Regaining "lost" customers: The predictive power of first-lifetime behavior, the reason for defection, and the nature of the win-back offer

Abstract

Service firms, which have high attrition rates, are finding it exceedingly difficult to grow their customer base. Despite their extensive retention efforts, customers still defect. For these firms, "lost" customers may pose a rewarding "lastresort" opportunity. Reacquiring customers who left the firm may help these firms not only regain their lost profits but also usurp profits from competitors. However, some pertinent questions remain as to whether lost customers are worth the investment in reacquisition and whether they will remain profitable if reacquired. This is the first study to empirically demonstrate how (1) the lost customers' first-lifetime experiences and behaviors, (2) the reason for defection, and (3) the nature of the win-back offer made to lost customers are all related to the likelihood of their reacquisition, their second-lifetime duration, and their second-lifetime profitability per month. The study shows that the stronger the first-lifetime relationship with the firm, the more likely a customer is to accept the win-back offer. This study also presents relevant implications for managers interested in identifying new avenues for growth through effective resource allocation on the reacquisition and management of lost customers. Finally, the authors outline if and when managers should choose between maximizing reacquisition and profitability.