Journal Article

Social Effects on Customer Retention

Libai, Barak, Nitzan, Irit

2011

Overview

This study explores the role of customers' social network in their defection from a service provider. The authors use data on communication among one million customers of a cellular company to create a large-scale social system composed of customers' individual social networks. The study's results indicate that exposure to a defecting neighbor is associated with an increase of 80% in the defection hazard, after controlling for a host of social, personal, and purchase-related variables. This effect is comparable in both magnitude and nature to social effects observed in the highly researched case of product adoption: The extent of social influence on retention decays exponentially over time, and the likelihood of defection is affected by tie strength and homophily with defecting neighbors and by these neighbors' average number of connections. Highly connected customers are more affected, and loyal customers are less affected by defections that occur in their social networks. These results carry important implications for the theoretical understanding of the drivers of customer retention and should be considered by firms that aim to predict and affect customer retention.

• Publisher: American Marketing Association,Publications Group of the American Marketing Association,SAGE PUBLICATIONS, INC
• Subject: Beziehungsmarketing / Brand loyalty / Consumer behavior / Customer retention / Customers / Data transmission / Health hazards / Konsumentenverhalten / Marketing / Marketing strategies / Mittelmeerraum / Modeling / Neighborhoods / Social interaction / Social networking / Social networks / Soziales Netzwerk / Studies / Telekommunikationssektor