Customer retention: A behavioural model

Customer retention: A behavioural model

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Article ID: iaor2002596
Volume: 6
Issue: 4
Start Page Number: 333
End Page Number: 342
Publication Date: Jan 1995
Journal: IMA Journal of Mathematics Applied in Business and Industry
Authors: , ,
Keywords: finance & banking
Abstract:

One of the main problems currently facing credit-card issuers is the increasing number of cardholders who are using their cards less often (i.e. attrition) and/or returning their cards (closures). This problem is of particular concern as the total number of credit cards held by consumers is declining (by approximately 0.6 per cent per month in 1992) and the number of new applicants is also running at an all time-low (less than 1 per cent per month in 1992). Most of the published literature in the broad area of credit cards looks at credit scoring, rather than the need for card issuers to identify and retain a profitable portfolio of card customers. The overall objective of our research is ‘segmentation for customer retention’, and this paper aims to identify the characteristics of card customers who initiate the closure of their accounts. Linear discriminant analysis is applied to a sample of approximately 17,000 UK holders of bank credit cards, using various behavioural and sociodemographic variables, and tested on a holdout sample of 10,000 cases.

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