Managing For Successful Customer Acquisition: An Exploration

Abstract

Given all the recent attention dedicated by academics, consultants and practitioners to customer retention, customer acquisition has become a secondary concern. Yet, customer acquisition is of major importance and demands attention as the first stage of the customer life-cycle. Our research shows that companies are not particularly skilled at managing the customer acquisition process. For example, less than half have a dedicated customer acquisition plan. Only one variable distinguishes companies that excel at customer acquisition – they have a budget dedicated to customer acquisition activities. Other variables examined - the presence of an executive responsible for customer acquisition, an understanding of the economics of customer acquisition, and the deployment of CRM technologies to support customer acquisition - are not associated with excellence at customer acquisition.

Full text

Journal of Marketing Management 2006, 22, 295-317
ISSN0267-257X/2006/3-4/00295 + 22 £8.00/0 ©Westburn Publishers Ltd.
Lawrence Ang
1
and
Francis Buttle
2
Managing For Successful Customer
Acquisition: An Exploration
Macquarie Graduate School
of Management, Macquarie
University
Given all the recent attention dedicated by academics,
consultants and practitioners to customer retention,
customer acquisition has become a secondary
concern. Yet, customer acquisition is of major
importance and demands attention as the first stage
of the customer life cycle. Our research shows that
companies are not particularly skilled at managing
the customer acquisition process. For example, less
than half have a dedicated customer acquisition plan.
Only one variable distinguishes companies that excel
at customer acquisition – they have a budget
dedicated to customer acquisition activities. Other
variables examined - the presence of an executive
responsible for customer acquisition, an
understanding of the economics of customer
acquisition, and the deployment of CRM technologies
to support customer acquisition - are not associated
with excellence at customer acquisition.
Keywords: CRM, customer acquisition, customer retention, customer life-
cycle
Introduction
The management guru, Peter Drucker, once wrote that the sole purpose of a
business is to create a customer (Drucker 1973). In the recent migration of
thought towards the merits of managing customer retention, businesses
appear to have taken their eye off the issue of customer acquisition. This
paper first addresses this imbalance and then reports the results of a survey
of customer acquisition practices in a sample of companies.
Customer Life-Cycle
Although the idea of product life-cycle planning is well entrenched in the
marketing literature, the idea of customer life-cycle planning is much less
1
Correspondence: Lawrence Ang. Tel +61 (02) 9850 9135; Fax +61 (0)2 9850 9019; email
Lawrence.ang@mgsm.edu.au
2
Francis Buttle. Tel +61 (02) 9850 8987; Fax +61 (0)2 9850 9019; email
Francis.buttle@mgsm.edu.au

296 Lawrence Ang and Francis Buttle
well established. A number of customer management authorities have
developed conceptual notions of a customer journey, ladder or staircase
(Christopher, Payne and Ballantyne 1991; Gordon 1998; Ang and Buttle 2002;
Buttle 2004) along, or up, which customers advance. The initial rungs of the
ladder - suspect, prospect and first-time customer - are the focus of our
research. A suspect is a person or organisation that has yet to be qualified as
a prospect; a first-time customer is a customer who has made an initial
purchase from a vendor.
Customer Acquisition or Customer Retention
Customers are assets that need to be acquired before they can be managed
for profit (Levitt 1986). Customer retention is clearly a most important
objective in competitive and mature markets. Customer acquisition,
however, is still hugely important to companies in many contexts: for new
business start-ups, when entering new geographic or customer market
segments, when launching a new product or service, when exploiting new
applications for an existing product or service, when marketing low
involvement products and services, when repeat purchases are infrequent,
and when switching costs are low. Also, when markets show growth
potential it is strategically important for all players to grow the aggregate
market size rather than protect their own customer base through customer
retention efforts. There are some businesses in which the constant acquisition
of new customers is the only way to survive. Examples include funeral
direction, private hospitals dedicated to procedures such as hernia repairs or
cataract removal, and MBA programs.
Customer acquisition is important even where customer retention is
justified as the core strategy. It has been observed that 25% or more of
customers may need replacing annually (Sellers 1989; Hanan 2003; Buttle
2004). In a business-to-consumer context, customers may shift out of a
targeted demographic, or their personal circumstances may change such that
they no longer find value in an offering. In a business-to-business context,
corporate customers may be lost due to acquisition by another organisation
with firmly established supplier preferences, or if ceasing production of the
goods and services for which the input was needed or ceasing trade. It is
clear that without a well-developed, focused and successful customer
acquisition strategy, customer retention and development is irrelevant.
Against this tendency towards a retention emphasis, a number of authors
promote the view that acquisition is important. Dowling (2002) suggests that
customers have little time, energy or interest in establishing strong brand
relationships. Some customers are frequent brand switchers or portfolio
shoppers, and others are simply interested in need fulfilment, rather than
continuity. Goodwin and Ball (2003) indicate that there may be considerable

