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Competition to Retain Customers


  • A. M. McGahan

    (Harvard Business School)

  • Pankaj Ghemawat

    (Harvard Business School)


This paper contains theoretical and empirical analysis of competition to retain customers. A formal game-theoretic model suggests that large firms are likely to exhibit greater customer retention rates than their smaller rivals in equilibrium even when their (common) customer retention technology does not exhibit increasing returns to scale. This hypothesis is corroborated by an empirical analysis of competition in ordinary life insurance.

Suggested Citation

  • A. M. McGahan & Pankaj Ghemawat, 1994. "Competition to Retain Customers," Marketing Science, INFORMS, vol. 13(2), pages 165-176.
  • Handle: RePEc:inm:ormksc:v:13:y:1994:i:2:p:165-176

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    References listed on IDEAS

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    Cited by:

    1. Parlar, Mahmut & Weng, Z. Kevin, 2006. "Coordinating pricing and production decisions in the presence of price competition," European Journal of Operational Research, Elsevier, vol. 170(1), pages 211-227, April.
    2. Julian Villanueva & Pradeep Bhardwaj & Sridhar Balasubramanian & Yuxin Chen, 2007. "Customer relationship management in competitive environments: The positive implications of a short-term focus," Quantitative Marketing and Economics (QME), Springer, vol. 5(2), pages 99-129, June.
    3. Gergely Biczók & Sándor Kardos & Tuan Trinh, 2010. "Pricing Internet access in the presence of user loyalty," Netnomics, Springer, vol. 11(2), pages 119-147, July.
    4. Il-Horn Hann & Kai-Lung Hui & Sang-Yong Tom Lee & Ivan P.L. Png, 2005. "Sales and Promotions: A More General Model," Industrial Organization 0508014, EconWPA.
    5. Chen, Yuxin & Zhang, Z. John, 2009. "Dynamic targeted pricing with strategic consumers," International Journal of Industrial Organization, Elsevier, vol. 27(1), pages 43-50, January.
    6. Il-Horn Hann & Kai-Lung Hui & Sang-Yong T. Lee & Ivan P. L. Png, 2008. "Consumer Privacy and Marketing Avoidance: A Static Model," Management Science, INFORMS, vol. 54(6), pages 1094-1103, June.
    7. Joseph Hall & Evan Porteus, 2000. "Customer Service Competition in Capacitated Systems," Manufacturing & Service Operations Management, INFORMS, vol. 2(2), pages 144-165, November.
    8. Zhang, Wenqing & Li, Shanling & Zhang, Dan & Hou, Wenhua, 2014. "On the impact of advertising initiatives in supply chains," European Journal of Operational Research, Elsevier, vol. 234(1), pages 99-107.
    9. Charlotte R. Ren & Ye Hu & Yu (Jeffrey) Hu & Jerry Hausman, 2011. "Managing Product Variety and Collocation in a Competitive Environment: An Empirical Investigation of Consumer Electronics Retailing," Management Science, INFORMS, vol. 57(6), pages 1009-1024, June.
    10. Il-Horn Hann & Kai-Lung Hui & Sang-Yong Tom Lee & Ivan Png, 2005. "Consumer Privacy and Marketing Avoidance," Industrial Organization 0503009, EconWPA.
    11. Li, Chu-Shiu & Lin, Chih Hao & Liu, Chwen-Chi & Woodside, Arch G., 2012. "Dynamic pricing in regulated automobile insurance markets with heterogeneous insurers: Strategies nice versus nasty for customers," Journal of Business Research, Elsevier, vol. 65(7), pages 968-976.
    12. Wen, Zhong, 2014. "Mixed pricing in oligopoly with limited monopoly," Economics Letters, Elsevier, vol. 125(1), pages 87-92.
    13. Villanueva, Julian & Bhardwaj, Pradeep & Chen, Yuxin & Balasubramanian, Sridhar, 2004. "Managing customer relationships: Should managers really focus on the long term?," IESE Research Papers D/560, IESE Business School.
    14. Yan Dong & Yuliang Yao & Tony Haitao Cui, 2011. "When Acquisition Spoils Retention: Direct Selling vs. Delegation Under CRM," Management Science, INFORMS, vol. 57(7), pages 1288-1299, July.
    15. Bing Jing, 2007. "Product differentiation under imperfect information: When does offering a lower quality pay?," Quantitative Marketing and Economics (QME), Springer, vol. 5(1), pages 35-61, March.
    16. Lu, Jye-Chyi & Tsao, Yu-Chung & Charoensiriwath, Chayakrit, 2011. "Competition under manufacturer service and retail price," Economic Modelling, Elsevier, vol. 28(3), pages 1256-1264, May.
    17. Yuxin Chen & Chakravarthi Narasimhan & Z. John Zhang, 2001. "Individual Marketing with Imperfect Targetability," Marketing Science, INFORMS, pages 23-41.


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