Service elimination: Understanding customer reactions when a service disappears

By J. N. HALM

Change is the only constant in business. This adage rings particularly true in service industries where organisations must continuously innovate to stay competitive. New services are launched with much fanfare, existing ones are upgraded, and inevitably, some services must be eliminated. It is this last part—service elimination—that many businesses find most challenging to execute.

Service elimination occurs when an organisation decides to discontinue a particular service offering from its portfolio. This could be a specific product variant, a pricing plan, a delivery option, or any other service component that the organisation decides is no longer viable. The reasons for elimination vary. Sometimes, the service is no longer profitable. Other times, it has become technologically obsolete. In some cases, the organisation simply wants to streamline its offerings to focus on more promising opportunities.

However, regardless of how sound the business rationale might be, service elimination comes with risks. Chief among these risks is customer defection. When you take away something customers have grown accustomed to, there is always the danger that they will take their business elsewhere. This is particularly concerning in today’s hyper-competitive markets, where customers have numerous alternatives at their fingertips.

The challenge for businesses, therefore, is to figure out how to eliminate services that no longer serve the organisation’s strategic interests while minimising customer defection. This delicate balancing act was the focus of a comprehensive study published in the April 2021 edition of the International Journal of Research in Marketing. The article was titled “Customer Defection Due to Service Elimination and Post-Elimination Customer Behavior: An Empirical Investigation in Telecommunications.”

The researchers conducted their main study in Hungary’s telecommunications sector—an industry characterised by rapid innovation and intense competition. The telecommunications industry is particularly interesting for this kind of research because telecom companies regularly introduce new service plans, features, and pricing structures while phasing out older ones. If there is any industry that understands the challenges of service elimination, it is telecommunications.

What the researchers found provides valuable insights for any service organisation contemplating portfolio renewal through service elimination. The study revealed several factors that influence whether customers will defect when a service is eliminated, particularly when the elimination is accompanied by a price increase.

The first finding relates to customer tenure—essentially, how long a customer has been with the organisation. The study found that tenure reduces customer defection during service elimination accompanied by price increases. In other words, long-standing customers are less likely to leave when their service is eliminated and replaced with a more expensive alternative. This makes intuitive sense. Customers who have been with an organisation for years have invested time and effort into that relationship. They have learned the systems, established routines, and perhaps even developed relationships with customer service personnel. The switching costs—both psychological and practical—are higher for these customers.

I have witnessed this phenomenon first-hand during my years in customer service. Long-time customers, even when unhappy about changes, tend to give the organisation the benefit of the doubt. They might grumble and complain, but they rarely leave immediately. Their loyalty has been built over time, and it takes more than a single negative event to completely erode that loyalty.

The second factor identified by the study is usage intensity. Interestingly, customers who use the service more intensively are also less likely to defect when it is eliminated and replaced with a higher-priced alternative. This finding might seem counterintuitive at first. One would think that heavy users, who would be most affected by price increases, would be the first to leave. However, the opposite appears to be true.

The explanation lies in the value these customers derive from the service. Heavy users depend on the service for their daily activities. Switching to a competitor would mean disrupting established patterns and potentially facing a learning curve with a new provider. For these customers, the inconvenience of switching outweighs the dissatisfaction with the price increase. They need the service too much to risk the disruption that comes with changing providers.

Age emerged as the third significant factor. The study found that older customers are less likely to defect during service elimination accompanied by price increases. This aligns with what we know about consumer behaviour across different age groups. Older customers tend to be more loyal, less price-sensitive in certain contexts, and less inclined to switch providers frequently. They value stability and familiarity over the potential savings that might come from shopping around.

Beyond understanding what reduces defection, the study also examined post-elimination usage patterns—how customers who stay with the organisation behave after the service elimination. The findings here were equally illuminating.

The researchers found that price increases following service elimination actually lead to higher usage intensity among customers who remain. This might seem paradoxical, but it makes sense when you think about it. Customers who are now paying more for the service feel compelled to get their money’s worth. They increase their usage to justify the higher price they are paying. It is the same psychology that makes people who buy expensive gym memberships more likely to actually use the gym.

The study also found that the degree to which customers had previously interacted with service providers affected their post-elimination usage. Customers who had lower interaction intensity before the elimination showed higher usage afterwards. This suggests that these customers were perhaps not fully utilising the service before but became more engaged after the changes.

Additionally, the very fact of customer defection and competitive effects in the market led to increased usage among those who remained. When customers see others leaving, it creates a sense of scarcity or exclusivity among those who stay. The competitive effects—perhaps competitors also eliminating similar services or raising prices—make customers realise that the grass is not necessarily greener on the other side.

From these findings, the researchers drew important practical implications for decision-makers in rapidly innovating markets. They suggest that organisations implementing service elimination strategies should focus their retention efforts on specific customer segments: new customers, light users, and ensuring high-quality customer interactions.

New customers, having less tenure, are at higher risk of defecting when faced with service elimination and price increases. These customers have not yet developed strong loyalty to the organisation, making them more willing to explore alternatives. Businesses must therefore pay special attention to this segment, perhaps by offering transitional pricing or enhanced support during the changeover period.

Light users, similarly, are more prone to defection because the switching costs are lower for them. They have less invested in the relationship and less to lose by moving to a competitor. For these customers, organisations might consider offering incentives to increase their usage intensity or providing alternatives that better match their lighter usage patterns.

The quality of customer interactions also emerged as a critical factor. The study suggests that organisations should invest in improving how they communicate with customers about service eliminations. This means not just announcing the change but explaining the rationale, offering alternatives, and providing support through the transition.

In my experience, the biggest mistake organisations make when eliminating services is treating it purely as an operational decision. They focus on the logistics—updating systems, training staff, communicating deadlines—but fail to consider the emotional impact on customers. Service elimination, especially when accompanied by price increases, can make customers feel betrayed, undervalued, or manipulated.

I believe that successful service elimination requires a human touch. It requires honest communication about why the change is necessary, empathy for customers who are affected, and a genuine effort to ease the transition. Organisations should not hide behind corporate speak or bury the information in fine print. Instead, they should be upfront, provide adequate notice, and offer meaningful alternatives or compensation where appropriate.

The telecommunications industry, where this study was conducted, provides an excellent case study for other service industries. If telecom companies—operating in one of the most competitive and rapidly changing sectors—can successfully navigate service elimination while retaining customers, the lessons they provide are surely applicable elsewhere.

The truth is that service portfolio renewal is not optional in today’s business environment. Organisations that fail to innovate, streamline, and evolve their service offerings will find themselves overtaken by more agile competitors. Service elimination, while challenging, is a necessary tool for maintaining a healthy, competitive service portfolio. The key is understanding which customers are most at risk of defection and implementing strategies to retain them while managing the transition effectively for all customers involved.

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