The Bucket Theory of Marketing is an illustration used to explain the importance of the defecting customers. Growth in revenue, or profits over a specific period acts very much like a bucket being filled with water. Adding new customers and increasing the revenue form existing customers fill the “bucket”. Sales, advertising and promotion programs help in pouting business to the top of the bucket. But the bucket also has several “leaks” from customers who stop purchasing or decrease purchases from a prior period. The theory gives a fair idea about the ineffectiveness of our marketing efforts as long as there is a hole in the bottom, which gives way for some customers to leave our organizations for reasons known only to them. The bucket theory also explains why a relationship strategy that focuses on plugging the holes in the bucket makes so much sense.
It is more often easy and practical to identify the new customer revenue and the existing customer growth from the accounting database. The information at the individual customer level will give a fairly good idea about the customer migration.
Customer Migration
The measurement of customer migration is identifying what happens to individual customers during a specific period of time. The individual customer may either totally defect at a high value point in their life cycle. For example, a company can spend Rs. 10,00,000 on a campaign to acquire new customers who may really be valuable only during 2005 or spend Rs. 5,00,000 to retain customers who are profitable now.
