Mining optimal actions for profitable CRM

A novel algorithm is described that suggests actions to change customers from an undesired status to a desired one (such as loyal) and takes into account the cost of actions, and further it attempts to maximize the expected net profit.

Abstract

Data mining has been applied to CRM (Customer Relationship Management) in many industries with a limited success. Most data mining tools can only discover customer models or profiles (such as customers who are likely attritors and customers who are loyal), but not actions that would improve customer relationship (such as changing attritors to loyal customers). We describe a novel algorithm that suggests actions to change customers from an undesired status (such as attritors) to a desired one (such as loyal). Our algorithm takes into account the cost of actions, and further it attempts to maximize the expected net profit. To our best knowledge, no data mining algorithms or tools today can accomplish this important task in CRM. The algorithm is implemented, with many advanced features, in a specialized and highly effective data mining software called Proactive Solution.