TY - JOUR
T1 - Managing B2B customer churn, retention and profitability
AU - Tamaddoni Jahromi, Ali
AU - Stakhovych, Stanislav
AU - Ewing, Michael Thomas
PY - 2014
Y1 - 2014
N2 - It is now widely accepted that firms should direct more effort into retaining existing customers than to attracting new ones. To achieve this, customers likely to defect need to be identified so that they can be approached with tailored incentives or other bespoke retention offers. Such strategies call for predictive models capable of identifying customers with higher probabilities of defecting in the relatively near future. A review of the extant literature on customer churn models reveals that although several predictive models have been developed to model churn in B2C contexts, the B2B context in general, and non-contractual settings in particular, have received less attention in this regard. Therefore, to address these gaps, this study proposes a data-mining approach to model non contractual customer churn in B2B contexts. Several modeling techniques are compared in terms of their ability to predict true churners. The best performing data-mining technique (boosting) is then applied to develop a profit maximizing retention campaign. Results confirm that the model driven approach to churn prediction and developing retention strategies outperforms commonly used managerial heuristics.
AB - It is now widely accepted that firms should direct more effort into retaining existing customers than to attracting new ones. To achieve this, customers likely to defect need to be identified so that they can be approached with tailored incentives or other bespoke retention offers. Such strategies call for predictive models capable of identifying customers with higher probabilities of defecting in the relatively near future. A review of the extant literature on customer churn models reveals that although several predictive models have been developed to model churn in B2C contexts, the B2B context in general, and non-contractual settings in particular, have received less attention in this regard. Therefore, to address these gaps, this study proposes a data-mining approach to model non contractual customer churn in B2B contexts. Several modeling techniques are compared in terms of their ability to predict true churners. The best performing data-mining technique (boosting) is then applied to develop a profit maximizing retention campaign. Results confirm that the model driven approach to churn prediction and developing retention strategies outperforms commonly used managerial heuristics.
U2 - 10.1016/j.indmarman.2014.06.016
DO - 10.1016/j.indmarman.2014.06.016
M3 - Article
SN - 0019-8501
VL - 43
SP - 1258
EP - 1268
JO - Industrial Marketing Management
JF - Industrial Marketing Management
IS - 7
ER -