FORECASTING CUSTOMER FUTURE BEHAVIOR IN RETAIL BUSINESS USING MACHINE LEARNING MODELS
Journal Title: Scientific Journal of Astana IT University - Year 2022, Vol 10, Issue 10
Abstract
The ability to forecast customers’ future purchases, lifetime value, and churn are fundamental tasks in business management. These tasks become more complicated when the relationship between customers and business is not contractual. Therefore, the application of an appropriate method of customer analysis influences the efficiency of company cost management in interaction with their customers. The purpose of this paper is to compare existing solutions of customer lifetime value prediction and provide a new way to predict the future behavior of customers with consideration of the drawbacks of previous works. The method should have the following properties: use data that is available in any retail business; take into account that markets are constantly changing; be more precise than existing solutions. In this paper, we proposed the method of identifying customer churn provided a way to analyze customer behavior associated with churn or retention. In order to understand why customers churn, we used eleven customer behavioral metrics. The relationship of used metrics with churn was proved using churn cohort analysis. The results of training of logistic regression and neural network on prepared dataset showed that their forecast accuracy is in the healthy range for highly predictable churn. Based on predicted churn probabilities, we calculated the customer lifetime value in the future period. Our research results on customer behavior in the retail business confirm the hypothesis that customers who make many purchases are less likely to churn than customers who make few purchases. The main uniqueness of this work is the way of finding customer churn, as no such data was provided in the initial dataset. In addition, the minimum amount of data that most retail companies have was used. This enables the proposed methodologies to be applied to a large number of retail companies.
Authors and Affiliations
Shyngys Akhmetbek
Keywords
Related Articles
- EP ID EP712439
- DOI 10.37943/ILMM7870
- Views 71
- Downloads 0
THE TASK OF CHOOSING PARTNERS FOR THE ORGANIZATION OF COOPERATION IN THE FRAMEWORK OF SCIENTIFIC AND EDUCATIONAL PROJECTS
The primary objective of this article is to establish a set of fundamental criteria for the selection of scientific partners for collaborative research efforts. Achieving this objective entails addressing the challenge o...
MATHEMATICAL, SOFTWARE AND HARDWARE SUPPORT OF THE CONCEPTUAL MODEL OF THE INFORMATION SYSTEM OF PRECISION AGRICULTURE
This study analyzes the current situation of application of precision farming technologies and solutions by agricultural enterprises of the Republic of Kazakhstan. The main players and used solutions have been identified...
FUNCTIONAL MODEL OF ORGANIZATION DEVELOPMENT BASED ON QUALITY MANAGEMENT IN AN EDUCATIONAL ORGANIZATIONAS A QUALITY ASSURANCE TOOL
In the context of the formation of an innovative economy, great attention in management in recent years has been paid to the problems of mastering and implementing the management of an organization based on quality. Qu...
INTELLECTUAL INFORMATION TECHNOLOGIES IN THE ACTIVITIES OF THE EMERGENCY RESCUE SERVICE
The paper considers the features of the use of intelligent information technologies in the process of the emergency rescue service of the enterprise. To improve the efficiency of the rescue services, it is necessary to...
STRUCTURAL MODEL OF THE SYSTEM OF DEVELOPMENT OF METHODOLOGICAL COMPETENCE OF IT-DISCIPLINE TEACHERS ON THE BASIS OF CONTINUING EDUCATION
The article considers the creation of structural model for the system of development of methodological competence of IT-discipline teachers based on continuing education with the description of the structure of microserv...