Customer‐Base Management in Network Industries: The Moderating Role of Network Size and Market Growth

Abstract

The study of network industries has emerged as an important research theme. In these markets, the customer base is a critical strategic asset for assessing the firm's current and future competitive position. To manage the customer base optimally in these industries, it is crucial to understand the key drivers of customer acquisition and retention. In this study, we integrate strategic and customer management research and provide a framework to understand the direct role of price and the moderating influences of two central characteristics of network markets, namely, network size and market growth, on a firm's ability to acquire and retain customers. The proposed framework is empirically tested in the European mobile communications industry using a longitudinal panel that contains information (quarterly data during 1998 to 2008) for 65 companies in 19 European markets. Our findings offer mixed support for the proposed framework as they reveal that, while network size and market growth do moderate the effect of price on customer acquisition, they only exert a direct influence on customer retention.