Multiple Product Relationships and Customer Churning Behavior

Abstract

Customer retention and churn behavior are issues of critical importance to researchers and managers. In this paper, we examine the impact of a customer’s multiple product relationships with a firm (multi-buying) on the likelihood of churn by that customer. We use data from the wireless and phone services industry to examine this issue. We estimate a bivariate probit model of customer churn that accounts for the simultaneity of multi-buying and churn behavior. The results, after accounting for endogeneity and the effect of intrinsic customer characteristics, show that multi-buying significantly reduces churn even though the customers who are more predisposed to multi-buy have an inherently higher predisposition to churn. In other words, if the firm does not undertake efforts to persuade customers who are predisposed to multi-buying, to actually purchase multiple products from the firm, these customers will churn at a higher rate. Managerial efforts to enhance multi-buying behavior will not only boost revenue, but also improve customer retention. The result has implications for allocating resources between cross-selling and customer retention efforts.