Does Service Bundling Reduce Churn?
Indiana University - Kelley School of Business - Department of Business Economics & Public Policy
Shane M. Greenstein
Harvard University - Technology & Operations Management Unit; National Bureau of Economic Research (NBER)
We examine whether bundling in telecommunications services reduces churn using a series of large, independent cross sections of household decisions. To identify the effect of bundling, we construct a pseudo-panel dataset and utilize a linear, dynamic panel-data model, supplemented by nearest-neighbor matching. We find bundling does reduce churn for all three “triple-play” services. The effect is only “visible” during times of turbulent demand. We also find evidence that broadband was substituting for pay television in 2009. This analysis highlights that bundling helps with customer retention in service industries, and may play an important role in preserving contracting markets.
Number of Pages in PDF File: 54
Keywords: Bundle, Service, Churn, Triple Play, Telecommunications, Cable, Broadband, Telephone, Screen
JEL Classification: D12, L96
Date posted: November 30, 2011 ; Last revised: May 13, 2014