A Novel Model for Global Customer Retention Using Data Mining Technology

Abstract

This chapter deals with how to use data mining technology to find interesting pattern, which can be organized for global customer retention. Customer relationship management (CRM) comprises a set of processes and enabling systems supporting a business strategy to build long term, profitable relationships with specific customers. Customer data and information technology (IT) tools shape into the foundation upon which any successful CRM strategy is built. Although CRM has become widely recognized as an important business strategy, there is no widely accepted definition of CRM. Parvatiyar (2001) defines CRM as the strategic use of information, processes, technology, and people to manage the customer relationship with the company across the whole customer life cycle. Kincaid (2003) defines CRM as a company approach to understanding and influencing customer behavior through meaningful communications in order to improve customer acquisition, customer retention, customer loyalty, and customer profitability. These definitions emphasize the importance of viewing CRM as a comprehensive process of retaining customers, with the help of business intelligence, to maximize the customer value to the organization. According to (Swift 2001; Kim et al., 2003) CRM consists of four dimensions: Customer Identification, Customer Attraction, Customer Retention, and Customer Development. They share the common goal of creating a deeper understanding of customers to maximize customer value to the organization in the long term. Customer retention has a significant impact on enterprise profitability. Analyzing and understanding customer behaviors and characteristics are the foundation of the development of a competitive customer retention strategy, so as to acquire and retain potential customers and maximize customer value. Gupta et al. (2004) find that a 1% improvement in retention can increase enterprise value by 5%. As such, elements of customer retention include one-to-one marketing, loyalty programs and complaints management. One-to-one marketing refers to personalized marketing campaigns which are supported by analyzing, detecting and predicting changes in customer behaviors. Loyalty programs involve campaigns or supporting activities which aim at maintaining a long term relationship with customers. Customer satisfaction is the central concern for customer retention. Customer satisfaction, which refers to the comparison of customer expectations with his or her perception of being satisfied, is the essential condition for retaining customers (Chen et al., 2005). Bolton and Ruth N. (1998) have established the positive effect of customer satisfaction on loyalty and O pe n A cc es s D at ab as e w w w .in te ch w eb .o rg