Customer defection: a study of the student market in Ireland

Abstract

Relationship marketing stresses that relationships, and not just transactions, should be the focus of marketing strategy. Part of the rationale for this lies in retention economics which are thought to be particularly powerful. Recent literature suggests that reduction of the defection rate can increase profits far more than growth in market share, better margins and other factors usually associated with competitive advantage. This paper reports the findings of a detailed analysis into the defection rate of university student accounts from financial service organizations throughout Ireland. University students’ accounts are a particularly illustrative case study since, a priori, their lifetime value, in terms of future revenue streams, have the potential of being greater than that of many other customer types. This paper then discusses defection issues and then presents evidence from the survey. Finally, the policy and strategic implications are examined.