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Customer Attrition Analysis For Financial Services Using Proportional Hazard Models

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  • D. VAN DEN POEL

    ()

  • B. LARIVIÈRE

    ()

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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Bibliographic 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
Date of revision:
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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References

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  9. Dekimpe, M.G. & Degraeve, Z., 1997. "The Attrition of volunteers," Open Access publications from Tilburg University urn:nbn:nl:ui:12-358836, Tilburg University.
  10. Francisco Pérez García & Javier Quesada Ibañez & José Manuel Pastor Monsálvez, 1995. "Efficiency Analysis In Banking Firms: An International Comparison," Working Papers. Serie EC 1995-18, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
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  13. Lorin M. Hitt & Frances X. Frei, 1999. "Do Better Customers Utilize Electronic Distribution Channels: The Case of PC Banking," Center for Financial Institutions Working Papers 99-21, Wharton School Center for Financial Institutions, University of Pennsylvania.
  14. S. Baranzoni & P. Bianchi & L. Lambertini, 2000. "Market Structure," Working Papers 368, Dipartimento Scienze Economiche, Universita' di Bologna.
  15. 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.
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