How do firms handle variability in customer experience? A dynamic approach to better understanding customer retention

Abstract

Firms invest in customer experience in the expectation that these investments will ultimately provide positive financial returns. In practice, however, customers are continuously exposed by the changes occurring in their personal perceptions of customer experience and market surrounding. Using a unique and comprehensive dataset containing customer-level and market-level information for a sample of 13,761 customers in the telecom market, we empirically test the proposed framework by applying multilevel modeling techniques. The results offer novel insights into the effects of customer experience, its variability (customer level), and market turbulence (market level) on customer retention, including the moderating effect of relationship age.