Social network analysis to analyze the purchase behavior of churning customers and loyal customers

Customer retention has been a pressing issue for companies to get and maintain the loyal customers in the competing environment. Lots of researchers make effort to seek the characteristics of the churning customers and the loyal customers using the data mining techniques such as decision tree. However, such existing researches don't consider relationships among customers. Social network analysis has been used to search relationships among social entities such as genetics network, traffic network, organization network and so on. In this study, a customer network is proposed to investigate the differences of network characteristics of churning customers and loyal customers. The customer networks are constructed by analyzing the real purchase data collected from a Korean cosmetic provider. We investigated whether the churning customers and the loyal customers have different degree centralities and densities of the customer networks. In addition, we compared products purchased by the churning customers and those by the loyal customers. Our data analysis results indicate that degree centrality and density of the churning customer network are higher than those of the loyal customer network, and the various products are purchased by churning customers rather than by the loyal customers. We expect that the suggested social network analysis is used to as a complementary analysis methodology with existing statistical analysis and data mining analysis.