. In a newspaper subscription setting, the author adopted accelerated failure time models ...