A Methodology for Linking Customer Acquisition to Customer Retention

Abstract

Customer acquisition and retention are not independent processes. However, because of data limitations, customer management decisions are frequently based only on an analysis of acquired customers. This analysis shows that these decisions can be biased and misleading. The author presents a modeling approach that estimates the length of a customer's lifetime and adjusts for this bias. Using the model, the author shows the financial impact of not accounting for the effect of acquisition on customer retention.