382. IJRM. The Effects of Churn on Subscription Services.
October 2, 2025
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In this episode, Professor Barak Libai of the Arison School of Business at Reichman University discusses research he conducted with colleagues and published in the International Journal of Research in Marketing. Their study explores the intersection of new product growth and customer profitability, with a focus on how churn fundamentally reshapes the growth and cash flow of subscription businesses. While churn is often viewed as just a hit to customer lifetime value, their work shows that its impact is much broader—it changes how markets grow, peak, and sustain themselves.
The work challenges us to revisit the foundations of product growth theory and better account for the realities of a subscription-driven economy.
Key Takeaways from Our Discussion:
Three curves matter: Adoption (who signs up), usage (who stays active), and money (cash flow). For subscriptions, adoption alone doesn’t tell the full story.
Churn reshapes growth: Higher churn not only reduces lifetime value, it slows growth, lowers the peak number of users, and shrinks the total market a company can realistically reach.
Churn is social: When a customer leaves, it doesn’t just hurt their value—it reduces word-of-mouth and network effects, making it harder to attract and retain others.
Covert vs. overt churn: Lost customers (overt churn) matter, but so does lost potential (covert churn)—those who might never adopt because others around them have left.
The cashflow trough problem: Acquiring customers costs money up front, and churn makes it harder to climb out of the initial dip before revenue catches up.
ARR vs. CLV: Annual recurring revenue is the “holy grail” metric in tech, but customer lifetime value provides a truer picture of long-term equity—especially when churn is high.
Freemium models complicate churn: Free users may not pay, but they sustain the ecosystem that premium users depend on, so their churn matters too.
Final advice: Don’t view churn in isolation. It’s not just about the value of the person leaving—it’s about their effect on the entire network of customers.
Click here for the Research Article
The Up Next podcast’s access to this content is courtesy of the International Journal of Research in Marketing, an international, double-blind peer-reviewed journal for marketing academics and practitioners. IJRM aims to contribute to the marketing discipline by providing high-quality, original research which advances marketing knowledge and techniques. As marketers increasingly draw on diverse and sophisticated methods, IJRM‘s target audience is comprised of marketing scholars, practitioners (e.g., marketing research and consulting professionals) and policymakers.
IJRM aims to be at the forefront of the marketing field with a particular emphasis on bringing timely ideas to market. The journal embraces innovative research with the potential to spur future research and influence practice. Hence, it welcomes contributions in various aspects of marketing. The editors, while accepting a wide array of scholarly contributions from different disciplinary approaches, especially encourage research that is novel, visionary or path breaking.
Interviewee
Barak Libai is Professor of Marketing at the Arison School of Business, Reichman University in Herzliya, Israel, where he also served as Head of the Marketing Group from 2018 to 2023. His research explores how customers create value for firms in a connected and increasingly digital marketplace, with a focus on social influence, customer lifetime value, and the growth of markets for new products and brands. He is a leading advocate for using “Customer Equity” as a core metric for profitability and resource allocation.
Barak’s work has received wide recognition, earning him numerous international awards, including the 2025 Steenkamp Long-Term Impact Award, the 2021 IJRM Best Paper Award, the 2014 Harold H. Maynard Award, and the 2004 Robert D. Buzzell Award from the Marketing Science Institute. He has twice been named among the top 50 most productive marketing researchers worldwide, based on publications in premier American Marketing Association journals.
His academic career includes appointments at Tel Aviv University and the Technion, as well as a visiting professorship at MIT Sloan School of Management. Beyond his research and teaching, Barak serves on the editorial boards of leading journals, including the Journal of Marketing, Journal of Service Research, California Management Review, and the International Journal of Research in Marketing.
With over 12,700 citations on Google Scholar, Barak’s work has shaped how both scholars and practitioners understand word-of-mouth, customer retention, and the financial impact of marketing. His recent interests extend to the business management of older consumers—an underappreciated, high-equity segment that he believes holds significant potential for both research and practice.
Co-Authors
Professor Eitan Muller is a professor of marketing at the Stern School of Business, New York University. He earned a B.Sc. (with distinction) in mathematics from the Technion, Israel Institute of Technology, an MBA (with distinction) in marketing, and a Ph.D. in managerial economics from the Kellogg Graduate School of Management, Northwestern University. He previously held positions at the economics department of the University of Pennsylvania, and the business schools at the Hebrew University, Tel Aviv University, and Reichman University (IDC).
His research interests are in new product and pricing. He has published extensively in journals in marketing, business and economics, with about 29,000 citations in Google Scholar. He has won several awards including the Harold Maynard award for significant contribution to marketing theory and thought, the Distinguished Marketing Scholar Award of the European Marketing Academy for outstanding marketing scholarship, and (twice) the Steenkamp Long-Term Impact Award.
Professor Verena Schoenmueller is an Assistant Professor in the Department of Marketing at ESADE Business School. Prior to joining Esade, she was an Assistant Professor at Bocconi University. She holds a PhD from the University of Basel and was a Visiting Postdoctoral Research Fellow at Columbia Business School. Her research examines consumer behavior in digital environments, with a focus on user-generated content on online platforms and social media, political marketing, and customer retention. Her work has been published in leading journals such as the Journal of Marketing Research, Marketing Science, and the International Journal of Research in Marketing, and has been recognized as a finalist for the Paul E. Green Best Paper Award (2021), the John D. C. Little Paper Award (2024), and the Weitz-Winer-O'Dell Award (2025).
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International Journal of Research in Marketing
Interviewee
Barak Libai
Co Authors
Eitan Muller
Verena Schoenmueller