Introduction
This article proposes a
link between the philosophical studies of the nature of being and
CRM studies of customer response. This link is obvious when viewing
customer response through the metaphor of business as an organism,
rather than a machine. This approach guides the design of powerful
customer behavior models based on the abstractions obtained from historical
time-series data. These time based or temporal abstractions, keyed
to the response date for each customer (rather than the calendar date),
reflect what customers did during the several months before their
response was captured for this model. This voluntary attrition model,
based on households with automobile insurance policies, indicates
approximately 60 percent of the models with values over the random
average is attributable to non-historical (static) variables while
the temporal abstraction variables supply the other 40%.
Knowing How Our Customers Behaved
Before They Acted
To be competitive in today’s
markets, a company must capture and exploit information from historical
detail records describing what customer did in the past. This information
helps define patterns in customer behavior leading up to their decision
not to patronize the company. For a given customer, the decision
to leave the company did not happen in a vacuum. Many factors contributed
to this decision, such as dissatisfaction with service, enhanced
perception of competitive goods and services, and changes in business
or personal needs. While customer care programs track some factors,
such as customer satisfaction, it is not possible to capture and
store in the corporate databases most factors that directly contribute
to attrition. The only method for reflecting these attrition variables
is relating them to customer behavior patterns that are traceable
from data in the data warehouse. This article examines how
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historical information on customers
who have left the company can predict patterns indicating which
current customers have a high probability of leaving in the near
future.
Transforming Corporations into
Business Ecosystems: The Path to Customer Fulfillment
Since the Industrial Revolution,
Western Society tends to view the world as a machine, composed of
components that functioned like cogs, wheels and springs. Although
Newton formalized this approach in Science, it only worked within
the range of Newton’s instruments. Later discoveries by Einstein
(Relativity) and Quantum Physicists caused the Newtonian concept
of the world change drastically.
The business community
also embraced this metaphor during the Industrial Revolution and
viewed Henry Ford’s automobile assembly line as the paragon
of efficiency. As long as the product was relatively simple in organization,
this metaphor works. An efficient business became defined in terms
of:
a “well-oiled
machine”
“having momentum”
“gaining steam”
“firing on all eight
cylinders”
The primary
business unit became the corporation with the prevailing attitudes;
“It is Us Against Them” and “Only the Strong Competitors
Survived.” For these corporations, with production being the
primary business activity, they believed they had to maximize production
to maximize revenue. Generations of Operations Research practitioners
sought to optimize processes to maximize business revenue.
Fast computers, flexible
communications and (recently) the Internet, fostered a new business
paradigm — The Business Ecosystem
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