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This research examines the reasons for brand defection in a business-to-business financial service. Three cross-sectional studies examine customers who ceased using a brand in the previous month. The research shows that about 60% of brand defection occurs for reasons that brand managers cannot influence, such as business closure or head office decisions. Hence, retention strategies can have a maximum success rate of 40%. Furthermore, most defection within this 40% relates to dissatisfaction with fees and charges, or the attractiveness of competitors' offers. These reasons limit what brand managers can do to retain these customers other than just matching competitors' offers. On the other hand, most customers who defect because of price issues or reasons beyond management control still have a positive attitude towards their former brand and are likely to consider this brand for future purchases. Only 4% of lapsed customers defect because of service service-related issues. These customers are less positive about their former brand, compared to other lapsed customers. The research provides implications for investments in customer acquisition versus customer retention.

Marketing practitioners and academics often assume that customers who terminate relationships with a brand are dissatisfied or disappointed with the brand's offering. Therefore, the literature suggests that if brand managers can identify and address the areas of concern, then an almost zero defection rate is achievable (e.g. Gould, 1995; Hawkes, 1994; Reichheld, 1993a, 1996; Reichheld and Sasser, 1990). However, previous research into the antecedents of customer defection shows that not all of the customers who leave a brand do so because of dissatisfaction (Ganesh et al., 2000). Reichheld (1993b) reports that “on average, 65 to 85 percent of defectors say they were satisfied or very satisfied with their former supplier”. Mittal and Lassar (1998) find that one third of current customers who say they are satisfied with the brand also express an intention to switch. These claims suggest that some of the reasons for customer defection may be beyond the influence of brand managers and sometimes even the customer. Examples include moving residence, another provider opening a more conveniently located branch, or corporate head office directing a change of supplier (e.g. Colgate et al., 1996; Keaveney, 1995; Schneider, 1973; Hogan et al., 2003). Marketing literature provides qualitative categorization of the reasons for brand switching, however only a few publications go further to describe the proportions of customers citing each reason. In order to assess the likely return on investment from customer recovery and retention strategies, managers need to know not only the reasons for defection, but also how much defection they can influence. In other words, how many customers lapse for reasons brand management can do something about (for example, improve a service), and how many customers defect for the reasons brand management cannot do anything about (for example, the customer is moving or is going out of business). The greater the proportion of brand defection beyond management control, the lower the potential return from retention strategies along with greater incentive for managers to direct resources to strategies designed for new customers acquisition to replace lapsed customers. This research looks specifically at overall customer loss, or brand defection, when customers cease using a brand, which is different from prior research that focuses mainly on brand switching, and only examines customers who switch from one brand to another brand. Focusing solely on switching neglects the proportion of defectorswho leave the category, hence providing an incomplete picture of brand defection. This study also extends prior research conducted in consumer markets, into a business-to-business context. Business-to-business markets are usually characterized by more complex products, greater bonds between parties, and greater value accounts (Bendapudi and Leone, 2002; Coviello and Brodie, 2001). These factors might affect the reasons for defection in business-to-business relationships and make the brand-switching models designed for consumer markets less applicable. The aim of this study is to categorize and quantify the reasons for brand defection among all business customers who cease using afinancial service in a specified time period. The findings will establish benchmarks for the proportion of defection that is within the influence of brand management and therefore how many customers are potentially retainable/savable. A secondary objective is to link the reasons for brand defection to the possibility of brand recovery through analyzing customers' attitudes and likelihood of considering their former brand for future product needs.

Most of the prior research in the area of brand defection (e.g. Colgate et al., 1996; Keaveney, 1995; Schneider, 1973) focuses on switching from one brand to another. Therefore, it is easy to form the impression that all defection is due to switching behavior. However, the findings of this study show that only about half of all the people who defected actually switched to another provider. Therefore, the main contribution of this paper is in including those customers underrepresented in the prior (switching only) models. The results show that for this business-to-business financial service, about 60% of brand defection happens for reasons that areoutside the influence of brand management (i.e. due to lack of need for the service or a business closure). Of those interviewed the vast majority said that brand managers could not have done anything to save them and retain their business. However, these people have the most positive responses towards the former brand in regards to both attitude and future consideration. Therefore, 60% of defectors are excellent prospects of becoming customers again some time in the future when they have a new need for this particular service, or a related financial service. The remaining 40% of the defection in the business-to-business financial market occurs for reasons that brand managers may influence. The majority of these reasons are price related. Most price price-driven customers do not have negative feelings towards their former brand. Assuming that the reasons for switching from a brand are similar to the reasons for taking up a new brand (or returning to the former brand), these price price-driven customers would only consider switching back to their former provider if the offer is competitive. This scenario limits what brand managers could do to retain or win back these customers, Matching competitors' offers might not be a cost effective retention strategy in the long term (Stauss and Friege, 1999).