All Customers Are Polygamists and How Direct Marketers Can Understand Them
TM: I never thought I'd hear 'acquisition' and 'inertia' in the same sentence.
PF: Yep. But I really do believe it. And, again, this isn't just based on some theoretical model, it's not based on some absurd economic rational principles. It's purely driven by the data. And it's driven by an agnostic look at data. Let's let the data, let's let the customers tell us what the patterns are, as opposed to imposing some kind of framework on them that forces it in a particular direction.
TM: How does this relate to your more recent research, such as "Customer Retention Dynamics in a Contractual Setting: The Paradox of Increasing Loyalty"?
PF: And now, let me add the newest piece to it. … But so, let me go back to my coin-flipping story. I'm basically saying every customer flips a coin, 'Heads, I stick around. Tails, I leave.' And my first-pass version of the story is to say that while the coins vary across customers, they don't vary over time. I'm flipping my coin time and time again until it comes up tails and I leave.
And a lot of people don't buy that story. They say, 'How can that be true? Of course your coin is changing over time.' So we built this new model to allow the coins to change over time. To allow for some dynamics at the individual level. And do you know what we find? The coin becomes more tailsey over time in almost every situation. In other words, as you stay around longer as a customer, your propensity to leave increases over time. And that's the most heretical thing I can say. Because there's not a person on the planet who would believe that.
TM: Except for, maybe, Christopher Ryan and Cacilda Jethá, who just released a book about how humans are not historically inclined to be monogamous.
PF: You know what? You're right. There's actually a lot of people on the planet who agree with me, but none of them are in marketing.
And I'll give you another example where the same patterns apply. It's not only in relationships among males and females, but it's also relationships between firms and employees. The very same patterns apply there; which is to say, every year the employee flips a coin: 'Heads, I stay on the job. Tails, I leave and get a new one.' And a lot of firms believe that, 'The longer they stay with us, the more loyal they become.' But there have been a number of heretical studies over the years, in the last 20, 30 years that have shown the opposite. 'What's up with this? That employees who stay with us longer become slightly more inclined to leave?' And I think that relationship between firm and employee and firm and customer is quite the same. And so it's another one of these examples about establishing similar patterns across domains and that basically, the exact same model that you could apply to customers, to employees and to relationships. I believe that those linkages, what it says about us as a species is much stronger than what marketers [believe], the Kool-Aid that they're drinking. So it's great that you're aware of that and, again, it makes it easier to establish some of these more general patterns. But trying to get marketers to believe it, it's an uphill climb.