Thursday, April 05, 2012

Social Effects On Customers Retention

We all knows that the social community around one customer is a very important part of one customer decision making process. Depending on what friends, relatives or co workers buy, a person will be influenced and there are strong chances he will buy similar products,probably from the same manufacturer.

The social impact has been used a lot by advertisers in commercials. But social impact on customer choices has become even stronger lately as customers become more and more aware, and more and more connected, thanks to social media, like Twitter, or Facebook.

It is also true for the opposite, when people around a customer decides to switch from one brand to another, people around him may have the same reaction.

That is what this blog post is about: Researchers Irit Nitzan and Barak Libai analyzed the behavior of more than a million customers of a cell phone service provider to see how likely they were to defect to another service provider when one or more of the people in their calling network canceled their service. A year's worth of data revealed that approximately one-third of the customers studied saw at least one of their friends leave the service provider. The research reveals that after that friend or friends left, the probability that the remaining customer would also leave rose 80%.”

“Consumers who were closer to one another—defined by the volume of communications they used—were more likely to defect than consumers who spoke with the defecting friend less frequently, ostensibly because close friends share more purchase recommendations and opinions with those closest to them than with consumers to whom they speak less frequently, the authors say. The impact of these word-of-mouth opinions was less among consumers considered loyal to the carrier, as defined by how long they'd been customers of the mobile service provider and their usage level. In all instances, the impact of friends' defections to other carriers was felt most acutely shortly after they left and diminished within a few months' time.”

This should gives you extra arguments to look after what people says about your brand on social media. It also gives a very good data to look after: the volume of communications between individuals to evaluate how strong the chances are that this person will follow the decision of the other persons.

What do you think about it?