In Pursuit of Enhanced Customer Retention Management: Review, Key Issues, and Future Directions

Abstract

In today’s turbulent business environment, customer retention presents a significant challenge for many service companies. Academics have generated a large body of research that addresses part of that challenge—with a particular focus on predicting customer churn. However, several other equally important aspects of managing retention have not received similar level of attention, leaving many managerial problems not completely solved, and a program of academic research not completely aligned with managerial needs. Therefore, our goal is to draw on previous research and current practice to provide insights on managing retention and identify areas for future research. This examination leads us to advocate a broad perspective on customer retention. We propose a definition that extends the concept beyond the traditional binary retain/not retain view of retention. We discuss a variety of metrics to measure and monitor retention. We present an integrated framework for managing retention that leverages emerging opportunities offered by new data sources and new methodologies such as machine learning. We highlight the importance of distinguishing between which customers are at risk and which should be targeted—as they are not necessarily the same customers. We identify trade-offs between reactive and proactive retention programs, between short- and long-term remedies, and between discrete campaigns and continuous processes for managing retention. We identify several areas of research where further investigation will significantly enhance retention management.

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Notes

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    We recommend to use the median in the recency/inter-purchase-time ratio when the distribution of inter-purchase time is skewed or when the number of observations is small.

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Correspondence to Eva Ascarza.

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This paper is the outcome of a workshop on “Customer Retention” as part of the 10th Triennial Invitational Choice Symposium, University of Alberta, 2016.

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Ascarza, E., Neslin, S.A., Netzer, O. et al. In Pursuit of Enhanced Customer Retention Management: Review, Key Issues, and Future Directions. Cust. Need. and Solut. 5, 65–81 (2018). https://doi.org/10.1007/s40547-017-0080-0

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Keywords

  • Customer retention
  • Churn
  • Customer relationship management (CRM)