Managing For Successful Customer Acquisition: An Exploration 297
economic gain from focusing on customer acquisition. They compute that a
firm having a 16.7% share of market enjoys 5 times the revenue impact from
a 1% increase in acquisition than from a 1% increase in retention.
But how good are companies at acquiring new customers, and is it
possible to identify attributes or conditions that distinguish companies that
excel at customer acquisition? This area has not been well researched, even
though customer acquisition is a fundamental sales and marketing activity.
Our exploratory study investigates a number of variables that are potentially
associated with successful customer acquisition.
Literature Review
Results from a search of electronic databases indicate that scholars have
researched customer acquisition significantly less than customer retention.
Since 1983, the databases report that customer retention has been the focus of
45 scholarly papers, but customer acquisition only 7.
Managing the Customer Acquisition Process
The mainstream marketing and sales literatures focus on customer
management issues. Practically every marketing management scholar makes
the assumption that it makes good sense to plan and budget for the
achievement of business outcomes. Kotler (2003), for example, writes that
‘successful companies… practice the art of market-oriented strategic
planning’. There is almost universal agreement throughout the modernist
management literature that establishing measurable key performance
indicators, creating a budgeted plan and assigning responsibility for their
achievement, are norms of good practice. Miller and Cardinal’s (1994) review
of management research generally finds support for the idea that planning
processes are associated with better business performance.
However, our literature search has found very little evidence regarding
management practices such as planning, budgeting or the deployment of
technologies that assist in customer acquisition, per se. Both Blattberg et al.
(2001) and Sargeant and West (2001) recommend that management thinks
and acts strategically about customer acquisition, but neither make the claim
that companies actually do so. Blattberg et al. (2001) present a 6 phase
approach to customer acquisition, dubbed ACTMAN (Acquisition Tactical
Management). Sargeant and West (2001) propose a normative 7-stage
approach to the development of a customer acquisition campaign: 1. set
campaign objectives (such as target response rate, numbers of new customers
recruited, acquisition cost per new customer, average new customer value);
2. segment and profile prospects; 3. targeting - tailoring the communication
message, channel and offer for the selected audience; 4. select cost-effective
media; 5. communicate the offer; 6. fulfilment; 7. response analysis, using

298 Lawrence Ang and Francis Buttle
metrics such as percentage response, cost per response, percentage
conversion, cost per customer, revenue per customer, profit per customer,
projected lifetime value per customer, and percentage return on investment.
It has been suggested that managers charged with customer acquisition
consider 3 issues: which potential customers to target, how to communicate
with them and what to offer them (Buttle 2004). Blattberg et al. (2001)
emphasise that most companies are unselective in their customer acquisition
processes, that is, they fail to adequately target their acquisition activities.
These ‘how-to-perform-customer-acquisition’ issues are reflected in a large
body of research that ranges across strategic issues such as market
segmentation, targeting and positioning (STP), out-bound and in-bound
customer communications, development of value propositions, and
management of business networks, and tactical issues such as the
deployment of consumer sales promotions, or media selection for advertising
campaigns.
Furthermore, many studies and industry reports have examined the
tactical role of particular marketing mix elements in customer acquisition.
These include introductory offers (van Ackere and Reyniers 1993),
competitions (Peattie 1998), word-of-mouth (Buttle 1998; Stokes and Lomax
2002), viral marketing (Dellarocas 2003), out-bound solicitation by call-center
staff (Prabhakar, Sheehan and Coppett 1997), affiliate marketing or
partnership programs (Hoffman and Novak 2000), service guarantees
(Clepper 1996), and the world-wide web (Vishwanath and Mulvin 2001;
Daniel and Wilson 2002; Thomas 2002). The role of certain products as
relationship openers has also been identified. Banks, for example, depending
on their competitive environment, might use high interest savings accounts,
no-load mutual funds or low-interest credit cards to attract new customers
(Ratner 1997). Given this body of research and the general consensus
concerning planning in modernist management practice, we would expect
that companies that excel at customer acquisition would have an executive
charged with the task and a budget for achieving plan outcomes. These are
the first two hypotheses we test.
Economics of Customer Acquisition
One research theme that has emerged of late concerns the estimation of
potential customer value, a statistic that is relevant to the targeting decision.
This body of research draws largely on experiences in direct and database
marketing (Lix, Berger and Magiozzi 1995; Hansotia and Wang 1997; Dwyer
1997; Berger and Nasr 1998; Calciu and Salerno 2002). As a rule it is
suggested that a prospect should be converted to customer status only when
the potential life-time value (the discounted value of future net margins

