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The
Working Concepts for
Building a Database Attrition Model Bruce Ratner, Ph.D. Database marketers are
often tasked with stemming the tide of customer attrition as mature
markets fizzle and new markets overtake existing ones. They use models
as a key component in their marketing programs to make headway against
a declining customer database. For example, in the financial services
and telecommunications industries, database marketer use attrition
models to identify individuals who are likely to cancel their credit
cards and cellular services, respectively, and then develop campaigns
targeted to those individuals intended to excite rather than cancel
activity. Logistic regression analysis is the standard method for
building an attrition model to explain and predict a binary target
variable - defined by attriters and nonattriters – based on static
variables (e.g., age and gender of customer) and time-series variables
(e.g., January through December balances due). Specifically, the model
provides an individual’s likelihood of attrition in a prescribed time
period in the future, e.g., one month prior to the cancellation of the
product or service. The time-series data must be in correct relative
position with respect to the prescribed time period before the data
analyst begins model building. This article discusses the working
concepts for building an attrition model by reviewing the basics of
logistic regression analysis, presenting an explicit definition of the
attrition model, and providing the SAS-code program for aligning
times-series data, which should be a welcomed entry in the tool kit of
data analysts who frequently work on the attrition problem
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