Customer Retention

Name

Customer Retention

Description

Attrition or churn is a growing problem in many industries. It is characterized by the act of customers switching companies, usually to take advantage of a better offer or just to get some incentives. Attrition is defined as a decrease in the use of a product or service. For bank accounts, attrition is the decrease in balances on which interest is being earned. Churn is defined as the closing of one account in conjunction with the opening of another account for the same product or service, usually at a reduced cost to the consumer. This must not necessarily be a competitor, e.g. a customer of the "traditional" business division may switch to the e-business division of the same company. For DM activities there are several opportunities. One type of analysis predicts the act of reducing or ending the use of a product or service after an account has been activated. At Swiss Life for example, the serious business problem of life insurance surrender falls into this category. The benefit of DM would be to build an understanding of what the factors are that indicate high risk customers. Using the DM results, substantial money can be saved by targeting specifically at-risk customers.