تاثیر قیمت گذاری و تبلیغات بر حفظ مشتری در بازار آزاد
|کد مقاله||سال انتشار||تعداد صفحات مقاله انگلیسی||ترجمه فارسی|
|1872||2011||14 صفحه PDF||سفارش دهید|
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Publisher : Elsevier - Science Direct (الزویر - ساینس دایرکت)
Journal : Journal of Interactive Marketing, Volume 25, Issue 4, November 2011, Pages 201–214
This study investigates the drivers of customer retention in a liberalizing market. The authors address key retention issues that allow them to contribute to existing retention research in several critical ways. They (1) examine the effects of pricing and mass advertising, (2) account for (new entrants) competitors' actions, (3) investigate the dynamic impact of marketing tactics, and (4) study the proposed relationships in a market recently opened to competition. Using longitudinal data for a sample of 650 mobile phone consumers and a split-population hazard model that accounts for the notion that some customers are never at risk of defection, the authors show that both the focal firm's (incumbent) and the competitors' price and mass advertising exert a significant influence on the probability of terminating an existing incumbent relationship. They find that the relationships between marketing variables and retention are not static but vary over time. Price is generally less effective in the early stages of market liberalization, which suggests that customers become more price sensitive in later stages. Finally, the study findings can have important strategic implications on designing customer management and marketing resource allocation strategies, as well as on providing a competitive regulatory framework in liberalizing markets.
Customer retention and the building of long-standing relationships with customers are central elements in the creation of value (Berger and Nasr, 1998 and Gupta et al., 2004). For this reason, both marketing research and practice show great interest in understanding the driving forces behind “establishing, developing, and maintaining successful relational exchanges” (Morgan and Hunt 1994, p. 22). Various studies have investigated the antecedents of customer retention or customer relationship duration (Bolton, 1998, Drèze and Bonfrer, 2008, Pfeifer and Farris, 2004, Reinartz and Kumar, 2003 and Verhoef, 2003). However, such studies often neglect the effect of mass marketing instruments (Verhoef, van Doorn, and Dorotic 2007), the influence of pricing (Blattberg, Malthouse, and Neslin 2009), and/or the impact of competitors' pricing and advertising strategies on a focal firm's relationships (Gupta and Zeithaml 2006). Recently, some studies have started to consider these influences. Prins and Verhoef (2007) note the impact of advertising expenditures by the firm and its competitors on customer adoption of a new e-service. Venkatesan, Reinartz, and Ravishanker (2009) investigate the impact of customer attitudes toward the focal firm and the competitors on customer behavior in the presence of CRM activities. Rust, Lemon, and Zeithaml (2004) examine the effect of brand advertising on retention and explicitly incorporate competition to project financial returns from marketing investments. Dawes (2009) investigates the impact of price levels and increases on customer retention and finds that a price increase leads to greater churn, though the effect differs across customer groups. Notably, studies in this research stream have only investigated liberalized markets (Wieringa and Verhoef 2007). The deregulation of strategic, utility goods markets (e.g., power, transport and telecommunications) is occurring in many countries (Roberts, Nelson, and Morrison 2005) and forces state-owned monopolists (i.e., incumbents) to compete with new entrants. Existing customer retention knowledge might, therefore, improve significantly with further empirical applications in liberalizing markets,1 and this knowledge may be of significant value to incumbents, who must understand the determinants of relational continuity and develop defensive strategies (Hauser and Shugan 1983), as well as to new entrants, who require an understanding of the factors that motivate existing customers to switch (Green, Barclay, and Ryans 1995). Research that examines defensive and offensive marketing strategies in these newly competitive markets remains limited. We respond to this gap by investigating the extent to which the incumbent's and competitors' price and advertising affect customer retention in a liberalizing market. We have the following research objectives and areas of contribution to the literature. First, we assess the impact of the incumbent's price and mass (or above-the-line) advertising efforts on customer retention and, thereby, identify specific actions that incumbents can develop to increase relationship duration and profitability (Bolton 1998). Second, we provide insights into the effects of pricing and mass advertising by competitors to help them identify the issues that must be addressed in order to attract customers from the incumbent firm. Third, we investigate whether these effects change over time in a liberalizing market and, thus, help clarify its changing dynamics. Fourth, we offer a methodological novelty and apply a split-population hazard model that takes a segment of customers who never leave the incumbent company into account and, thereby, offer insights into how incumbent firms and new entrants should formulate their strategies to allocate marketing resources optimally. This knowledge is relevant for public policy officials too because they have to design a fully-competitive regulatory framework. We rely particularly on Bolton's (1998) research which examines the impact of price on customer retention. She finds that an increase in price decreases retention. In the context of the recently liberalized Spanish mobile phone market, we extend Bolton's research in several critical ways. We study the effect of advertising on the timing to customer defection, explicitly account for competitors' prices and advertising, and examine these dynamic relationships in a liberalizing market. Using a sample of 650 mobile phone customers and a split-population hazard model, our results reveal that the length of an incumbent relationship depends mainly on the incumbent's price and advertising, as well as the competitors' price, that the effects of pricing on retention strengthen over time, which implies that customers become more price sensitive, and that a segment of incumbent customers has a zero probability of terminating the relationship (and switching to a new provider). The remainder of this manuscript proceeds as follows: In the next section, we review previous research about the role of price and above-the-line advertising in customer retention and discuss their expected effects in the context of liberalizing markets. We then describe the study context and data set that we use to examine the drivers of retention and discuss the research methodology. Subsequently, we present the estimation results and conclude with a discussion of the main findings and contributions of our study.
