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IMPROVING CUSTOMER RETENTION IN FINANCIAL SERVICES USING KINSHIP NETWORK INFORMATION

D. F. Benoit () and Dirk Van den Poel ()

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: This study investigates the advantage of social network mining in a customer retention context. A company that is able to identify likely churners in an early stage can take appropriate steps to prevent these potential churners from actually churning and subsequently increase profit. Academics and practitioners are constantly trying to optimize their predictive-analytics models by searching for better predictors. The aim of this study is to investigate if, in addition to the conventional sets of variables (socio-demographics, purchase history, etc.), kinship network based variables improve the predictive power of customer retention models. Results show that the predictive power of the churn model can indeed be improved by adding the social network (SNA-) based variables. Including network structure measures (i.e. degree, betweenness centrality and density) increase predictive accuracy, but contextual network based variables turn out to have the highest impact on discriminating churners from non-churners. For the majority of the latter type of network variables, the importance in the model is even higher than the individual level counterpart variable.

Keywords: network based marketing; CRM; predictive analystics; social network analysis (SNA); kinship network; financial services; random forests (search for similar items in EconPapers)
Pages: 28 pages
Date: 2012-05
New Economics Papers: this item is included in nep-for and nep-net
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