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Paper info: Effects on New Customer Acquisition by Retained Customers in Professional Services


Effects on New Customer Acquisition by Retained Customers in Professional Services


Anna Löfmarck Vaghult and Kent Eriksson

Place of Publication

The paper was published at the 16th IMP-conference in Bath, U.K in 2000.


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Is there a way for a firm to successfully balance between retaining clients and selling to newcustomers? When can new clients be gained through the existing relationships? This papersets out to study the effects on different kinds of relationship substance within the presentbusiness relationships, on the number of new customers added to the supplier. The conceptualmodel is tested on a sample of business relationships in professional services. The resultsshow that the relationship satisfaction of present customers (a less embedded type ofsubstance) provides more new customers to the supplier. Satisfied customers createopportunities for word-of-mouth referrals to potential users. Satisfaction also increasesretention, while a more embedded kind of relationship substance, organisational change in thecustomer firm, reduces customer retention, at least in the consulting business. Retention in itsturn has a negative effect on the number of new customers to the supplier. The results suggestthat a firm's deep collaboration with present counterparts partly exclude the addition of newcustomer relationships. The supplier has less time and efforts to invest in new relationshipsand it gets increasingly difficult to explain what other firms may gain from a similar cooperation.Satisfied clients in referral networks, who have experienced an explainable result,can be a source to add new customers. An implication for management is to select betweendeep client collaboration on one hand, and widening or renewal of the customer base on theother. Operations with standardised services need to be managed separately from customisedactivities. The use of referral networks increases if used in the more standardised approach.