Budget allocation to grow market share and maximize customer equity: The effect of inertial segment size
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This article builds on the original Blattberg–Deighton (BD) model of customer equity to focus on short-term market share growth and long-term customer equity. We account for what we term the inertial segment – those consumers who will continue to purchase in the absence of retention spending – to explore ways to more optimally balance budget allocation between customer acquisition and retention. We demonstrate that previous focus on budget allocation with the single marketing objective of maximizing customer equity neglects the relevance of investment in acquisition. Our proposed model boosts customer equity and is achieved with a lower total budget.