Managing For Successful Customer Acquisition: An Exploration 299
earned from a relationship) exceed the costs of that customer’s acquisition
(Blattberg et al. 2001). However, Hoffman and Novak (2000) claim that
several online retailers have pursued the ‘suicidal’ strategy of acquiring
customers whose lifetime value is less than their acquisition costs. Other
studies have examined the (credit) risk attached to customer acquisition
programs (Irvin 1994; Wood 2000). Clearly, these authors are promoting a
more thoughtful, data-driven, approach to customer acquisition.
In this regard, there is growing interest in the economics of customer
acquisition. It is clearly in the interest of companies to know the relative
cost/benefits of different customer acquisition strategies and tactics. The
application of metrics such as customer numbers acquired, average first
purchase value, leads-to-sales conversion rates and cost-per-qualified-lead
can help distinguish the effectiveness of different acquisition efforts (Ball
1993; Blattberg et al. 2001). Schmid and Trollinger (2002) suggest that ‘at the
very least… [companies] need to determine how much it costs to acquire a
customer from media such as rental lists, space ads, package insert programs,
trade shows and card decks. Buttle (2004), for example, notes that the relative
costs of recruiting new customers for a motoring organisation varies from
£22 for member-get-member referrals to £100 from direct response TV.
Case studies of companies such as CDnow indicate that there is
considerable merit in thinking analytically about customer acquisition
strategy. CDnow employs seven customer acquisition strategies, each with
different cost-benefit profiles. They range from advertising in TV, radio and
print media, through online advertising, affiliate marketing, word-of-mouth,
free links to public relations. The company can identify the source of some of
its new customers, although about 60% arrive at the CDnow website from
unknown sources. CDnow spends 96% of its customer acquisition budget –
on advertising online and offline, and partnerships - to acquire only 45% of
its customers. Put another way, 4% of its budget is successfully deployed in
acquiring 55% of its customers (Hoffman and Novak 2000). Given this
research we would expect companies that excel at customer acquisition to
understand the economics of customer acquisition. This is the third
hypothesis we test.
CRM Technologies
CRM technologies can provide tools that assist in customer acquisition
(Buttle 2004). The campaign management process, supported by data mining
capabilities, and linked to a plan-do-measure-learn cycle, enables companies
to develop deep knowledge about prospects to target, channels to use and
offers to make. Fairlie (2004) suggests that over time business rules emerge
from this process, and Wood (2003) observes that customer and prospect
databases, together with knowledge regarding their exploitation, can become

300 Lawrence Ang and Francis Buttle
valued corporate assets. Experiments can be performed on different subsets
of the database, for example on different cells of the RFM (recency-
frequency-monetary value) matrix, to develop an understanding of the
propensities to buy of different groups (Levin and Zahavi 2004). Event-based
(or trigger) marketing, again supported by customer profiling, enables
companies to respond to changes in prospects’ circumstances and convert
them into first-time customer status. An event-based campaign could, for
example, mark when a new child is born, and respond with an appropriate
offer. Moving home signals opportunity for many marketers. Data from
served customers can enable companies to refine their acquisition efforts. For
example, a company can compare the profiles of heavy users with nonusers
and produce indices of propensities to buy. These can then be used to target
acquisition efforts (Lix and Berger 1995). Methods such as cluster analysis,
decision trees and neural networks assist the profiling process. Given the
availability of CRM technologies to support customer acquisition, we would
expect companies that deploy these applications to perform better at
customer acquisition than those who do not. This is the fourth hypothesis we
test.
In summary, there is a strong analytical, planning and control emphasis to
the bulk of the contemporary customer management literature. This
emphasis is projected into our research hypotheses, which focus on the first
stage of the life-cycle – customer acquisition. In particular, we examine (1)
executive responsibility, (2) budgeting for customer acquisition, (3)
knowledge of the economics of customer acquisition and (4) the deployment
of CRM technologies.
Research Questions
Our main goal in conducting this research is to be able to identify and
explore attributes or conditions that enable companies to excel at customer
acquisition. We test the following hypotheses, derived from the literature
reviewed above. The strong business planning ethic that pervades modern
customer management literature informs our first three objectives whilst the
potential impact of CRM technologies leads us to include the fourth.
H1: Companies that excel at customer acquisition will have an executive
tasked to manage customer acquisition
H2: Companies that excel at customer acquisition will have a budget
dedicated to the task of customer acquisition
H3: Companies that excel at customer acquisition will understand the
economics of customer acquisition
H4: Companies that excel at customer acquisition will be more likely to
employ CRM technologies