نتیجه گیری انگلیسی
We study customer retention in a liberalizing market and focus on the extent to which customers' decisions to terminate the relationship with the incumbent firm and switch to a new entrant depend on both the incumbent's and the new entrants' price and mass advertising. By combining several innovative research elements (actual customer behavior rather than intentions to repurchase, data that combine longitudinal information about pricing and mass marketing communication with data about customer purchase behavior, a study context only recently opened to competition and a split-population hazard model that accounts for the notion that some customers have a zero probability of defecting), we contribute to existing marketing literature in several critical ways. First, we contribute to retention literature by examining the effect of two frequently neglected marketing instruments, price and mass advertising (see Blattberg, Malthouse, and Neslin 2009). We find that our price measure, ARpU, is a significant variable not only at the beginning of the relationship, during the acquisition process, but also during the development of the relationship (Bolton, Lemon, and Verhoef 2004). In addition, by considering the impact of mass advertising, we provide new insights into the drivers of customer retention and extend Bolton's (1998) findings to a mobile communications context. Above-the-line (service and brand) advertising by the incumbent determines the timing to relationship termination and leads to longer relationships. Service advertising appears to have a greater impact so communicating about the service can help the incumbent firm retain its customers in this setting. Second, unlike most CRM literature, our study explicitly includes the impact of competitive marketing instruments on existing customers' behavior. Previous research establishes how competitive communications can predict customer behavior in the context of a new service adoption (Prins and Verhoef 2007).We show that customer retention is not so significantly affected by competitors' advertising campaigns. This interesting finding implies that different customer behaviors are not affected in the same way by firms' general marketing actions. Regarding ARpU, incumbent customers react to reductions in competitors' ARpU by significantly increasing the probability that they will end their existing relationship with the incumbent vendor. These results support the assertion that competition is an important driver of customer behavior and must be considered in CRM research. Third, we contribute to customer management literature by investigating customer retention in a liberalizing market. Current knowledge mainly comes from studies in liberalized, well-established industries but, considering their distinctive features, generalizing these findings to liberalizing markets might be dangerous (Wieringa and Verhoef 2007). The set of explanatory variables that we include in our model (specifically, the incumbent's and competitors' ARpU and advertising) helps to explain the timing to relationship termination in this context. Furthermore, we investigate the dynamic effects of these marketing tactics, which mainly apply to ARpU and not so much to advertising. Specifically, the effect of ARpU becomes stronger in later stages of market liberalization for all three companies, which suggests that customers become more value conscious and price sensitive as the liberalization process advances. This result is consistent with various research streams. In line with first-mover advantage research (Lieberman and Montgomery 1988), incumbent customers bear high switching costs and their behavior reflects their habits and inertia. Consistent with information economics research (Kirmani and Rao 2000), aggressive price policies by new entrants suggest low quality, which discourages switching behavior. However, as market liberalization progresses, customers gain knowledge about and confidence in competing suppliers, so they base their behavior on more rational aspects, making them more value conscious and price sensitive. Fourth and finally, we significantly advance knowledge about the drivers of customer retention with our use of advanced modeling techniques. The split-population hazard model accounts for the notion that a portion of the population will never experience the event of interest (defection). Consistent with Wieringa and Verhoef (2007), we confirm that inertia is a key determinant of relationship continuance for a significant group of consumers, some of whom will never defect and are, in that sense, inherently loyal. The proposed model also enables us to characterize this customer segment according to customer-specific variables, which might help both incumbents and new entrants to allocate their marketing resources optimally by targeting consumers with a non-zero probability of switching. Management and Public Policy Implications In recent years, various European governments have opened their utility goods markets to competition (Roberts, Nelson, and Morrison 2005). Deregulation prompts intense competition among privatized incumbents and newcomers. Understanding why existing incumbent consumers might want to end their current relationship and switch to new entrants is key for the incumbent to secure