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Customer Attrition Analysis For Financial Services Using Proportional Hazard Models

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Author Info
D. VAN DEN POEL ()
B. LARIVIÈRE ()

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Abstract

This paper studies the topic of customer attrition in the context of a European financial services company. More specifically, we investigate predictors of churn incidence as part of customer relationship management (CRM). We contribute to the existing literature: (1) by combining several different types of predictors into one comprehensive retention model including several ‘new’ types of time-varying covariates related to actual customer behaviour; (2) by analysing churn behaviour based on a truly random sample of the total population using longitudinal data from a data warehouse. Our findings suggest that: (1) demographic characteristics, environmental changes and stimulating ‘interactive and continuous’ relationships with customers are of major concern when considering retention; (2) customer behaviour predictors only have a limited impact on attrition in terms of total products owned as well as the interpurchase time.

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Publisher Info
Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 03/164.

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Length: 45 pages
Date of creation: Jan 2003
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Handle: RePEc:rug:rugwps:03/164

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Related research
Keywords: Banking marketing retention modelling proportional hazard model Cox regression

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This paper has been announced in the following NEP Reports: References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Pastor, JoseManuel & Perez, Francisco & Quesada, Javier, 1997. "Efficiency analysis in banking firms: An international comparison," European Journal of Operational Research, Elsevier, vol. 98(2), pages 395-407, April. [Downloadable!] (restricted)
  2. Golany, B. & Phillips, F. Y. & Rousseau, J. J., 1995. "Optimal design of syndicated panels: A mathematical programming approach," European Journal of Operational Research, Elsevier, vol. 87(1), pages 148-165, November. [Downloadable!] (restricted)
  3. Rust, Roland T. & Metters, Richard, 1996. "Mathematical models of service," European Journal of Operational Research, Elsevier, vol. 91(3), pages 427-439, June. [Downloadable!] (restricted)
  4. Athanassopoulos, Antreas D., 2000. "Customer Satisfaction Cues To Support Market Segmentation and Explain Switching Behavior," Journal of Business Research, Elsevier, vol. 47(3), pages 191-207, March. [Downloadable!] (restricted)
  5. Baesens, Bart & Viaene, Stijn & Van den Poel, Dirk & Vanthienen, Jan & Dedene, Guido, 2002. "Bayesian neural network learning for repeat purchase modelling in direct marketing," European Journal of Operational Research, Elsevier, vol. 138(1), pages 191-211, April. [Downloadable!] (restricted)
  6. Kumar, Dhananjay & Westberg, Ulf, 1997. "Maintenance scheduling under age replacement policy using proportional hazards model and TTT-plotting," European Journal of Operational Research, Elsevier, vol. 99(3), pages 507-515, June. [Downloadable!] (restricted)
  7. Dekimpe, Marnik G. & Degraeve, Zeger, 1997. "The attrition of volunteers," European Journal of Operational Research, Elsevier, vol. 98(1), pages 37-51, April. [Downloadable!] (restricted)
  8. Jones, Michael A. & Mothersbaugh, David L. & Beatty, Sharon E., 2002. "Why customers stay: measuring the underlying dimensions of services switching costs and managing their differential strategic outcomes," Journal of Business Research, Elsevier, vol. 55(6), pages 441-450, June. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. B. Larivière & D. Van Den Poel, 2004. "Predicting Customer Retention and Profitability by Using Random Forests and Regression Forests Techniques," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/282, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  2. B. Larivière & D. Van Den Poel, 2004. "Investigating the role of product features in preventing customer churn, by using survival analysis and choice modeling: The case of financial services," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/223, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  3. B. Larivière & D. Van Den Poel, 2005. "Investigating the post-complaint period by means of survival analysis," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 05/299, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  4. A. Prinzie & D. Van Den Poel, 2005. "Incorporating sequential information into traditional classification models by using an element/position- sensitive SAM," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 05/292, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  5. A. Prinzie & D. Van Den Poel, 2003. "Investigating Purchasing Patterns for Financial Services using Markov, MTD and MTDg Models," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/213, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  6. B. Larivière & D. Van Den Poel, 2007. "Banking behaviour after the lifecycle event of “moving in together”: An exploratory study of the role of marketing investments," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/433, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
    Other versions:
  7. D. Van Den Poel, 2003. "Predicting Mail-Order Repeat Buying: Which Variables Matter?," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/191, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
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