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Customer Attrition Analysis For Financial Services Using Proportional Hazard Models

  • D. VAN DEN POEL

    ()

  • B. LARIVIÈRE

    ()

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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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
Contact details of provider: Postal: Hoveniersberg 4, B-9000 Gent
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Web page: http://www.ugent.be/eb

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  11. 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.
  12. 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.
  13. 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.
  14. Rust, Roland T. & Metters, Richard, 1996. "Mathematical models of service," European Journal of Operational Research, Elsevier, vol. 91(3), pages 427-439, June.
  15. Dekimpe, Marnik G. & Degraeve, Zeger, 1997. "The attrition of volunteers," European Journal of Operational Research, Elsevier, vol. 98(1), pages 37-51, April.
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