Managing For Successful Customer Acquisition: An Exploration 301
Figure 1. Directional Hypotheses
Methodology
Our methodology involved gathering data by mail-administered survey of a
stratified random sample of companies. Details of the sampling strategy,
data collection methods, instrument development and analysis follow.
Sampling
Given that we wanted to conduct exploratory research, our population of
interest was Australian industry, across the full range of primary, secondary
(manufacturing) and tertiary (service) sectors. A stratified random sample of
732 companies was selected from the Dun and Bradstreet database of the top
1000 companies in Australia. The population was stratified into 3 annual
turnover groups: $50 to $99 million, $100 to $500 million, and above $500
million.
Data Collection
A mail questionnaire was developed. Following an initial telephone
solicitation to participate, the instrument was mailed to the sample. Follow-
up calls and reminders were issued two to three months later. The invitation
to participate was addressed to the person in charge of customer
Executive
in char
g
e
Dedicated
bud
g
et
Understand costs
o
f
customer
acquisition
Emplo
y
CRM
technolo
g
ies
H1 +
H2 +
H4 +
H3 +
Exceed customer
acquisition
expectations

302 Lawrence Ang and Francis Buttle
relationships, customised by name where this was known. Whenever there
was a person in charge of customer acquisition, his or her cooperation was
sought. We conducted follow-up telephone interviews to clarify any issues
or concerns that emerged from the questionnaire’s completion.
We encouraged response by offering a summary report of the study. This
has now been distributed to respondents.
Instrument
Items in the questionnaire were developed from the literature review,
piloted three times in the field, and refined. All the questions measuring the
independent variables were nominal in nature, and required ‘yes’, ‘no’, or
‘don’t know’ responses. These questions investigated the presence or absence
of a range of customer acquisition management practices, objectives and
tactics. The instrument collected data on a wide variety of customer
management issues, only some of which are the subject of this paper. Given
the large number of variables investigated, we opted to use simple nominal
scaling wherever possible. This was less onerous for, and more familiar to,
respondents, particularly those who were less involved. Previous research
shows that when respondents are not involved, having fewer scale points
generally lead to a higher response rate (Leigh and Martin 1987). Nominal
scaling is also consistent with the properties of the constructs being
measured (Burns and Bush 1998) since we are only interested to see if the
presence or absence or certain variables is associated with excellence at
customer acquisition. In short, measures for all our independent variables are
single-item nominal scales.
The dependent variable used in this study – ‘excellence at customer
acquisition’ – was measured by asking whether the company’s acquisition of
new customers had exceeded expectations in the last 12 months. This
variable was measured on a 7-point metric scale, anchored at three points.
The point 1 anchor read ‘greatly under-performed expectations’, the mid
point read ‘met expectations’ and the point 7 anchor was ‘greatly exceeded
expectations’. Use of a single item to measure the dependent variable is
justified on several grounds. First, for a lengthy and complex instrument
such as our six-page questionnaire, it is more efficient. Second, since the
object of our measurement and its operationalisation (expectations of
customer acquisition) is singular and concrete, and is readily understood by
our respondents (i.e., persons who are involved in customer acquisition or
relationship management), the use of single item is highly recommended
(Rossiter 2002)
3
. Third, we are not striving to evaluate the reliability of an
3
Another example of a singular and concrete concept is that of purchase intention,
while an example of a concept that is neither singular nor concrete is capitalism (see
Rossiter 2002).

Managing For Successful Customer Acquisition: An Exploration 303
abstract psychological construct that resides in a person (Finn and Kayande
1997; Diamantopoulos and Winklhofer 2001), which requires multiple-item
measures. In contrast, our operationalisation of the dependent variable is
more concrete and tangible. Furthermore, we are more interested in trying to
explain the factors that are associated with excellence in customer
acquisition, rather than seeking to uncover some underlying latent construct,
often associated with traditional domain-sampling theory of scale formation
in fields such as psychology. Appendix 1 shows the measures used in this
study.
Analysis
Data were analysed using procedures within SPSS PC version 10. Two
basic forms of analysis were performed. First, simple descriptive univariate
statistics were computed for the measured variables. Here, we were
interested in understanding the frequency with which certain customer
acquisition management practices, objectives and tactics were used by our
sample.
Second, non-parametric bivariate correlations (Kendall’s tau) were
performed to test the hypotheses. Here, we were interested in knowing if the
adoption of certain customer acquisition management practices, objectives or
tactics help differentiate excellent companies. To enable these non-parametric
bivariate correlations to be performed, all the relevant variables were
transformed to a two-point ordinal scale, including the dependent variable.
For the dependent variable, excellence at customer acquisition, the metric
data were recoded as follows: all responses above the midpoint (i.e., 5-7)
were recoded to ‘1’ and those below, including the midpoint (i.e., 4-1) to ‘2’.
If Kendall’s tau revealed a significant correlation between any customer
acquisition management practices, objectives or tactics and the dependent
variable, Chi-square tests were also conducted to confirm the association.
Even though the dependent variable was measured on an interval scale (1-
7), non-parametric procedures were used throughout because: (1) all the
independent variables were measured on nominal scales (yes, no, don’t
know); (2) some analyses employ relatively small sample sizes (n < 30); (3)
almost all variables violate the assumption of normality (with significant
Kolmogorov-Smirnov statistics), and (4) some items also exhibit
heterogeneity of variance (with significant Levene statistics). Under these
circumstances, the use of parametric test statistics is inappropriate (Siegel
and Castellan 1989).

