September 2012
Intermediate to advanced
286 pages
8h 7m
English
Content preview from Statistical Methods in Customer Relationship ManagementBecome an O’Reilly member and get unlimited access to this title plus top books and audiobooks from O’Reilly and nearly 200 top publishers, thousands of courses curated by job role, 150+ live events each month,
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6.2 Customer Churn
Researchers have a strong interest in the causes of customer churn or switching behaviors. In the mobile telephony industry, Kim and Yoon [1] adopted a binomial logit model to investigate the causes for customers switching carriers. The dependent variable of the model recorded the churning behavior (1 for switching, 0 for staying). These authors assumed that customers switch carriers because the utility of churning is greater than no churning. The utility can be expressed as
(6.1) 
where 
denotes service attributes and 
denotes individual-specific characteristics, and
(6.2) 
The probability of the nth subscriber to churn can be expressed as
(6.3) 
Since the unobserved part, 
, could be identically and independently distributed (i.i.d.) following a logistic distribution, a binomial logit model is suitable to model the utility and the probability of churning. The model is expressed ...
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