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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

    ()

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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Citations

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Cited by:
  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.
  2. Van den Poel, Dirk & Buckinx, Wouter, 2005. "Predicting online-purchasing behaviour," European Journal of Operational Research, Elsevier, vol. 166(2), pages 557-575, October.
  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.
  4. K. W. De Bock & D. Van Den Poel, 2012. "Reconciling Performance and Interpretability in Customer Churn Prediction using Ensemble Learning based on Generalized Additive Models," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/805, Ghent University, Faculty of Economics and Business Administration.
  5. Chen, Zhen-Yu & Fan, Zhi-Ping & Sun, Minghe, 2012. "A hierarchical multiple kernel support vector machine for customer churn prediction using longitudinal behavioral data," European Journal of Operational Research, Elsevier, vol. 223(2), pages 461-472.
  6. 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.
  7. K. W. De Bock & D. Van Den Poel, 2011. "An empirical evaluation of rotation-based ensemble classifiers for customer churn prediction," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/717, Ghent University, Faculty of Economics and Business Administration.
  8. Stefan Lessmann & Stefan Voß, 2010. "Customer-Centric Decision Support," Business & Information Systems Engineering, Springer, vol. 2(2), pages 79-93, April.
  9. D. Van den Poel, 2003. "Predicting Mail-Order Repeat Buying. Which Variables Matter?," Review of Business and Economics, Katholieke Universiteit Leuven, Faculteit Economie en Bedrijfswetenschappen, vol. 0(3), pages 371-404.
  10. Demirbag, Mehmet & Apaydin, Marina & Tatoglu, Ekrem, 2011. "Survival of Japanese subsidiaries in the Middle East and North Africa," Journal of World Business, Elsevier, vol. 46(4), pages 411-425, October.
  11. 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.
  12. Verbeke, Wouter & Dejaeger, Karel & Martens, David & Hur, Joon & Baesens, Bart, 2012. "New insights into churn prediction in the telecommunication sector: A profit driven data mining approach," European Journal of Operational Research, Elsevier, vol. 218(1), pages 211-229.
  13. W. Buckinx & D. Van Den Poel, 2003. "Customer Base Analysis: Partial Defection of Behaviorally-Loyal Clients in a Non-Contractual FMCG Retail Setting," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/178, Ghent University, Faculty of Economics and Business Administration.
  14. Coussement, Kristof & Benoit, Dries Frederik & Van den Poel, Dirk, 2009. "Improved Marketing Decision Making in a Customer Churn Prediction Context Using Generalized Additive Models," Working Papers 2009/18, Hogeschool-Universiteit Brussel, Faculteit Economie en Management.
  15. Coussement, Kristof & De Bock, Koen W., 2013. "Customer churn prediction in the online gambling industry: The beneficial effect of ensemble learning," Journal of Business Research, Elsevier, vol. 66(9), pages 1629-1636.
  16. Lariviere, Bart & Van den Poel, Dirk, 2007. "Banking behaviour after the lifecycle event of "moving in together": An exploratory study of the role of marketing investments," European Journal of Operational Research, Elsevier, vol. 183(1), pages 345-369, November.
  17. 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.
  18. D. F. Benoit & D. Van Den Poel, 2012. "Improving Customer Retention In Financial Services Using Kinship Network Information," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/786, Ghent University, Faculty of Economics and Business Administration.
  19. Gandomi, A. & Zolfaghari, S., 2013. "Profitability of loyalty reward programs: An analytical investigation," Omega, Elsevier, vol. 41(4), pages 797-807.
  20. K. Coussement & D. Van Den Poel, 2008. "Improving Customer Attrition Prediction by Integrating Emotions from Client/Company Interaction Emails and Evaluating Multiple Classifiers," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 08/527, Ghent University, Faculty of Economics and Business Administration.

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