Retaining or losing customers as they "churn" — Professor devises new competing risk model

MIT Sloan Assoc. Prof. Michael Braun

Businesses often spend a lot of money trying to retain customers. Many direct their retention activities toward all of their customers and hope that enough respond for the effort to pay off. But some customers leave anyway.  A more effective approach recognizes that customers are different and their likelihood of departing—a phenomenon known as churn in the business world—varies among individuals and over time.

Some customers churn for reasons a business can control. These customers may be unhappy with the price or product, or they may prefer a competitor. Others churn because they move away or die or go bankrupt—matters a business can’t control. An efficient strategy targets those customers likely to churn for controllable reasons and does not overspend on customers likely to leave for uncontrollable reasons. And when evaluating the success or failure of retention marketing activities, managers should take the incidence of uncontrollable churn into account.

Read More »