The impact of personalised incentives on the profitability of customer retention campaigns

Ali Tamaddoni, Stanislav Stakhovych, Michael Ewing

Research output: Contribution to journalArticleResearchpeer-review

6 Citations (Scopus)

Abstract

Traditional approaches to managing customer churn have typically concentrated on those customers most likely to defect. While accurately predicting customer churn probability is important, this metric alone does not sufficiently empower managers to make optimal decisions. Hence, the current study focuses on the relationship between retention incentives and profit maximisation. Specifically, we improve existing churn management practices by: (1) allowing for customer heterogeneity in incentive redemption behaviour, (2) introducing the dependence of the probability of accepting an incentive on its monetary value, and (3) offering an improved model for developing retention campaigns. We support our conclusions with empirical data and simulations and make tangible managerial recommendations.

Original languageEnglish
Pages (from-to)327-347
Number of pages21
JournalJournal of Marketing Management
Volume33
Issue number5-6
DOIs
Publication statusPublished - 24 Mar 2017

Keywords

  • Customer churn management
  • customer retention
  • data mining
  • incentive redemption
  • profitability frameworks

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