Not All Churn Customers Are the Same: Investigating the Effect of Customer Churn Heterogeneity on Customer Value in the Financial Sector

Woong Park and Hyunchul Ahn ()
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Woong Park: Graduate School of Business IT, Kookmin University, Seoul 02707, Korea
Hyunchul Ahn: Graduate School of Business IT, Kookmin University, Seoul 02707, Korea

Sustainability, 2022, vol. 14, issue 19, 1-22

Abstract: This research suggests a way to sustain a firm’s business by focusing on the economic aspects of relationship marketing by managing the heterogeneity of churn customers. In general, firms have regarded churn customers as a homogeneous segment, for they have not been conscious that churn ego can be various. However, customer churn can be divided into voluntary and involuntary, implying that firms should reform the retention strategy by focusing on egos that seem homogenous but are heterogeneous in terms of churn behavior. Using a multiple regression model, this study analyzed customer data from an insurance company to investigate the heterogeneous impacts of churn customers. It measured the impact based on the period and revenue in the second lifetime, comprehensively representing customer satisfaction. Empirical results show that customer churn heterogeneity significantly affects customers’ second-lifetime behavior. The analysis reveals how the firm effectively performed customer regaining initiatives and successfully maintained persistency. This research also concludes that voluntary and involuntary churn occurred by intrinsic and extrinsic motivation. Finally, this research implicates the retention strategy that differs from the heterogeneity to achieve a firm’s high performance and suggests an empirical method of spurious loyalty avoidance by hedging loyal customer selection risk.

Keywords: customer churn heterogeneity; voluntary churn; involuntary churn; win-back; customer’s second lifetime (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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