Target the Ego or Target the Group: Evidence from a Randomized Experiment in Pro-Active Churn Management

Marketing Science (Forthcoming)

64 Pages Posted: 9 Apr 2015 Last revised: 10 Mar 2018

See all articles by Miguel Godinho de Matos

Miguel Godinho de Matos

School of Business and Economics, Católica-Lisbon; Carnegie Mellon University

Pedro Ferreira

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management; Carnegie Mellon University - Department of Engineering and Public Policy

Rodrigo Belo

Rotterdam School of Management, Erasmus University

Date Written: September 29, 2017

Abstract

We propose a new strategy for proactive churn management that actively uses social network information to help retain consumers. We collaborate with a major telecommunications provider to design, deploy and analyze the outcomes of a randomized control trial at the household level to evaluate the effectiveness of this strategy. A random subset of likely churners were selected to be called by the firm. We also randomly selected whether their friends would be called. We find that listing likely churners to be called reduced their propensity to churn by 1.9 percentage points from a baseline of 17.2%. When their friends were also listed to be called their likelihood of churn reduced an additional 1.3 percentage points. The NPV of likely churners increased 2.1% with traditional proactive churn management and this statistic becomes 6.4% when their friends were also listed to be called by the firm. We show that in our setting likely churners receive a signal from their friends that reduces churn among the former. We also discuss how this signal may trigger mechanisms akin to both financial comparisons and conformity that may explain our findings.

Keywords: Churn, Retention, Client Lifetime Value, Telecommunications, Social Networks, Peer Influence, Predictive Analytics

Suggested Citation

Godinho de Matos, Miguel and Ferreira, Pedro and Belo, Rodrigo, Target the Ego or Target the Group: Evidence from a Randomized Experiment in Pro-Active Churn Management (September 29, 2017). Marketing Science (Forthcoming). Available at SSRN: https://ssrn.com/abstract=2591671 or http://dx.doi.org/10.2139/ssrn.2591671

Miguel Godinho de Matos (Contact Author)

School of Business and Economics, Católica-Lisbon ( email )

Palma de Cima
Lisbon, Lisboa 1649-023
Portugal

Carnegie Mellon University ( email )

Pittsburgh, PA 15213
United States

Pedro Ferreira

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

Carnegie Mellon University - Department of Engineering and Public Policy ( email )

Baker Hall 129
5000 Forbes Ave
Pittsburgh, PA 15213
United States

Rodrigo Belo

Rotterdam School of Management, Erasmus University ( email )

RSM Erasmus University
PO Box 1738
Rotterdam, 3062 PA
Netherlands

HOME PAGE: http://www.rsm.nl/people/rodrigo-belo/

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