Effectiveness of Mobile Phone Customer Retention Strategies

Using the 419,194 customers of a mobile operator as the sample, this research investigates the effectiveness of the company’s retention strategies. It examines the effect of such strategies on extending customer life cycle. We find that the retention policies and the incremental average revenue per user (ARPU) in the retention period over the month prior are positively correlated. In addition, the correlation between the retention polices and the increments of consumer consumption variables, such as the number of calls, the number of short messages and the value-added services, are also positive. Moreover, the significantly positive interaction terms between the retention bonus and the consumption increments suggest that the bonus affects the relative ARPU through the consumption variables. Finally, the retention strategies demonstrate the different effectiveness according to the three different calling plans. The managerial implications of our findings are discussed.