The challenge of retaining customers acquired by free trials

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dc.citation.issue2
dc.citation.volume52
dc.contributor.authorDatta H
dc.contributor.authorFoubert B
dc.contributor.authorvan Heerde HJ
dc.date.available2015-04
dc.date.issued1/04/2015
dc.description.abstractMany service firms acquire customers by offering free-trial promotions. However, a crucial challenge is to retain the customers acquired with these free trials. To address this challenge, firms need to understand how free-trial customers differ from regular customers in terms of their decisions to retain the service. This article conceptualizes how marketing communication and usage behavior drive customers' retention decisions and develops hypotheses about the impact of free-trial acquisition on this process. To test the hypotheses, the authors model a customer's retention and usage decisions, distinguishing usage of a flat-rate service and usage of a pay-per-use service. The model allows for unobserved heterogeneity and corrects for selection effects and endogeneity. Using household panel data from a digital television service, the authors find systematic behavioral differences that cause the average customer lifetime value of free-trial customers to be 59% lower than that of regular customers. However, free-trial customers are more responsive to marketing communication and usage rates, which offers opportunities to target marketing efforts and enhance retention rates, customer lifetime value, and customer equity.
dc.description.publication-statusPublished
dc.format.extent217 - 234
dc.identifierhttp://gateway.webofknowledge.com/gateway/Gateway.cgi?GWVersion=2&SrcApp=PARTNER_APP&SrcAuth=LinksAMR&KeyUT=WOS:000355553700005&DestLinkType=FullRecord&DestApp=ALL_WOS&UsrCustomerID=c5bb3b2499afac691c2e3c1a83ef6fef
dc.identifier.citationJOURNAL OF MARKETING RESEARCH, 2015, 52 (2), pp. 217 - 234
dc.identifier.doi10.1509/jmr.12.0160
dc.identifier.eissn1547-7193
dc.identifier.elements-id231741
dc.identifier.harvestedMassey_Dark
dc.identifier.issn0022-2437
dc.identifier.urihttps://hdl.handle.net/10179/8087
dc.publisherAmerican Marketing Association
dc.relation.isPartOfJOURNAL OF MARKETING RESEARCH
dc.subjectfree trials
dc.subjectcustomer retention
dc.subjectusage behavior
dc.subjectcustomer lifetime value
dc.subjectacquisition mode
dc.subject.anzsrc1505 Marketing
dc.titleThe challenge of retaining customers acquired by free trials
dc.typeJournal article
pubs.notesNot known
pubs.organisational-group/Massey University
pubs.organisational-group/Massey University/Massey Business School
pubs.organisational-group/Massey University/Massey Business School/School of Communication, Journalism and Marketing
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