304 Lawrence Ang and Francis Buttle
Results
Response Rate
One hundred and seventy responses were obtained, representing a 23%
response rate. Forty-three had annual turnover of between $50-$99 million,
forty-six were between $100-$500 million, and forty-two were above $500
million. Thirty-nine companies declined to divulge their annual turnover.
Participants represented all major standard industrial classification (SIC)
codes. Dominant sectors were manufacturing (43 companies); wholesale and
retail (24 companies); and health, community services, accommodation,
cultural/recreation, personal and other services (23 companies).
Descriptive Results
To get a flavour of current practices in customer acquisition, we firstly
report some simple descriptive statistics. This gives us a picture of what
companies do.
Less than half the sample (47%) had an explicit, documented customer
acquisition plan. Only a third of the sample (34%) assigned a specific budget
to customer acquisition activities. Nearly three-quarters of the companies
(74%) surveyed had appointed a specific person or group to be responsible
for customer acquisition activities, but only 38% of these were sufficiently
aware of customer acquisition costs to be able to estimate customer
profitability. Just 42% had conducted tests or experiments in the last 12
months to find more cost-effective ways of gaining new customers.
Companies vary in the type of objectives they set for customer acquisition.
The most common customer acquisition objectives specify revenue streams
from new customers (84% of companies with acquisition plans specify this
objective), numbers of new customers to be acquired (65%), specific named
customers to be acquired (57%), and margins to be earned from new
customers (53%).
Use of CRM technologies to support customer acquisition is not
widespread. About half the companies (49%) had adopted a computerised
enquiry management system to handle inbound unsolicited enquiries, and
42% used a computerised sales lead generation and qualification system for
their outbound sales calls.
Bivariate Correlations
Kendall’s tau and Chi-square tests were used to measure the hypothesised
relationships. The results are as follows:
H1: Companies that excel at customer acquisition will have an executive
tasked to manage customer acquisition

Managing For Successful Customer Acquisition: An Exploration 305
Computer-
ised out-
bound sales
lead
generation
system
1
Computer-
ised in-
bound
enquiry
managemen
t system
1
0.41**
No. of
new
customers
to acquire
1
0.01
0.05
Executive
in-charge of
acquisition
1
0.09
0.07
0.08
Test cost-
effective
methods of
acquisition
1
0.09
0
0
-0.03
Margins
to be
earned
from new
customers
1
-0.22
0.01
0.17
-0.02
0.12
Know cost
to acquire
customer
1
0.32*
0.41**
0.14
0.19
0.07
0.15
Have
acquisition
budget
1
0.40**
0.08
0.31**
-0.13
0.28*
0.11
-0.02
Exceed
acquisition
expectations
1
0.28*
0.13
0.09
0.08
0.03
0.14
-0.01
0.05
Table 1. Correlations Between Variables
Exceed acquisition
expectations
Have acquisition
budget
Know cost to acquire
customer
Margins to be
earned from new
customers
Test cost-effective
methods of
acquisition
Executive in-charge
of acquisition
No. of new
customers to acquire
Computerised in-
bound enquiry
management system
Computerised out-
bound sales lead
generation system
*p<.05, **p<.001 (2-tailed)

306 Lawrence Ang and Francis Buttle
Table 1 shows a positive (r = 0.03) but non-significant correlation, using
Kendall’s tau, between managerial responsibility for customer acquisition
and excellence at customer acquisition. H1 is therefore not supported.
H2: Companies that excel at customer acquisition will have a budget
dedicated to the task of customer acquisition
Table 1 shows that companies that have an acquisition budget are
significantly more likely to have excel at customer acquisition (r = 0.28,
p<.02). Further testing using Chi-square confirms the association (χ
2
= 5.7;
p<0.02). H2 is therefore supported.
H3: Companies that excel at customer acquisition will understand the
economics of customer acquisition
Table 1 reports a positive (r = 0.13) but non-significant association between
knowledge of customer acquisition costs and excellence at customer
acquisition. H3 is therefore rejected.
H4: Companies that excel at customer acquisition will be more likely to
employ CRM technologies
In our study, two CRM acquisition technologies were evaluated: (1) the use
of a computerised enquiry management system for handling unsolicited in-
bound calls, and (2) the use of a computerised sales lead generation and
qualification system to handle out-bound calls. The table shows that neither
of these applications was significantly correlated with excellence at customer
acquisition (-0.01 and 0.05 for computerised enquiry and sales lead
generation systems respectively). H4 is therefore rejected.
Discussion
Examination of the first column of data in Table 1 shows that all except one
of the hypothesised relationships are rejected. The exception is having a
budget especially dedicated for customer acquisition. This is associated with
excellence at customer acquisition, as measured by exceeding the sampled
companies’ own expectations of customer acquisition.
4
4
We also conducted a median test. This test is useful when the distributions of data
differ markedly from normality. It tests the null hypothesis that the medians of two
data sets have been drawn from populations with the same median (Siegel and
Castellan 1989). This analysis supports our observation that only one variable –
having a dedicated acquisition budget – is related to excellence in customer
acquisition.

