Two-level model of customer retention in the US mobile telecommunications service market

The unprecedented growth of competition in the wireless telecommunications market has raised the importance of retaining current customers. Retaining existing customers is much less expensive and difficult than recruiting new customers in a mature market such as the US wireless communications industry. In addition to the reduced cost, there is the potential and opportunity value of customers gained over a long period of time. Because wireless service is not a one-time sale like commodity products but rather, a continuous service, service providers can offer additional services over the length of a customer's tenure to generate more revenue. This study focuses on understanding the factors related to customer retention behavior, both behavioral factors such as switching costs and customer satisfaction and demographic factors. Its two goals are to understand (1) how factors that affect switching costs and customer satisfaction, such as length of association, service plan complexity, handset sophistication and the quality of connectivity, drive customer retention behavior, and (2) how customer demographics such as age and gender affect their choice of service plan complexity and handset sophistication, leading to differences in customer retention behavior. The methodologies used were a binary logistic regression model and a two-level hierarchical linear model.