Predicting partial customer churn using Markov for discrimination for modeling first purchase sequences
Currently, in order to remain competitive companies are adopting customer centered strategies and consequently customer relationship management is gaining increasing importance. In this context, customer retention deserves particular attention. This paper proposes a model for partial churn detection in the retail grocery sector that includes as a predictor the similarity of the products’ first purchase sequence with churner and non-churner sequences. The sequence of first purchase events is modeled using Markov for discrimination. Two classification techniques are used in the empirical study: logistic regression and random forests. A real sample of approximately 95,000 new customers is analyzed taken from the data warehouse of a European retailing company. The empirical results reveal the relevance of the inclusion of a products’ sequence likelihood in partial churn prediction models, as well as the supremacy of logistic regression when compared with random forests. Copyright Springer-Verlag Berlin Heidelberg 2012
Volume (Year): 6 (2012)
Issue (Month): 4 (December)
|Contact details of provider:|| Web page: http://www.springer.com|
Web page: http://www.gfkl.org/en/
Web page: http://www.bunrui.jp/en/
Web page: http://dssm.unipa.it/cladag
Web page: http://www.classification-society.org/
|Order Information:||Web: http://www.springer.com/statistics/statistical+theory+and+methods/journal/11634/PS2|
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.:
- K. Coussement & D. Van den Poel, 2008. "Churn prediction in subscription services: an application of support vector machines while comparing two parameter-selection techniques," Post-Print hal-00788096, HAL.
- Takanobu Nakahara & Katsutoshi Yada, 2012. "Analyzing consumers’ shopping behavior using RFID data and pattern mining," Advances in Data Analysis and Classification, Springer;German Classification Society - Gesellschaft für Klassifikation (GfKl);Japanese Classification Society (JCS);Classification and Data Analysis Group of the Italian Statistical Society (CLADAG);International Federation of Classification Societies (IFCS), vol. 6(4), pages 355-365, December.
- Buckinx, Wouter & Van den Poel, Dirk, 2005.
"Customer base analysis: partial defection of behaviourally loyal clients in a non-contractual FMCG retail setting,"
European Journal of Operational Research,
Elsevier, vol. 164(1), pages 252-268, July.
- 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.
- Jan Roelf Bult & Tom Wansbeek, 1995. "Optimal Selection for Direct Mail," Marketing Science, INFORMS, vol. 14(4), pages 378-394.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 2010.
"A theory of Fads, Fashion, Custom and cultural change as informational Cascades,"
Levine's Working Paper Archive
1193, David K. Levine.
- Bikhchandani, Sushil & Hirshleifer, David & Welch, Ivo, 1992. "A Theory of Fads, Fashion, Custom, and Cultural Change in Informational Cascades," Journal of Political Economy, University of Chicago Press, vol. 100(5), pages 992-1026, October.
- 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.
- K. Coussement & D. Van Den Poel, 2006. "Churn Prediction in Subscription Services: an Application of Support Vector Machines While Comparing Two Parameter-Selection Techniques," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 06/412, Ghent University, Faculty of Economics and Business Administration.
- Maria Mavri & George Ioannou, 2008. "Customer switching behaviour in Greek banking services using survival analysis," Managerial Finance, Emerald Group Publishing, vol. 34(3), pages 186-197.
- Prinzie, Anita & Van den Poel, Dirk, 2006. "Investigating purchasing-sequence patterns for financial services using Markov, MTD and MTDg models," European Journal of Operational Research, Elsevier, vol. 170(3), pages 710-734, May.
- Sushil Bikhchandani & David Hirshleifer & Ivo Welch, 1998. "Learning from the Behavior of Others: Conformity, Fads, and Informational Cascades," Journal of Economic Perspectives, American Economic Association, vol. 12(3), pages 151-170, Summer.
- A. Prinzie & D. Van Den Poel, 2007. "Predicting home-appliance acquisition sequences: Markov/Markov for Discrimination and survival analysis for modeling sequential information in NPTB models," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 07/442, Ghent University, Faculty of Economics and Business Administration.
- Dudyala Anil Kumar & V. Ravi, 2008. "Predicting credit card customer churn in banks using data mining," International Journal of Data Analysis Techniques and Strategies, Inderscience Enterprises Ltd, vol. 1(1), pages 4-28.
When requesting a correction, please mention this item's handle: RePEc:spr:advdac:v:6:y:2012:i:4:p:337-353. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla)or (Rebekah McClure)
If references are entirely missing, you can add them using this form.