Churn management optimization via sequential quadratic programming with controllable marketing variables and associated management costs
- Title
- Churn management optimization via sequential quadratic programming with controllable marketing variables and associated management costs
- Author
- 김용석
- Keywords
- Churn management; PLS prediction model; PLS optimization model; Management cost; Triangulation; Sequential quadratic programming
- Issue Date
- 2013-05
- Publisher
- Elsevier LTD
- Citation
- Expert Systems With Applications, 2013, 40(6), P.2198-2207
- Abstract
- In this paper, we propose a churn management model based on a partial least square (PLS) optimization method that explicitly considers the management costs of controllable marketing variables for a successful churn management program. A PLS prediction model is first calibrated to estimate the churn probabilities of customers. Then this PLS prediction model is transformed into a control model after relative management costs of controllable marketing variables are estimated through a triangulation method. Finally, a PLS optimization model with marketing objectives and constraints are specified and solved via a sequential quadratic programming method. In our experiments, we observe that while the training and test data sets are dramatically different in terms of churner distributions (50% vs. 1.8%), four controllable variables in three marketing strategies significantly changed through optimization process while other variables only marginally changed. We also observe that the most significant variable in a PLS prediction model does not necessarily change most significantly in our PLS optimization model due to the highest management cost associated, implying differences between a prediction and an optimization model. Finally, two marketing models designed for targeting the subsets of customers based on churn probability or management costs are presented and discussed.
- URI
- https://www.sciencedirect.com/science/article/pii/S0957417412011670?via%3Dihubhttp://hdl.handle.net/20.500.11754/44761
- ISSN
- 0957-4174
- DOI
- 10.1016/j.eswa.2012.10.043
- Appears in Collections:
- GRADUATE SCHOOL OF BUSINESS[S](경영전문대학원) > BUSINESS ADMINISTRATION(경영학과) > Articles
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