Three essays in modeling customer retention

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UCLA, 2006 - Business & Economics - 318 pages
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The objective of this research was to improve the prediction of customer retention and customer churn and to establish empirically the impact on these rates of different factors in the context of the customer-firm relationship. In this dissertation I focus on three research problems. In the first problem, I model the prediction of customer retention in the context of repeat visits to a website. I incorporate heterogeneity in customer retention over time by allowing customer retention probabilities to vary across first and subsequent return visits. I show the effects of customer fit (how well the product meets the customer's requirement), switching costs and customer interactions on customer retention at an Internet recommendation site. In the second problem, I model the prediction of customer churn in the context of a continuous subscription product i.e., direct-to-home satellite television. I highlight the importance of incorporating heterogeneity in the customer churn rates across customers. I empirically link customer churn to customer service experience, failure recovery (how well the firm performs in its recovery efforts after a service failure) and payment equity. In the third problem, I model the prediction of different types of customer churn for a continuous subscription product. I show the importance of accounting for all types of customer churn---voluntary as well as involuntary when estimating the churn probabilities. Ignoring the existence of involuntary churn significantly impacts the prediction and diagnosis of voluntary churn.

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Contents

Introduction 1
6
Customer Fit and Customer Retention at an Internet
9
Hazards of Ignoring Involuntary Customer Churn
105

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