Content
Prof. Peter Zubcsek (Tel Aviv University)
- Date: Thursday, September 18, 2025
- Time: 10:00 am - 11:30 am
- Location: Ludwigstr. 28 VG/II, Room 211b
- Title: "Product returns, service pauses, and lifetime value in subscription retailing"
- Abstract: The $700B subscription economy faces persistently high churn. One retention strategy is to allow subscribers to pause their plans. We assess the profitability of this practice using transaction data from 28,212 customers of an apparel box subscription retailer. Each month, subscribers receive a curated box for a fee that is credited toward any purchases; unwanted items can be returned at no cost. At any time after their first month, customers may pause their subscription for one or two months. We estimate a hidden Markov model to link revenues, churn, and customer lifetime value (CLV) to product return behavior. Our results show that: (1) product returns and residual CLV have a non-monotonic relationship—zero-return customers have 25–40% lower residual CLV than some selective returners, indicating returns can signal engagement, not only dissatisfaction; (2) this relationship varies by tenure, with return rates’ effect on CLV differing by up to 30% between months one and two; and (3) allowing pauses is profitable under conservative assumptions grounded in market realities. This study advances understanding of subscription retailing by demonstrating the profit potential of pause policies, reframing product returns as a behavioral indicator of CLV, and providing retention strategies for practitioners.
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