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FIGHTING CUSTOMER CHURN RATE: AN EXPLORATION OF CUSTOMER DEFECTION IN FINANCIAL SERVICES
(A2020-62876)

Published: May 27, 2020

AUTHORS

FERNANDO FERREIRA, Fundacao Getulio Vargas; Carlos Lourenco, Fundacao Getulio Vargas

KEYWORDS

customer churn; defection; Consortium

ABSTRACT

Few empirical studies have analyzed financial niched products to evaluate customer churn regarding financial literacy levels in emerging markets. This paper examines the relationship between customer financial literacy and customer churn and investigate the reasons why customers churn in a financial niched product (Consortium) in Brazil. A mixed method was chosen, and a survey was conducted to measure the financial literacy of 2,004 customers. These consumers were tracked for three months after signing the contract and were then separated into churners and non-churners. In the qualitative phase, a semi-structured interview with 12 churners was carried out to identify motivations and reasons why they defected. Results show that churners have lower financial literacy levels. Ultimately, findings suggest three main reasons for defection: 1) Misleading negotiation of the financial niched, 2) Financial restraints, 3) Customer withdraw. Managerial implications are discussed and solutions proposed.