Managing For Successful Customer Acquisition: An Exploration 307
The intriguing question is why, of all the variables investigated, only one –
having a budget dedicated to customer acquisition – is associated with
excellence in customer acquisition. One possible explanation is that the
budget represents the outcome of political battles fought and won within an
organisation (Pfeffer and Salanick 1974; Pfeffer and Moore 1980). Fighting
implies serious intent; winning requires that the performance match the
intent. Another way of thinking about this outcome is that the acquisition
budget may represent a leading indicator for acquisition excellence.
Given the importance of this outcome, we pursue further exploratory
analyses to understand how having an acquisition budget is related to the
other variables investigated. This resulted in a number of insights connected
to the deployment of a customer acquisition budget, which can serve as
guidelines for managing the customer acquisition process.
Figure 2. Diagrammatic Representation of Correlations
Further exploration of data, as reported in Figure 2, shows that having an
acquisition budget is highly correlated with knowing the cost of customer
acquisition (r = 0.40, p<0.001; χ
2
= 9.6; p<0.001). Also, companies that pursue
the objective of increasing the number of new customers are also more likely
to have such a budget (r = 0.28, p<0.02; χ
2
= 6.0; p<0.01). The availability of a
budget is, however, not associated with any of the other customer acquisition
objectives investigated in our research, i.e. revenue streams from new
customers, specific named customers to be acquired, and margins to be
Exceedin
g
expectations o
f
acquirin
g
new
customers
Mar
g
ins
to be earned
from new
customers
Knowin
g
costs-to-acquire
new customers
Havin
g
a bud
g
et
for customer
acquisitio
n
activities
r =.32, p<0.02
r =.40,
p<0.002
r =.28,
p<0.02
Experiment with
more cost-effective
wa
y
s of customer
acquisitio
n
r =.41, p <0.001
Number of new
customers
to be acquired
r =.28,
p<0.02
r =.31,
p<0.001

308 Lawrence Ang and Francis Buttle
earned from new customers. Possession of a budget for customer acquisition
purposes is also significantly correlated with willingness to experiment with
more cost effective methods of acquisition (r = 0.31; p<0.001; χ
2
= 7.3, p<0.01).
In sum, a company that has a customer acquisition budget is significantly
more likely to know the acquisition cost of new customers, experiment with
customer acquisition tactics, set simple measurable objectives, and ultimately
to excel at customer acquisition.
H1, hypothesising a positive relationship between excellence at customer
acquisition and having an executive or group in charge of customer
acquisition was not supported. Effectively, this tells us that placing an
executive in charge of customer acquisition makes no significant difference to
acquisition outcomes. This runs contrary to modernist management practice
and thought where notions of personal responsibility for delivery of business
results, such as KPIs based on customer acquisition, are well embedded.
This is an unexpected result and we can only speculate why such a well-
established modernist planning principle like putting someone in charge of
acquisition does not achieve excellent results. One possible reason is that the
responsible executives may not be particularly competent at developing
customer acquisition plans. Second, even if the executive’s plans are astute,
they may still fail because of poor execution (Hrebiniak 2005; Pfeffer 2003).
One recent study for instance found that only 60% of strategic plans achieved
their full potential (Mankins and Steele 2005). Failure occurs generally due to
people or process issues. Examples of the latter include bureaucratic obstacles,
poor marketing policies and integration of programs (Bonoma 1984). It is also
possible that the right sort of metrics and rewards were not in place to
motivate the executive. Unfortunately, in our study, we cannot ascertain if
any of these reasons are correct. We merely measure the presence or absence
of a manager in charge; the manager’s competence and the surrounding
contextual issues that may affect execution are not investigated. This is
clearly an opportunity for additional research.
H3, hypothesising a positive relationship between excellence at customer
acquisition and understanding the economics of customer acquisition, was
also rejected. Further investigation shows that although only 35% of
companies in the sample were aware of their customer acquisition costs, this
was significantly more likely to be the case when companies pursue the
‘margins to be earned (per customer)’ objective to guide their customer
acquisition activities (r =.32, p<0.02; χ
2
= 5.5, p<0.02). Furthermore, the more
the company is aware of its customer acquisition costs, the more willing it is
to experiment and test to find more cost effective methods of customer
acquisition (r = 0.41, p<0.001; χ
2
= 22.2, p<0.001).
H4, hypothesising a positive relationship between excellence at customer
acquisition and the use of CRM technologies was rejected. It therefore

