The impact of customer-initiated communication and customer behaviour on contract renewal likelihood: An empirical study

Abstract

PURPOSE The purpose of the thesis is to contribute to customer retention literature by developing an empirical model explaining which drivers affect renewal likelihood in a contractual context. The framework consists of two primary constructs: customer-initiated communication and customer behaviour. The thesis has three main objectives: To evaluate the effect of customer-initiated communication (i.e. inquiries and complaints) on renewal likelihood; to evaluate empirically the effect of customer behaviour as predictor of renewal likelihood; and to explore how the interaction between multichannel contract and cross-category usage affects renewal likelihood. SCOPE The research is based on panel data with a sample of 30 003 users of an online product/service in collaboration with a leading Scandinavian media group. FINDINGS The thesis has empirically shown the relationship between customer-initiated communication (i.e. inquiries and complaints) and renewal likelihood. Contrary to previous research, complaints seem to have a positive influence on renewal likelihood, which suggest that a voiced complaint may signal customer commitment. Furthermore, behavioural variables such as cross-category usage, multichannel contract and past renewals have a positive impact on renewal likelihood contract subscription. Lastly, the interaction between multichannel contract and cross-category usage have negative effect on renewal likelihood, suggesting a tension between channel value propositions (i.e. overlapping offers, limited added value), which negatively influence the utility derived from a multichannel contract. CONTRIBUTION The paper provides valuable insights related to customer-initiated communication and behavioural influence on the likelihood of renewal in a contractual context. Existing retention literature focuses on customer complaint or attitudinal variables (e.g. satisfaction, commitment), but rarely include inquiry as customer-initiated communication along with behavioural variables in a contractual context within the same model.