Creating a Predictive Churn Model : Part 1

A Predictive Churn Model is a tool that defines the steps and stages of customer churn, or a customer leaving your service or product. Having a predictive churn model gives you awareness and quantifiable metrics to fight against in your retention efforts. Without this tool, you would be acting on broad assumptions, not a data-driven model that reflects how your customers really act. But with an evolving churn model, you can fight for retention by acting on the metrics as they happen. This gives you the ability to pattern habits of customers who leave, and step in before they make that decision.

The first step in creating this model is understanding your customer behavior that comes from customer data points. Without a strong base of customer data, it’s going to be impossible to understand how you can better serve them. You need to be able to evaluate the triggers that caused them to ultimately leave your company. So what data do you need? Let’s look at some popular items that might help you think of your own company and what data you have, or could get easily.

Purchase HistoryCustomer Information
Zip Code
Do they get your Mailings?
Frequency of Purchase
Date of Last Purchase
Value of Purchases
Payment Method
Balances / Store Credit
Customer InteractionsProducts
Type of Product
Variety of Products
Coupon Usage
Service Questions
Store Visits / Online
Complaint Resolutions
Complaint Priority

The more data you have in your evaluation, the more accurate your model can be. It’s important to know as much as you can about the events that lead to your customer leaving. But once you have customer data in a format that you can easily manipulate and query, you can start to look for trends in you data that equate to customer churn. Identify all the churned customers first, then look at that group to establish any patterns. In the second part of this article we will look at how to use that data to start asking the right questions to see the churn happening, and in the last part of this series we will look at how we take that information and flip it around to put our predictive churn model into action.

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Read Part 2 of this series >>

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