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  • Journal of Marketing Research (JMR)

The Perils of Proactive Churn Prevention Using Plan Recommendations: Evidence from a Field Experiment

By: Eva Ascarza, Raghuram Iyengar and Martin Schleicher
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Abstract

Facing the issue of increasing customer churn, many service firms have begun recommending pricing plans to their customers. One reason behind this type of retention campaign is that customers who subscribe to a plan suitable for them should be less likely to churn because they derive greater benefits from the service. In this article, the authors examine the effectiveness of such retention campaigns using a large-scale field experiment in which some customers are offered plan recommendations and some are not. They find that being proactive and encouraging customers to switch to cost-minimizing plans can, surprisingly, increase rather than decrease customer churn: whereas only 6% of customers in the control condition churned during the three months following the intervention, 10% did so in the treatment group. The authors propose two explanations for how the campaign increased churn, namely, (1) by lowering customers’ inertia to switch plans and (2) by increasing the salience of past-usage patterns among potential churners. The data provide support for both explanations. By leveraging the richness of their field experiment, the authors assess the impact of targeted encouragement campaigns on customer behavior and firm revenues and derive recommendations for service firms.

Keywords

Churn/retention; Field Experiment; Pricing; Tariff/plan Choice; Targeting; Customer Relationship Management; Price; Performance Effectiveness

Citation

Ascarza, Eva, Raghuram Iyengar, and Martin Schleicher. "The Perils of Proactive Churn Prevention Using Plan Recommendations: Evidence from a Field Experiment." Journal of Marketing Research (JMR) 53, no. 1 (February 2016): 46–60.
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About The Author

Eva Ascarza

Marketing
→More Publications

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More from the Authors
  • When Less Is More: Using Short-term Signals to Overcome Systematic Bias in Long-run Targeting By: Ta-Wei Huang and Eva Ascarza
  • Retail Media Networks By: Eva Ascarza, Ayelet Israeli and Celine Chammas
  • Managing Customers in the Digital Era By: Eva Ascarza
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