Tracking customer portfolio composition: A factor analysis approach
Article first published online: 1 SEP 2009
Copyright © 2009 John Wiley & Sons, Ltd.
Applied Stochastic Models in Business and Industry
Volume 26, Issue 5, pages 535–550, September/October 2010
How to Cite
Abascal, E., García Lautre, I. and Mallor, F. (2010), Tracking customer portfolio composition: A factor analysis approach. Appl. Stochastic Models Bus. Ind., 26: 535–550. doi: 10.1002/asmb.798
- Issue published online: 1 SEP 2009
- Article first published online: 1 SEP 2009
- Manuscript Accepted: 3 JUL 2009
- Manuscript Revised: 24 JUN 2009
- Manuscript Received: 2 FEB 2009
- cluster analysis;
- data mining;
- multiple factor analysis;
- multiple correspondence analysis
In this paper, we address the changing composition of a customer portfolio taking into account actions undertaken by the company to adapt its service offer to market conditions and/or technological innovations. We present a specific methodology to identify clusters of customers in different periods and then compare them over time. The classification process takes into account both qualitative and quantitative aspects of the consumption levels of the services or products offered by the company. The possibility of period-to-period variation in the customer portfolio and the service or product offer is also considered, in order to achieve a more realistic scenario.
The core of the proposed methodology is related to the family of exploratory factorial and cluster techniques. The customers are classified by using a bicriterial clustering methodology based on ‘tandem’ analysis (multiple factor analysis+cluster analysis of the main factors). The bicriterial approach allows for a compromise between customers' consumption levels (a quantitative criterion) and their consumption/non-consumption pattern (a qualitative criterion). The evolution of the customer portfolio composition is explored through multiple correspondence analysis. This technique allows visual comparison of the position of different clusters against time and the identification of key changes in customer consumption behavior. The methodology is tested on realistic customer portfolio scenarios for a major telecommunication company. We simulate various scenarios to show the strengths of our proposal. Copyright © 2009 John Wiley & Sons, Ltd.