Customer churn prediction using a hybrid method and censored data.docVIP

Management Science Letters 3 (2013) 1345–1352 Contents lists available at GrowingScience Management Science Letters homepage: www.GrowingS/msl Customer churn prediction using a hybrid method and censored data a* a b Bahram Bahmani , Golshan Mohammadi , Mehrdad Mohammadi and Reza Tavakkoli- Moghaddamc a Masters of Financial Management, Sanandaj Branch, Islamic Azad University, Sanandaj, Iran b PhD Student, Department of Industrial Engineering, Faculty of Engineering, University of Tehran, Tehran, Iran c Department of Industrial Engineering, Faculty of Engineering, University of Tehran, Tehran, Iran C H R O N I C L E A B S T R A C T Article history: Customers are believed to be the main part of any organization’s assets and customer retention Received January 22, 2013 Received in revised format 29 March 2013 Accepted 18 April 2013 Available online April 20 2013 Keywords: Customer churn prediction Customer relationship management as well as customer churn management are important responsibilities of organizations. In today’s competitive environment, organization must do their best to retain their existing customers since attracting new customers cost significantly more than taking care of existing ones. In this paper, we present a hybrid method based on neural network and Cox regression analysis where neural network is used for outlier data and Cox regression method is implemented for prediction of future events. The proposed model of this paper has been implemented on some data and the results are compared based on five criteria including prediction accuracy, errors’ type I and II, root mean square error and mean absolute deviation. The preliminary results indicate that the proposed model of this paper performs better than alternative methods. Neural network ? 2013 Growing Science Ltd. All rights reserved 1. Intro