The importance of social embeddedness

Abstract

This article argues the importance of social embeddedness at mobile providers by examining the effects of customers’ network topological properties on churn probability—the probability of a customer switching from one telecommunication provider to another. This article uses data from regional snowball sampling—the only practically feasible network sampling method—to identify groups with significantly different churn ratios for customers with different network topological properties. Clear evidence indicates that individual network characteristics (node-level metrics) have considerable impact on churn probabilities. The inclusion of network-related measures in the churn model allows a longer-term projection of churners and improves the predictive power of the model.With no possibility to carry out repeated sampling, sample stability was checked through simulation results. On the one hand, this article highlights the importance and effectiveness of the provider’s tailored marketing campaigns by showing that customers targeted by direct marketing campaigns are less threatened by churn than nontargeted customers. On the other, this article shows that social embeddedness blocks the impact of the very samemarketing efforts. This article forwards the idea that social embeddedness, also prevalent in vendor switching, can be extended to understanding the development of professional societies threatened by membership churn.