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Churn management optimization with controllable marketing variables and associated management costs
Abstract:

In this paper, we propose a churn management model based on a partial least square (PLS) optimization method that explicitly considers the management costs of controllable marketing variables for a successful churn management program. A PLS prediction model is first calibrated to estimate the churn probabilities of customers. Then this PLS prediction model is transformed into a control model after relative management costs of controllable marketing variables are estimated through a triangulation method. Finally, a PLS optimization model with marketing objectives and constraints are specified and solved via a sequential quadratic programming method. In our experiments, we observe that while the training and test data sets are dramatically different in terms of churner distributions (50% vs. 1.8%), four controllable variables in three marketing strategies significantly changed through optimization process while other variables only marginally changed. We also observe that the most significant variable in a PLS prediction model does not necessarily change most significantly in our PLS optimization model due to the highest management cost associated, implying differences between a prediction and an optimization model. Finally, two marketing models designed for targeting the subsets of customers based on churn probability or management costs are presented and discussed

Keywords: Churn management PLS prediction model PLS optimization model Management cost Triangulation Sequential quadratic programming
Author(s): .
Source: Expert Systems with Applications 40 (2013) 2198–2207
Subject: بازاریابی
Category: مقاله مجله
Release Date: 2013
No of Pages: 10
Price(Tomans): 0
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