Tag: research

Quitting Behavior is Social Too

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When we talk about social networking or contagion effect, we are usually referring to getting good words out about us so that we can engender good will and gain additional customers. In other words, we often focus on positive behavior in the context of social networks. But just as positive behavior can be fostered through social networks, quitting behavior can be social too. When consumers decide to leave a company, even when no particularly negative word-of-mouth is present, that decision can still have a social rippling effect. Consider my recent quitting of Facebook, for instance. That decision was bolstered by seeing 36000+ consumers who also signed up to quit on QuitFacebookDay.com.

 

Exit

Image by Loui Loui from Flickr | CC 2.0

To help understand how this social quitting behavior works, I would like to discuss the findings from a rare academic study on this subject. Published in the Marketing Science Institute’s 2010 Working Paper Series, Irit Nitzan and Barak Libai from Tel Aviv University studied the effect of defection by friends on our own decisions to quit a company. If you are interested in the full report, you can purchase it directly from MSI.

Context

The study is based on the behavior of 853,643 customers of a major cellphone service provider in a Mediterranean country. The communication records and defection behavior of these consumers over the course of one year were examined. Social networks were constructed from the consumers’ call and text messaging records.

Main Findings

  • Quitting definitely has a social effect. Having an additional defecting friend increases one’s probability of leaving the same company by as much as 80%.
  • This social effect is the strongest right after the friend quits, and dissipates rather rapidly as time passes.
  • The stronger the social relationship one has with the quitting friend and the more similar one is to the friend, the stronger the social impact of quitting.
  • Heavy users and loyal customers who have been with the company for a long time and heavy users are more immune to the social effect of quitting from defecting friends.

What Does All This Mean to Practice?

  • Be proactive when a customer quits. If you have access to the customer’s social network (e.g., through online social networks such as Facebook), engage in preventive measures with the customer’s friends, such as sending an appreciation message to the friends, offering a special promotion, or obtaining feedback to address potential issues.
  • Try to respond fast, preferably within the first month, as the social effect of quitting is the strongest at the beginning.
  • Fostering customer loyalty does pay off. Loyal customers are much more resistance to forces that may lure them away from your company. This has been found to be the case from not only this study but also other academic studies as well.

Reference:
Irit Nitzan and Barak Libai (2010). Social Effects on Customer Retention Marketing Science Institute Working Paper Series 2010 Report No. 10-107

How Do College Students Approach Social?

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College students, like other young consumers, are notoriously fickle and may not exactly seem like an ideal candidate for loyalty marketing. But there are at least two things that make college students hard to ignore for many businesses. First, college kids are usually at the cutting edge of technology and fashion trends. After all, two of the major online players today, Google and Facebook, had sprung from university campuses. This makes college students important trendsetters to watch. Second, although college kids may not be rich today and some may even have concerns paying for their education, they do tend to spend more (a good 40%) on discretionary items such as fashion and entertainment. They are also well on their way to joining the educated professional workforce in a few years. So for some businesses, college students represent valuable customers right now, and for many others, these students are potentially valuable customers in the near future.

Because of this, it is important for loyalty marketers to get into the mind of college students. Recently, I conducted a brief survey of 184 college students. Similar to an earlier study I did on adult consumers, the purpose of this survey was to understand college students’ online social activities and their consumption and sharing of online content. Some findings from this survey were expected, while a few surprising facts also emerged. Here are some highlights.

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Loyalty Program Design Fundamentals Part II

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Last week, I wrote about the key loyalty program design factors that a loyalty manager should consider. In the second part of this series, I’d like to review what we know about effective loyalty program design from published academic research. I should start by saying that this area is still pretty new. So we don’t know a whole lot at this point. I’m hoping that by putting together here what we know will also help academic researchers identify the holes that still need to be filled in this area.

  

I. Program Requirements

Key References: Kivetz and Simonson (2003); Demoulin and Zidda (2009)

  • Although increasing program requirements may make a loyalty program less relevant to some consumers, it can also make the program more appealing to frequent customers. So if the goal of a loyalty program is to selectively attract heavy buyers, a relatively high program bar should be set.
  • Make sure the program is straightforward. Too much complexity in a program, whether it’s the point earning action required or the redemption of rewards, can turn consumers away right at the beginning.

Continue reading “Loyalty Program Design Fundamentals Part II”