An Overview of Data Mining Techniques - Data Mining Techniques in CRM: Inside Customer Segmentation - page 33

Table 2.5 Marketing application and campaigns that can be supported by classification
modeling.

Business objective Marketing application

Getting customers

• Acquisition: finding new customers and expanding the cus-
tomer base with new and potentially profitable customers

Developing customers • Cross selling: promoting and selling additional products or

services to existing customers
• Up selling: offering and switching customers to premium
products, other products more profitable than the ones that
they already have
• Deep selling: increasing usage of the products or services
that customers already have

Retaining customers

• Retention: prevention of voluntary churn, with priority
given to presently or potentially valuable customers

The most difficult task is usually to decide on the target event and population.
The analysts involved should come up with a valid definition that makes business
sense and can lead to really effective and proactive marketing actions. For
instance, before starting to develop a churn model we should have an answer
to the ''what constitutes churn?'' question. Even if we build a perfect model,
this may turn out to be a business failure if, due to our target definition, it only
identifies customers who are already gone by the time the retention campaign
takes place.
Predictive modeling and its respective marketing applications are beyond the
scope of this topic, which focuses on customer segmentation. Thus, we will not deal
with these important methodological issues here. In the next section, though, we
will briefly outline an indicative methodological approach for setting up a voluntary
churn model.

SETTING UP A VOLUNTARY CHURN MODEL

In this simplified example, the goal of a mobile telephony network operator is to
set up a model for the early identification of potential voluntary churners. This
model will be the base for a respective targeted retention campaign and predicts
voluntary attrition three months ahead. Figure 2.7 presents the setup.