The effects of frequency of purchase and tenure on firm revenue

Saalem Sadeque

Research output: ThesisDoctoral Thesis

162 Downloads (Pure)

Abstract

A longer tenure for buyers of firm’s products has been argued to bring
a number of benefits for the firm; such as generating high profits,
lower operating costs, being less price sensitive, etc. This theory-based
assumption has led companies to focus on developing and managing
customer retention programmes. However, some other studies have cast
doubts by reporting that in many marketing contexts, the benefits from
longer tenure customers do not actually materialise. For example, some
research findings show that short tenure customers can be as profitable
as long tenure customers. It appears that buyers’ frequency of purchase
may be one important factor that can explain these discrepancies.

Prior studies have not explicitly investigated buyers’ frequency of
purchase and tenure in firm revenue. This study investigates these two
variables in the context of a very frequently purchased product like
gambling. Gambling is now recognized as the largest revenue
generating subcategory in the entertainment industry with revenues
greater than music, theme parks and movies combined. The study used
a dataset obtained from a large gambling service provider in Australia.
The dataset contained real time, actual behavioural information
collected over a period of over nine years for over 11,000 bettors.

The major contribution of the study is the finding that frequency of
purchase has a greater role in firm revenue than tenure with the
company. The study also found that longest and shortest tenure
customers contribute about the same to firm revenue. The customer
groups that exhibited high frequency of purchase contributed the
greatest to firm revenue. Interestingly, these high of frequency
purchase groups did not account for the longest or the shortest tenure
with the company. Prior studies did not report these differences in
customer groups based on frequency of purchase and tenure with the
firm. One of the major implications from this research is that the
objective of loyalty programmes may need to be rethought for of high
frequency of purchase products. Buyers with high frequency of
purchase in these product categories may be strongly influenced by
habit that may leave them less affected by loyalty programmes. This
also implies that it may not be necessary to offer loyalty programmes
to high frequency buyers in these categories.
Original languageEnglish
QualificationDoctor of Philosophy
Publication statusUnpublished - 2016

    Fingerprint

Cite this