Modeling of churn behavior of bank customers using logistic regression

Abstract

With the intense competition and increasing globalization in the nan- cial markets, bank management must develop customer-oriented strate- gies in order to compete successfully in the competitive retail banking environment. The longer a bank can retain a customer,the greater rev- enue and cost savings from that customer. However customers are prone to changing their banking behavior when they can purchase nearly iden- tical nancial products provided by the retail banks. In order to stay competitive, bank managers need to understand the customer that are likely to switch, factors that in uence and determine customers switching behavior and also to what extent each of the factor in uence customer switching. This research aimed at modeling the churn behavior of bank customer using logistic regression.It also identi ed the factors that contribute to the switching behavior and also to what extent each of the factors in u- enced the switching behavior. The ndings reveal that Bank reputation,Service quality,Service Prod- ucts and Price are the main factors that have an impact on customers switching behavior.In general, the results of this research allow service marketers and practitioners to develop and implement services market- ing strategies to decrease customer defection rates , and in turn, increase bank pro ts. Furthermore,this research provides useful information for future researchers who study switching-behavior in the banking industry.