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The Probability Model of Customer Retention with Measuring Customers’ Satisfactions

Hui-Hsin Huang

Abstract


Customer retention rate is an important topic in E-commerce when company hopes to keep the profit from the active customers by marketing programs. This study constructs a probability model to consider customer retention, follows Weibull distribution and is influenced by their satisfaction which is considered as a parameter on retention probability density function. A Bayesian form is formulated by calculating marginal density of customer retention. This probability model can predict how much time customer will retention in the future and its ratio of probability. An empirical data is conducted to estimate the parameters of the proposed model. The results of proposed model are compared to the previous research for model calibration. Finally, the conclusion is made for business applications. The results can reveal some cues that customer’s retention tendency and can be made as a reference for managers to revise or adjust E-commerce strategies to achieve the customers’ satisfaction.


Keywords


Customer retention, satisfaction, Weibull distribution, customer profitability, Reinartz

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