its dominant position and for new entrants to build an initial customer base. This knowledge is also central for public policy officials, who must create a competitive regulatory framework. We suggest some insights that may help firms and public policy officials determine strategies and resource allocations. When market liberalization occurs, defensive and offensive marketing strategies come into conflict. Incumbents can use price and advertising to preserve their existing customer relationships and their advertising strategies should communicate about both the service and the brand to protect their current dominant status, though the effect of service advertising is stronger. Incumbents must also adapt their marketing strategies as market liberalization continues. Our results indicate that their customers become more price sensitive over time and incumbent price policies should adapt accordingly. In contrast, new entrants should rely heavily on aggressive price policies from the start to capture customers from the incumbent. Although conventional wisdom suggests that advertising is essential to acquire consumers, our results imply that it has a limited role in capturing incumbent customers; it may be more important for acquiring consumers who are new to the market. New entrants' strategies should also be subject to updating over the course of the market liberalization process to reflect customers' greater price sensitivity. With regard to resource allocations, our finding of a group of incumbent customers with zero probability of ending the relationship offers some important guidelines. These customers are irresponsive to any (incumbent or new entrant) marketing initiative. They also exhibit certain relationship characteristics and demographic variables that firms may use to identify them to avoid spending valuable marketing resources on attracting them. Finally, the public policy implications stem mainly from this same group of customers who will never defect from the incumbent. Regulatory goals might aim to give all consumers the option to switch providers, but public policy officials should be aware that market deregulation per se does not produce this outcome. Additional programs might be considered to inform this inherently loyal consumer group of the possibility and potential advantages of switching to alternative suppliers. In addition, our results indicate that, after market deregulation, the dynamic adaptations in consumer behavior lead to increased price sensitivity over time. Public policy officials who want more immediate outcomes will need to increase customer knowledge about and confidence in the new suppliers, perhaps through special programs prior to liberalization that inform consumers about the impending market situation. Study Limitations and Further Research Some limitations of the current study may provide a basis for further investigations. First, for theory testing purposes, we investigate the drivers of customer retention in the specific context of the mobile phone industry. This industry is increasingly important in developed economies and constitutes a good example of a market configuration recently opened to competition. Nevertheless, our results cannot be generalized to other contexts without caution. For example, among new entrants in this market, service advertising is not a significant predictor of the timing to relationship termination for incumbent customers, a result that might not hold in other contexts. Additional research, therefore, might examine the relative effect of price and advertising in other industries. Second, we used longitudinal behavioral data to test the proposed hypotheses. Although our research meets two criteria required to establish causal relationships (concomitant variation and time order of occurrence of variables), we cannot rule out alternative explanations. To assess causal relationships fully, experimental studies would be required. We also considered the impact of advertising spending levels, which could follow specific patterns and differ significantly over time. We ignored these patterns, so further research should address the effects of specific patterns and changes in advertising on retention. Third, we measure price as the average revenue per user (ARpU). Although frequently used by firms, public policy officials and researchers in a mobile communications context, largely because of the difficulties associated with obtaining customer-level price measures (Shy 2002), the ARpU measure suffers from some limitations that recommend the use of caution in generalizing our research findings to other contexts. Further research could develop a customer-level price measure that facilitates the analysis of pricing effects in mobile communications. Fourth, price and advertising are two key determinants of customer retention, but they are only a subset of the potential factors affecting relationship continuance. We do not consider, for example, the role of direct marketing communications. Fifth, and finally, it would be interesting to test for the effects of brand strength in the context of a liberalizing market. Brand strength likely plays a key role in affecting customer purchase decisions and may also exert a moderating influence on the impact of marketing activities (e.g. advertising) on retention.