Should they stay or should they go? Reactivation and Termination of Low-Tier Customers: Effects on Satisfaction, Word-of-Mouth, and Purchases
Many companies face the problem of having a substantial number of low-tier customers ? clients at the bottom of the customer pyramid. For this segment, it is necessary to either reactivate or terminate the customer relationships to increase profitability. Managers seek to learn more about marketing actions targeted towards low-tier customers and their response towards these actions. Therefore, we conducted a large field experiment in which we implemented a ?last call? marketing action for a large sample of low-tier customers of a catalogue retailer (N = 12,000). The action aims at sales reactivation, but in case a customer should not react, the relationship will be terminated. We measure customer response in terms of satisfaction, (positive and negative) word-of-mouth, and purchase behavior. We find no harmful effects from relationship termination, such as dissatisfaction or negative word-of-mouth. The results indicate that the ?last call? marketing action reactivates a small fraction of the low-tier customers. These customers remain active in the months following the action period. We discuss managerial implications of our findings and future research on low-tier customer segments.
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