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Does Service Bundling Reduce Churn?

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  • Jeffrey Prince
  • Shane Greenstein

Abstract

We examine whether bundling in telecommunications services reduces churn using a series of large, independent cross sections of household decisions. To identify the effect of bundling, we construct a pseudo‐panel dataset and utilize a linear, dynamic panel‐data model, supplemented by nearest‐neighbor matching. We find bundling does reduce churn for all three “triple‐play” services. The effect is only “visible” during times of turbulent demand. We also find evidence that broadband was substituting for pay television in 2009. This analysis highlights that bundling helps with customer retention in service industries, and may play an important role in preserving contracting markets.

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  • Jeffrey Prince & Shane Greenstein, 2014. "Does Service Bundling Reduce Churn?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 23(4), pages 839-875, December.
    • Handle: RePEc:bla:jemstr:v:23:y:2014:i:4:p:839-875
    DOI: 10.1111/jems.12073
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    Citations

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    Cited by:

    1. Calzada, Joan & Martínez-Santos, Fernando, 2014. "Broadband prices in the European Union: Competition and commercial strategies," Information Economics and Policy, Elsevier, vol. 27(C), pages 24-38.
    2. Howell, Bronwyn E & Potgieter, Petrus H., 2017. "Competition and vertical/agglomeration effects in media mergers: bagging bundle benefits," 14th ITS Asia-Pacific Regional Conference, Kyoto 2017: Mapping ICT into Transformation for the Next Information Society 168487, International Telecommunications Society (ITS).
    3. Jin, Haofeng, 2022. "The effect of overspending on tariff choices and customer churn: Evidence from mobile plan choices," Journal of Retailing and Consumer Services, Elsevier, vol. 66(C).
    4. repec:bri:cmpowp:13/321 is not listed on IDEAS
    5. Ribeiro, Hugo & Barbosa, Belém & Moreira, António C. & Rodrigues, Ricardo, 2022. "Churn in services – A bibliometric review," Cuadernos de Gestión, Universidad del País Vasco - Instituto de Economía Aplicada a la Empresa (IEAE).
    6. Reiko Murakami, 2022. "Consumer switching behavior and bundling: an empirical study of Japan’s retail energy markets," International Journal of Economic Policy Studies, Springer, vol. 16(2), pages 443-463, August.
    7. Grzybowski, Lukasz & Liang, Julienne & Zulehner, Christine, 2017. "Bundling, consumer retention and entry: evidence from fixed broadband market," 14th ITS Asia-Pacific Regional Conference, Kyoto 2017: Mapping ICT into Transformation for the Next Information Society 168483, International Telecommunications Society (ITS).
    8. Howell, Bronwyn E. & Potgieter, Petrus H., 2017. "Triple-play (un)bundled pricing – cui bono?," 28th European Regional ITS Conference, Passau 2017 169466, International Telecommunications Society (ITS).
    9. Jeffrey Prince & Shane Greenstein, 2017. "Measuring Consumer Preferences for Video Content Provision via Cord‐Cutting Behavior," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 26(2), pages 293-317, June.
    10. Stephanie Lee, 2017. "Does Bundling Decrease the Probability of Switching Telecommunications Service Providers?," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 50(3), pages 303-322, May.
    11. Kim, Moon-Koo & Park, Myeong-Cheol & Lee, Duk Hee & Park, Jong-Hyun, 2017. "Determinants of the subscription to bundled services and their effect on customer retention in the Korean communications sector," 14th ITS Asia-Pacific Regional Conference, Kyoto 2017: Mapping ICT into Transformation for the Next Information Society 168501, International Telecommunications Society (ITS).
    12. Calzada, Joan & García-Mariñoso, Begoña & Suárez, David, 2023. "Do telecommunications prices depend on consumer engagement?," Information Economics and Policy, Elsevier, vol. 62(C).
    13. Prince, Jeffrey T., 2019. "A paradigm for assessing the scope and performance of predictive analytics," Information Economics and Policy, Elsevier, vol. 47(C), pages 7-13.
    14. Bronwyn E. Howell & Petrus H. Potgieter, 2018. "Bundles of trouble: Can competition law adapt to digital pricing innovation?," Competition and Regulation in Network Industries, , vol. 19(1-2), pages 3-24, March.
    15. Kim, Moon-Koo & Park, Myeong-Cheol & Lee, Duk Hee & Park, Jong-Hyun, 2019. "Determinants of subscriptions to communications service bundles and their effects on customer retention in Korea," Telecommunications Policy, Elsevier, vol. 43(9).
    16. Ilona Bondos & Marcin Lipowski, 2016. "Service Packages – Attractiveness Has Many Faces," Eurasian Journal of Business and Management, Eurasian Publications, vol. 4(1), pages 1-10.
    17. Sobolewski, Maciej & Kopczewski, Tomasz, 2017. "Estimating demand for fixed-line telecommunication bundles," Telecommunications Policy, Elsevier, vol. 41(4), pages 227-241.
    18. Yu, Eun & Jung, Jaemin, 2018. "Towards Quadruple-Play Service: Both Individual and Household Level Analyses on Mobile Bundle," 29th European Regional ITS Conference, Trento 2018 184972, International Telecommunications Society (ITS).
    19. García-Mariñoso, Begoña & Suárez, David, 2019. "Switching mobile operators: Evidence about consumers’ behavior from a longitudinal survey," Telecommunications Policy, Elsevier, vol. 43(5), pages 426-433.
    20. Vithala R. Rao & Gary J. Russell & Hemant Bhargava & Alan Cooke & Tim Derdenger & Hwang Kim & Nanda Kumar & Irwin Levin & Yu Ma & Nitin Mehta & John Pracejus & R. Venkatesh, 2018. "Emerging Trends in Product Bundling: Investigating Consumer Choice and Firm Behavior," Customer Needs and Solutions, Springer;Institute for Sustainable Innovation and Growth (iSIG), vol. 5(1), pages 107-120, March.
    21. Marjan Izadpanah & Ali Vaezi, 2023. "A Bundle Pricing Approach for Mobile Telecommunication Services: Method and Data Analysis," Journal of Emerging Trends in Marketing and Management, The Bucharest University of Economic Studies, vol. 1(3), pages 7-25, September.
    22. Hugo Ribeiro & Belém Barbosa & António C. Moreira & Ricardo Rodrigues, 2024. "A closer look at customer experience with bundle telecommunication services and its impacts on satisfaction and switching intention," Journal of Marketing Analytics, Palgrave Macmillan, vol. 12(3), pages 668-686, September.
    23. Hugo Ribeiro & Belém Barbosa & António Carrizo Moreira & Ricardo Gouveia Rodrigues, 2024. "Determinants of churn in telecommunication services: a systematic literature review," Management Review Quarterly, Springer, vol. 74(3), pages 1327-1364, September.
    24. Howell, Bronwyn E. & Potgieter, Petrus H., 2019. "Bagging bundle benefits in broadband and media mergers: Lessons from Sky/Vodafone for antitrust analysis," Telecommunications Policy, Elsevier, vol. 43(2), pages 128-139.
    25. Tim Burnett, 2014. "The Impact of Service Bundling on Consumer Switching Behaviour: Evidence from UK Communication Markets," The Centre for Market and Public Organisation 14/321, The Centre for Market and Public Organisation, University of Bristol, UK.

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    More about this item

    JEL classification:

    • L0 - Industrial Organization - - General
    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • L96 - Industrial Organization - - Industry Studies: Transportation and Utilities - - - Telecommunications

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