Determinants of subscriptions to communications service bundles and their effects on customer retention in Korea

Abstract

Since bundles provide price discounts to customers and have lock-in effects for businesses in the communications sector, the number of bundle subscribers is rapidly growing in many countries, including Korea. The consumer welfare and economic effects of bundles have been well documented. Existing literature, however, has paid little attention to identifying the facets of benefit and risk that influence subscription, the differences in switching costs between subscribers and non-subscribers, and the relationships among bundle satisfaction, customer retention, and switching costs. To address these gaps. we performed an empirical analysis using survey data from 550 individuals. Our findings show that concerns about lock-in and performance, as well as economic benefit influence subscription to the bundles, and all switching costs are higher for the subscribers than for stand-alone users. Non-monetary switching cost of bundles especially has a moderating effect on customer retention. The implications for regulatory policy and customer strategy are discussed.