The Role of Big Data Analytics in Improving Customer Retention: An Empirical Study Using Structural Equation Modeling

Abstract

With the advent of digital technologies, organizations are significantly changing how they gather, analyze, interpret, and utilize customer information. Big data analytics (BDA) has become a key organizational ability that helps companies transform their customer data into valuable information that can be used to enhance customer experiences and build lasting relationships. With increased competition to acquire customers, customer retention has become an important strategic outcome for the analytics-driven marketing and has become a priority for organizations that strive to retain customers by personalizing, responding fast, improving service and fostering relationships. The purpose of this study is to investigate the impact of these key elements of big data analytics on customer retention, namely analytical capability, customer insight generation, personalisation and customer relationship management capability. The study is based mainly on the resource-based view and the dynamic capability theory. Quantitative research design was employed and structured questionnaires were used for the collection of responses on the utilization of customer-related big data analytics in organizations and customers' perception of the quality of the relationships and retention. Structural equation modeling were used to test the measurement and structural models. Reliability, convergent validity, discriminant validity, coefficient of determination, effect size, predictive relevance, direct effects and mediation analysis were used in the analysis. Based on the empirical model, it can be concluded that there is a positive effect of big data analytics on customer retention, which is quite significant. The results also highlight that generation of customer insight, personalization capability and customer relationship management capability have significant positive impact on retention. The pathway from big data analytics to customer retention is partially mediated by customer satisfaction, indicating that the value of big data analytics for customer retention is realized when big data provides insights that are leveraged to enhance customer experiences. The results add to the growing body of research that tie big data analytics capability not only to firm performance or measures of sales outcome, but also to measures of customer retention. The study also offers implications from the managerial perspective on how managers can build analytics-based customer retention.