It’s well established that customer acquisition is considerably more expensive than customer retention. The reason why customer acquisition is so high is because sellers spend money to acquire customers that will not purchase from them. The key to reducing this cost is to target their efforts on those prospective customers who are most likely to purchase. Sometimes sellers can use the marketing channel to differentiate the likelihood of customer purchase. For example, if a customer comes to the seller from a word-of-mouth referral vs a television advertisement then they are more likely to make a purchase.
The situation is more complicated for markets that transition from illegal to legal (such as he sex trade). Sellers of sexual services in Canada are selling legal services but they cannot promote these services. If their’ promotion is restricted then how do they acquire customers and how do they reduce their costs by targeting appropriately. The paper we presented at the Marketing and Public Policy Conference looks at this question using a unique dataset from a provider of fetish services in Canada. A copy of the presentation is available from here: Marketing in markets that transition from illegal to legal – MPPC
