Improving customer retention in financial services using kinship network information

Authors:
Dries F. Benoit;Dirk Van den Poel
Affiliations:
Department of Marketing, Faculty of Economics and Business Administration, Ghent University, Tweekerkenstraat 2, B-9000 Ghent, Belgium;Department of Marketing, Faculty of Economics and Business Administration, Ghent University, Tweekerkenstraat 2, B-9000 Ghent, Belgium
Venue:
Expert Systems with Applications: An International Journal
Year:
2012

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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.