Is customer churn a social phenomenon?

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I found this study by Irit Nitzan and Barak Libai on the “Social Effects on Customer Retention” very instructive.  Please note particularly:
“Researchers Irit Nitzan and Barak Libai analyzed the behavior of more than a million customers of a cell phone service provider to see how likely they were to defect to another service provider when one or more of the people in their calling network canceled their service. A year’s worth of data revealed that approximately one-third of the customers studied saw at least one of their friends leave the service provider. The research reveals that after that friend or friends left, the probability that the remaining customer would also leave rose 80%.”“Consumers who were closer to one another—defined by the volume of communications they used—were more likely to defect than consumers who spoke with the defecting friend less frequently, ostensibly because close friends share more purchase recommendations and opinions with those closest to them than with consumers to whom they speak less frequently, the authors say. The impact of these word-of-mouth opinions was less among consumers considered loyal to the carrier, as defined by how long they’d been customers of the mobile service provider and their usage level. In all instances, the impact of friends’ defections to other carriers was felt most acutely shortly after they left and diminished within a few months’ time.”

About Arie Goldshlager

Customer Insight, Customer Strategy, and Innovation Consultant
This entry was posted in Customer Loyalty, Customer Retention. Bookmark the permalink.

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