Business Commons^™

Churn Management Optimization With Controllable Marketing Variables And Associated Management Costs, Yong Seog Kim, Hyeson Lee, John D. Johnson

Data Analytics & Information Systems Faculty Publications

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 success- ful churn management program. A PLS prediction model is first calibrated to estimate the churn proba- bilities 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 …