Tactical Churn of Contractual Services: An Analysis of the Phenomenon and the Determinants: An Abstract

Abstract

Due to the target group-specific pricing policies of service providers, different prices exist for the same service across customer groups like new or reacquired customers compared to existing customers. Current customers may notice these offers but do not receive any benefits for their loyalty. Consequently, they may react with a ‘tactical churn’ to the target group-specific pricing policy of companies without having a clear intention to switch their providers. A ‘tactical churn’ comprises two aspects: (1) the cancellation of an existing contract with the objective of obtaining better contractual conditions and (2) the intention to remain with the current provider. Thus, this study examines the phenomenon of tactical churn and its determinants by conducting 19 qualitative interviews. The findings give first evidence for the phenomenon of ‘tactical churn’ as new type of customer churn behavior. The majority of the interviewees was familiar with the phenomenon and had already tactically cancelled their service contracts in different industries. The study shows that especially the price comparisons of existing customers with up to four reference groups are decisive for tactical churn. These are (a) new customers of the current provider, (b) other existing customers of the current provider, (c) customers of other providers, and (d) the price/value-change in the case of automatic renewal of the contract. If the comparison is not in favor for existing customers, this has a negative effect on the perceived price fairness and appreciation. This results in the pronouncement of a cancellation of the service contract without the clear intention to switch providers, but with the intention to get a better deal. Further, moral obligation and subjective norms of tactical churn behavior have also been identified as possible determinants of tactical churn. With regard to the question why customers remain in the relationship, the findings indicate that their decision depends on both affective and calculative commitment.