Assessing the impact of derived behaviour information on customer attrition in the financial service industry

Tang, Leilei and Thomas, Lyn and Fletcher, Mary H and Pan, Jiazhu and Marshall, Andrew (2014) Assessing the impact of derived behaviour information on customer attrition in the financial service industry. European Journal of Operational Research, 236 (2). pp. 624-633. ISSN 0377-2217 (https://doi.org/10.1016/j.ejor.2014.01.004)

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Abstract

The value of the customer has been widely recognized in terms of financial planning and efficient resource allocation including the financial service industry. Previous studies have shown that directly observable information can be used in order to make reasonable predictions of customer attrition probabilities. However, these studies do not take full account of customer behavior information. In this paper, we demonstrate that efficient use of information can add value to financial services industry and improve the prediction of customer attrition. To achieve this, we apply an orthogonal polynomial approximation analysis to derive unobservable information, which is then used as explanatory variables in a probit–hazard rate model. Our results show that derived information can help our understanding of customer attrition behavior and give better predictions. We conclude that both researchers and the financial service industry should gather and use derived financial information in addition to directly observable information.

  • Item type:Article
    ID code:49155
    Dates:
    Date
    Event
    16 July 2014
    Published
    17 January 2014
    Published Online
    3 January 2014
    Accepted
    Notes:NOTICE: this is the author's version of a work that was accepted for publication in European Journal of Operational Research. Changes resulting from the publishing process, such as peer review, editing, corrections, structural formatting, and other quality control mechanisms may not be reflected in this document. Changes may have been made to this work since it was submitted for publication. A definitive version was subsequently published in European Journal of Operational Research, [236, 2, (16/07/2014)] doi:10.1016/j.ejor.2014.01.004
    Subjects:Social Sciences > Finance
    Social Sciences > Commerce > Accounting
    Department:Strathclyde Business School > Accounting and Finance
    Faculty of Science > Mathematics and Statistics
    Depositing user: Pure Administrator
    Date deposited:09 Sep 2014 15:41
    Last modified:08 Apr 2024 21:39
    Related URLs:
    URI:https://strathprints.strath.ac.uk/id/eprint/49155
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