IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

Investigating the role of product features in preventing customer churn, by using survival analysis and choice modeling: The case of financial services

  • B. LARIVIÈRE

    ()

  • D. VAN DEN POEL

    ()

The enhancement of existing relationships is of pivotal importance to companies, since attracting new customers is known to be more expensive. Therefore, as part of their customer relationship management (CRM) strategy, many researchers have been analyzing “why” customers decide to switch. However, despite its practical relevance, few studies have investigated how companies can react to defection prone customers by offering the right set of products. Additionally, within the current customer attention “hype”, one tends to overlook the nature of different products when investigating customer defection. In this research, we study the defection of the savings and investment (SI) customers of a large Belgian financial service provider. We created different SI churn behavior categories by introducing two dimensions: (i) duration of the products (fixed term versus infinity) and (ii) capital/revenue risks involved. Considering these product features, we first gain explorative insight in the timing of the churn event by means of Kaplan-Meier estimates. Secondly, we elaborate on the most alarming group of customers that emerged from the former explorative analysis. A hazard model is built to detect the most convenient product categories to cross-sell in order to reduce their churn likelihood. Complementary, a multinomial probit model is estimated to explore the customers’ preferences with respect to the product features involved and to test whether these correspond with the findings of the survival analysis. The results of our study indicate that customer retention cannot be understood by solely relying on customer characteristics. In sum, it might be true that “not all customers are created equal”, but neither are all products.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://wps-feb.ugent.be/Papers/wp_04_223.pdf
Download Restriction: no

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 04/223.

as
in new window

Length: 28 pages
Date of creation: Feb 2004
Date of revision:
Handle: RePEc:rug:rugwps:04/223
Contact details of provider: Postal: Hoveniersberg 4, B-9000 Gent
Phone: ++ 32 (0) 9 264 34 61
Fax: ++ 32 (0) 9 264 35 92
Web page: http://www.ugent.be/eb

More information through EDIRC

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.:

as in new window
  1. Hajivassiliou, Vassilis & McFadden, Daniel & Ruud, Paul, 1996. "Simulation of multivariate normal rectangle probabilities and their derivatives theoretical and computational results," Journal of Econometrics, Elsevier, vol. 72(1-2), pages 85-134.
  2. D. Van Den Poel & B. Larivière, 2003. "Customer Attrition Analysis For Financial Services Using Proportional Hazard Models," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/164, Ghent University, Faculty of Economics and Business Administration.
  3. Rinus Haaijer & Michel Wedel & Marco Vriens & Tom Wansbeek, 1998. "Utility Covariances and Context Effects in Conjoint MNP Models," Marketing Science, INFORMS, vol. 17(3), pages 236-252.
  4. Jon A. Breslaw, 2002. "Multinomial probit estimation without nuisance parameters," Econometrics Journal, Royal Economic Society, vol. 5(2), pages 417-434, 06.
  5. Baesens, Bart & Verstraeten, Geert & Van den Poel, Dirk & Egmont-Petersen, Michael & Van Kenhove, Patrick & Vanthienen, Jan, 2004. "Bayesian network classifiers for identifying the slope of the customer lifecycle of long-life customers," European Journal of Operational Research, Elsevier, vol. 156(2), pages 508-523, July.
  6. Geweke, John & Keane, Michael P & Runkle, David, 1994. "Alternative Computational Approaches to Inference in the Multinomial Probit Model," The Review of Economics and Statistics, MIT Press, vol. 76(4), pages 609-32, November.
  7. 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.
  8. Keane, Michael P, 1992. "A Note on Identification in the Multinomial Probit Model," Journal of Business & Economic Statistics, American Statistical Association, vol. 10(2), pages 193-200, April.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:rug:rugwps:04/223. 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: (Nathalie Verhaeghe)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.