Marketing Strategy and Customer Lifetime Value in Our Current Time of Uncertainty and Distress—A Dynamic Industry Equilibrium Approach

Gerasimos Lianos (), Igor Sloev () and Roudaina Houjeir ()
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Gerasimos Lianos: Abu Dhabi Men’s College, Higher Colleges of Technology
Igor Sloev: Department of Economics, European University at St. Petersburg
Roudaina Houjeir: Abu Dhabi Men’s College, Higher Colleges of Technology

Chapter Chapter 14 in Research on Islamic Business Concepts, 2023, pp 237-259 from Springer

Abstract: Abstract We examine optimal marketing strategies under conditions of industrial contest for customer resources in the current state of uncertainty and turmoil. In a canonical dynamic equilibrium model of Customer Lifetime Value analysis, we consider customer acquisition and customer retention, as generic cases of “aggressive” and “defensive” marketing decisions. We study the optimal Customer Lifetime Value strategies of a firm in a competitive industry under conditions of economic crisis and industrial unrest that resemble our current economic situation. We find that: (1) Marketing budgets decrease. (2) The optimal marketing policy mix changes towards aggressive (customer acquisition) rather than defensive strategies (customer retention). (3) The equilibrium size of the firm decreases. (4) The relative size of the market to the density of competition and not absolute magnitudes that matters for the size of the firm. (5) Customer lifetime value per customer and per new customer and total customer lifetime value decrease. We produce a number of theoretical and empirically testable hypotheses for further research.

Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prbchp:978-981-99-5118-5_14

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DOI: 10.1007/978-981-99-5118-5_14

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