Customer Acquisition Promotions and Customer Asset Value

In this article, the author addresses the question of how a firm’s acquisition efforts influence the composition of the customer portfolio. The first part of the research is a conceptual model that illustrates how customer uncertainty provides an explanation for why promotionally acquired customers have lower repurchase rates and smaller lifetime values. The second part of the research involves empirical analyses of customer-level data from a newspaper and an online grocer. In both data sets, acquisition discount depth is negatively related to repeat-buying rates and customer asset value. For example, a 35% acquisition discount results in customers with about one-half the long-term value of non–promotionally acquired customers.