Managing For Successful Customer Acquisition: An Exploration 309
appears that our sample finds little value in the deployment of the two CRM
technologies we examined – inbound enquiry management and outbound
sales lead generation and qualification. However, use of these technologies in
tandem is indicated by a positive correlation (r = 0.41, p<0.001; χ
2
= 26.9,
p<0.001), meaning that companies that use one computerised system are also
more likely to use the other.
One possible reason why H3 and H4 are rejected is because companies
may not know how to take advantage of the information or insights gleaned
from customer economics, or how to use the CRM technologies. Perhaps
some more strategically significant issues are at fault. For instance, further
segmentation may be needed, or further integration of the database with
lead-generation technologies may be required before excellent results are
achieved. Companies may not be able to achieve this, especially if the hired
manager is not competent.
Finally, we find that the literature on the relationship between modernist
management practices and business outcomes is not of one voice. Mintzberg
(1990), for instance, has shown that formal planning does not necessarily
equate to corporate success. Miller and Cardinal’s (1994) meta-analysis of 26
published studies, found that although on average, there was a positive
relationship between planning and their dependent variables of interest -
growth (r = .17, p<.001), and profitability (r =.12, p<.001) the variance in the
sample is quite large. In fact the correlations range from -.31 to .75 between
planning and growth, and from -.21 to .71 between planning and
profitability. Indeed, they even find negative correlations in their data. This
might explain the unanticipated outcome in our research. In Miller and
Cardinal’s attempt to account for these apparent anomalies, they ran a series
of regressions and found among other things, that it is better not to employ
formal planning processes, but rather to adopt general plans. They
concluded:
“With respect to operational definitions of strategic planning, it appears that
focusing exclusively on standardized planning guidelines and written plans is
problematic (p. 1661).”
In short, we suspect that it is not merely the presence or absence of
acquisition strategies that drives customer acquisition excellence. Having the
funds to implement the strategies, having a strong sense about what
strategies are effective, and carrying out these strategies well may determine
acquisition excellence. These considerations may have nothing to do with
formal planning processes as we know them.

310 Lawrence Ang and Francis Buttle
Limitations and Directions for Future Research
There are two notable limitations to this study. First, it is based on a sample
drawn from a particular geography. The findings may not apply in different
contexts. For example, in economies where CRM has been implemented for a
longer period – the U.S.A., for example - one might expect to find that CRM
technologies are more widely and successfully deployed to support customer
acquisition. Second, within a diverse, advanced economy, one might expect
to find considerable variance between subsets of the business universe. The
sample sizes within particular cells have not allowed us to conduct
comparisons of customer acquisition practices between, say business-to-
business and business-to-consumer organisations, or between service
providers and goods manufacturers. These limitations inform the directions
for future research. Given the counter-intuitive nature of some of our
findings, there is an opportunity to conduct the research in other contexts.
This should help confirm whether companies that excel at customer
acquisition do indeed have an executive responsible for managing customer
acquisition, a dedicated budget, understand the economics of customer
acquisition, or employ CRM technologies.
This research for this paper has been an exploratory overview. An
additional opportunity for further research exists at a more detailed,
contextual level. This would enable comparisons to be made across sectors or
industries. Questions might include: are some industries more suited to the
deployment of CRM technologies to support customer acquisition? What are
the qualitative attributes of customer acquisition plans that make a difference
to acquisition outcomes? Is the goal of computing costs-to-acquire more
feasible in some industries than others?
Conclusion
The major conclusion of the research is that having a nominated executive
responsible for customer acquisition is not of itself a good indicator of
excellence at customer acquisition. These findings run contrary to accepted
doctrine that executive responsibility, and, by implication the associated
planning processes, are cornerstones of successful management. Indeed only
47% of our sample developed specific customer acquisition plans. The
companies that excelled at customer acquisition in our research were notable
because they were more likely to have a budget dedicated to acquisition
activities. Perhaps, only by having a dedicated budget does a company show
it is truly serious about new customer acquisition. We found that only 34%
of companies have such a budget.
Another major finding concerns the importance of knowing the cost of
customer acquisition. Whilst understanding customer economics underpins

