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arketing scholars emphasize the influence of cus- ent precipitating events, or “triggers,” to moderate the effect
Average
Variance
Trigger or Construct Measure Loading Extracted
Situational trigger There has been a recent change in your working N.A. N.A.
conditions, family situation, or living conditions that has
caused you to consider switching to another operator.
Reactional trigger There has been a recent change in your relationship with N.A. N.A.
the company that has caused you to consider switching
to another operator, such as poor service, receiving a
faulty invoice, or something similar.
Affective commitmenta 1: I take pleasure in being a customer of the company. .798 .692
2: The company is the operator that takes the best care .837
of their customers.
ACt .748
(.000)
CCt .519 .545
(.000) (.000)
STt –.243 –.225 –.173
(.000) (.000) (.000)
RTt –.256 –.248 –.143 –.191
(.000) (.000) (.000) (.000)
Churnt – 1 –.090 –.088 –.117 .035 –.033
(.000) (.000) (.000) (.065) (.086)
Churnt + 1 –.130 –.119 –.150 .054 –.010 .757
(.000) (.000) (.000) (.005) (.606) (.000)
Fixedt .050 .051 .054 .016 –.025 –.265 –.254
(.009) (.008) (.005) (.401) (.198) (.000) (.000)
Notes: N = 2715; significance levels are in parentheses (two-tailed test). CS = customer satisfaction, AC = affective commitment, CC = calcu-
lative commitment, ST = situational trigger, and RT = reactional trigger.
customer as a fixed factor in our preliminary analysis of approached significance. This suggests that the relation-
churn. This time factor did not approach significance, and ships are essentially linear.
thus we omitted it from further analyses. Given the collinearity among the latent variables and
Preliminary estimation of the churn models also their interaction terms, we use a series of regression equa-
included a four-level fixed factor to capture differences in tions to predict churn. We first estimate the effects of prior
the type of service studied. We included all possible interac- performance, in the form of overall customer satisfaction,
tion effects involving this fixed factor and found only a on churn. We include the effects of prior churn to capture
main effect difference in average months of churn among heterogeneity and type of service as a control variable:
the fixed-phone customers (1.93) and the other services (1) Churnt + 1 = β0 + β1CSt + β2Churnt – 1 + β3Fixedt,
(4.09). For parsimony, we collapsed the four-level factor
into a dummy variable, Fixedt, to indicate fixed-phone ser- where Churnt + 1 is the total months of churn (0–9) postsur-
vice; we included this as a control variable. vey, CSt is customer satisfaction measured in the survey at
It is important to control for heterogeneity across cus- time t, Churnt – 1 is total months of churn (0–4) presurvey,
tomers when predicting retention (Mittal and Kamakura and Fixedt is a dummy variable to capture whether the ser-
2001). Churn data were available for the four months before vice involved fixed-phone service. Table 3 reports the stan-
the month during which a customer was using a service and dardized parameters for the churn equations and their sig-
participated in the periodic satisfaction survey. We define nificance; it also reports the variance explained for each
Churnt – 1 as the total number of months in which customers equation.
were not using the service before the survey; the average is Equation 1 shows significant effects of customer satis-
1.46 months of prior churn (s.d. = 1.749). Use of this prior faction, prior churn, and fixed-phone service. Churn
churn as a state-dependent variable to predict future churn decreases with satisfaction, increases with prior churn, and
helps control for heterogeneity. It explains variation in decreases for fixed-phone customers. That satisfaction pre-
churn due to the inherent predisposition of some customers dicts behavior is consistent with previous studies (Bolton
to switch and others to remain loyal. We also explore the 1998; Bolton and Lemon 1999; Mittal and Kamakura
potential for a weaker satisfaction–retention relationship 2001). That prior churn influences future churn is consistent
among those customers who are predisposed to churn. with Mittal and Kamakura’s (2001) findings that there is
significant heterogeneity in the satisfaction–retention rela-
Churn Models and Results tionship. The standardized parameters suggest that prior
The analyses all assume that the relationships between the churn has a relatively large effect on churn. As we describe
latent variables and our churn measure are linear. Recall subsequently, the relatively short time horizon involved
that Mittal and Kamakura (2001) find a nonlinear (margin- helps explain this result.
