When an
existing customer or subscriber stops doing business with a company by
cancellation of a subscription or stop buying products/services, it is defined
as customer churn. For instance, customers that stop buying books from a
certain store or customers that cancel membership from a certain e-commerce
provider can be classified as churned customers.

churn is a crucial concept in today’s highly competitive business environment
and preventing the churn of existing customers is one of the most critical
challenges that many companies from various industries faced today. One of the
main reason behind is that in  most of the industries, there are a lot
companies providing equivalent products or services, so the customers are able
to choose among them so, they can easily switch from one product/service
provider to another (Junxiang Lu, 2008).

We Will Write a Custom Essay Specifically
For You For Only $13.90/page!

order now

need to be careful about losing their customers because customer churn leads
decreasing profits and possible loss of
referrals from continuing service customers (Jae-HyeonAh,
2006, p. 553). Moreover, it is significant to note that acquiring a new
customer far more costly than keeping an existing customer Therefore,
for many companies losing their existing (more profitable) customers is a huge
concern which lead them to take action on this issue and consider churn
prevention as a primal business goal (Junxiang
Lu, 2008).

For this purpose, companies
find ways to predict customer churn so that they can prevent it before it
actually happens. In other words, they try to find customers having high churn
probability so that they can take necessary actions before the customer stop using
their product or services. If the companies can predict the churn probability
of their customer base accurately, they can increase the effectiveness of
marketing actions and also optimize the usage of marketing resources (Jae-HyeonAh, 2006, p. 553). Because this way
they can target the customers having high churn risk and customer retention can
be achieved by directing the marketing actions to those customers rather than
the ones having low churn risk