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Erschienen in: Marketing Letters 4/2013

01.12.2013

Experience, socialization and customer retention: Lessons from the dance floor

verfasst von: Gianna Giudicati, Massimo Riccaboni, Anna Romiti

Erschienen in: Marketing Letters | Ausgabe 4/2013

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Abstract

Experience and socialization are key factors in customer commitment and defection decisions. To study the effect of experience and social relationships on customer retention, we analyze a reality-mined co-presence network of health club members over a period of 4 years. Since central customers in the network have more social ties they will lose if they defect, we use centrality as a proxy for customer relationship switching costs. We find that long-standing customers do have a lower chance of renewing their contracts. However, in line with theoretical predictions (Burnham et al., Journal of the Academy of Marketing Science 31(2):109–126, 2003), the consumer’s centrality in the network (reflecting a social cost of defection) reduces customer churn rate. This study’s results indicate that the inclusion of social effects increases the predictive power of the customer churn model (Nitzan and Libai, Journal of Marketing 75(6):24–38, 2011), thus contributing to our understanding of the role social networks play in customer decisions.
Fußnoten
1
Fowler and Christakis (2008) show that happiness is positively related to centrality in a social network.
 
2
Because our dataset includes all the customers of the health-club rather than a sample, we avoid the non-trivial problems associated with network-related analysis based on sampling from networks (Nitzan and Libai 2011).
 
3
For all contract types the nominal price equals the effective price paid.
 
4
Since the time cut-off is discretionary, we apply various thresholds (from 5 to 30 min) as a robustness check. Co-presence is not used to infer stronger social relationships (such as friendship) but rather to investigate the structure of weak ties, to measure co-experience, and to verify how socialization and experience influence renewal decision.
 
5
Since customers are usually registered as a member of the health club for a small fraction of the sampling period, the half-weight index has been used to avoid bias in the computation of y i , y j , and x (Whitehead 2008). Results do not change when alternative measures of association are used.
 
6
We checked other measures of connectivity (degree, betweenness, and eigenvector centrality). However, since they are all strongly correlated, results were largely independent of the selected centrality index.
 
7
The dummies representing customers’ location cover nine districts of the town in which the gym is located (downtown, north, east, west, south, southeast, southwest, northeast, northwest) and a dummy for out-of-town locations.
 
8
Cross-correlation between the variables experience, time, delay, centrality, and price per attendance is low (always below 0.19).
 
9
As a robustness check, we also ran a set of logit regressions, without noting any significant changes in the results.
 
10
In this version of the model, we do not account for temporal heterogeneity in the composition of the network. Additional regression results in a companion working paper (Giudicati and Riccaboni 2013) shows that the time of the day when customers go to the gym does not have a statistically significant effect on decisions to renew.
 
11
Indeed, the Weibull shape parameter (p) is always significantly lower than 1.
 
12
We applied the gamma and inverse Gaussian distributions, which are the most commonly used in continuous time models. Individual frailty models also confirm the need to control for unobserved heterogeneity (null hypothesis, frailty parameter = 0, was rejected at the 1 % level).
 
13
The social model raises the predictive accuracy at the median survival time of the Weibull model by increasing the percentage of true positive of 2 % and reducing the percentage of false positive predictions of 1.6 %. The social model’s superiority over the traditional one is also evident by looking at the log likelihood scores in Table 3.
 
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Metadaten
Titel
Experience, socialization and customer retention: Lessons from the dance floor
verfasst von
Gianna Giudicati
Massimo Riccaboni
Anna Romiti
Publikationsdatum
01.12.2013
Verlag
Springer US
Erschienen in
Marketing Letters / Ausgabe 4/2013
Print ISSN: 0923-0645
Elektronische ISSN: 1573-059X
DOI
https://doi.org/10.1007/s11002-013-9233-6

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