ally increasing) relationship between vehicle satisfaction In our second churn model, we explore whether addi-
and repurchase. Although our churn measure is relatively tion of the commitment constructs adds significant predic-
short term (ranging from zero months of churn to nine com- tors of churn:
plete months of churn), we estimated nonlinear relation- (2) Churnt + 1 = β0 + β1CSt + β2ACt + β3CCt + β4Churnt – 1
ships between each of our key latent variables (customer
+ β5Fixedt.
satisfaction, affective commitment, and calculative commit-
ment) and churn. In each case, the linear component was When we include affective and calculative commitment in
significant, whereas neither the quadratic nor cubic terms the model, all previously included variables remain signifi-
Churn Model R2
cant. Whereas calculative commitment becomes a signifi- coefficient for this interaction (.038, p = .022) demonstrates
cant predictor of churn, affective commitment does not. that the negative main effect of satisfaction on churn (–.065,
Note from Table 2 that customer satisfaction and affec- p < .000) is indeed lower for customers with a history of
tive commitment are highly correlated latent variables. If prior churn. We ran other models (not reported) that repre-
we remove customer satisfaction from Equation 2, the main sent variations on Equation 3. For example, when we sub-
effect of affective commitment becomes significant. stitute affective commitment for customer satisfaction, we
Although our top-down, or theoretical, analysis of reliabil- obtain the same pattern of results. When we include other
ity and discriminant validity supports separate satisfaction possible two- and three-way interactions, they are not
and affective commitment constructs, their correlation and significant.
our results suggest that they are capturing similar informa- Finally, we explore the potential for the situational and
tion. To understand this issue better, we conducted an reactional trigger conditions to influence churn. We add to
exploratory principal components analysis of the survey Equation 3 the main effects of the triggers on churn and
measures (with Varimax rotation). This bottom-up, or data- their potential to moderate the satisfaction–retention
driven, analysis reveals two principal components with relationship:
eigenvalues greater than one; these account for 62.9% of the (4) Churnt + 1 = β0 + β1CSt + β2CCt + β3STt + β4RTt
variation in the survey measures. The three measures of
customer satisfaction and the four measures of affective + β5Churnt – 1 + β6CSt × Churnt – 1 + β7CSt × STt
commitment load highest on the first component (average + β8CSt × RTt + β9Fixedt.
loading = .759), whereas the four measures of calculative
commitment load highest on the second component (aver- Although this model replicates the results from Equation 3,
age loading = .727). This analysis demonstrates that both none of the trigger main effects or interactions are signifi-
satisfaction and affective commitment capture customers’ cant. Again, the addition of all possible two- and three-way
overall evaluation of the offering. In contrast, calculative interactions to this equation reveals no other significant
commitment captures more of the competitive nature of the effects. Thus, Equation 3 captures the consistent predictors
offering with respect to switching costs or the availability of of churn in our data.
viable alternatives. In our subsequent churn equations, we
keep customer satisfaction and remove affective commit- Discussion and Implications
ment because satisfaction is the significant predictor.
Customer relationship managers benefit from a thorough
We then estimate two churn equations to explore the
understanding of the various factors that drive retention.
potential for interactions. Customers who are predisposed
The customer satisfaction and relationship marketing litera-
to churn or switch may be less sensitive to prior-
ture suggests three predictors of retention: overall customer
performance information. This suggests that the effect of
satisfaction, affective commitment, and calculative commit-
customer satisfaction on churn is lower for customers who
ment. Customer satisfaction is an overall evaluation of per-
are prone to churn. To explore this prediction, we include
formance to date, affective commitment captures the trust
the interaction between satisfaction and prior churn as
and reciprocity in a relationship, and calculative commit-
follows:
ment captures the existence of switching costs or lack of
(3) Churnt + 1 = β0 + β1CSt + β2CCt + β3Churnt – 1 viable alternatives. Prior research has used only a subset of
these constructs to explain behavior.
+ β4CSt × Churnt – 1 + β5Fixedt.
Our study contributes to the marketing literature in sev-
Equation 3 reveals a significant interaction between cus- eral ways. First, we combine customer satisfaction, affec-
tomer satisfaction and prior churn. The significant, positive tive commitment, and calculative commitment to predict
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