Managing For Successful Customer Acquisition: An Exploration 311
any intelligent CRM initiative, knowing the cost of acquisition has many
related implications. For a start, acquisition cost is closely related to customer
profitability. When companies set ‘margins to be earned’ as their customer
acquisition objective, the data show that companies are more likely to
understand the cost of customer acquisition. This relationship does not hold
true when objectives rotate around customer numbers or revenues. This
finding confirms that in order to understand customer profitability, it is
necessary to understand the costs of acquisition. The problem with ignoring
potential customer profitability during acquisition is that a company may
acquire customers that enhance the top line but diminish the bottom line,
being more costly to acquire and serve than the revenues they generate.
Unfortunately, in our research ‘margins to be earned’ turned out to the least
popular of acquisition objectives. Only 53% of companies adopted this
objective, perhaps because it is too difficult to assess. Instead, companies
tend to use simple KPIs such as revenue (84%) and numbers of new
customers (65%) as acquisition objectives.
Beside its close relationship with customer profitability, knowing the cost
of customer acquisition also has an unexpected upside. It is associated with
experimentation to find more cost-effective ways of customer acquisition
(which in turn can be factored into the customer acquisition budget).
Although doing such tests and experiments may not necessarily lead to a
better acquisition outcome (which in part may be due to poor execution), it
can benefit companies in the long run because of cumulative learning.
Unfortunately, only 35% of the companies knew their customer acquisition
cost.
Finally, CRM technologies in the form of computerised enquiry and lead
management systems are not widely deployed by our sample, but even so,
their application is not associated with excellence at customer acquisition.
In summary, two overarching managerial implications can be drawn from
this study. First, companies are generally not very advanced in their
management of the core CRM activity of customer acquisition as indicated by
the low level of adoption of management practices such as budgeting,
planning, executive responsibility and the application of CRM technologies.
Second, none of these management practices, other than having a dedicated
customer acquisition budget, is related to excellence in customer acquisition.
The overriding managerial implication is that if senior management is truly
serious about customer acquisition, it should be reflected in a budget
dedicated to the task. Our research shows that only then is excellence in
customer acquisition achieved.

312 Lawrence Ang and Francis Buttle
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Managing For Successful Customer Acquisition: An Exploration 315
Acknowledgment
The authors gratefully acknowledge the contribution of Doctoral candidate
Martin Williams. We would also like to thank the editor and two
anonymous reviewers for their insightful comments.
Appendix 1
Sample questions
Q1 Does the plan specify a budget for customer acquisition activities?
Yes 1
No 2
Don’t know 3
Q2 Does the plan specify any of the following customer acquisition
targets?
Yes
No
Don’t
know
Numbers of new customers to be
obtained
1 2 3
Specific named customers to be
obtained
1 2 3
Revenue streams to be generated
from new customers
1 2 3
Margins to be earned from new
customers
1 2 3
Other targets (please specify)
______________________________
1 2 3
Q3 Has your company nominated a particular person or group to be
responsible for new customer acquisition?
Yes 1
No 2
Don’t know 3

316 Lawrence Ang and Francis Buttle
Q4 In the past 12 months, has your company done any measured tests or
experiments to find more cost-effective ways of gaining new customers?
Yes 1
No 2
Don’t know 3
Q5 Does your company use a computerised enquiry management system
to handle unsolicited in-bound customer enquiries?
Yes 1
No 2
Don’t know 3
Q6 Does your company use a computerised sales lead generation and
qualification system to handle out-bound sales calls?
Yes 1
No 2
Don’t know 3
Q7 Does your company assign the following costs to customers in order to
estimate customer profitability?
a. Costs-to-acquire customers (eg prospecting, selling and sampling
costs)
b. Costs-to-serve customers (eg order processing, selling, product
customisation, enquiry-handling and logistics costs)
Q7a Q7b
Yes 1 1
No 2 2
Don’t know 3 3
Q8 In the last 12 months, to what extent has the number of new customers
won by your company met your expectations?
Greatly under performed
expectations
Met expectations Greatly exceeded
expectations
1 2 3 4 5 6 7

Managing For Successful Customer Acquisition: An Exploration 317
About the Authors
Lawrence Ang is a senior lecturer at Macquarie Graduate School of
Management, Sydney, Australia. He teaches a number of marketing subjects
and researches in the area of advertising and customer relationship
management. He loves fine food and wine and cooks for pleasure.
Francis Buttle is Professor of Management and Chair of Marketing at
Macquarie Graduate School of Management, Sydney, Australia. He teaches
and researches customer relationship management, services marketing and
marketing management. He is author of the recent book Customer
Relationship Management: Concepts and Tools and has published 300 items in a
variety of media. He lives on Sydney’s northern beaches, rides a Suzuki, and
kayaks on the harbour in his spare time.