Abstract
To determine spending on acquisition and retention of customers, a company can focus on maximizing a variety of indicators such as customer equity, profit or sales growth. In this article we use standard techniques from multivariable calculus to maximize market share through analysis of retention and switching ratios both in the absence and presence of a budget constraint. In the process, we identify firm theoretical foundations for some common intuitions, and give new insights on optimal competitive strategy. We include practical numerical examples that show marketing practitioners how to apply our analysis.
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