Customer segmentation based on survival character

Customer Segmentation is an increasingly pressing issue in today’s over-competitive commercial area. More and more literatures have researched the application of data mining technology in customer segmentation, and achieved sound effectives. But most of them segment customer only by single data mining technology from a special view, rather than from systematical framework. Furthermore, one of the key purposes of customer segmentation is customer retention. Although previous segment methods may identify which group needs more care, it is unable to identify customer churn trend for taking different actions. This paper focus on proposing a customer segmentation framework based on data mining and constructs a new customer segmentation method based on survival character. The new customer segmentation method consists of two steps. Firstly, with K-means clustering arithmetic, customers are clustered into different segments in which customers have the similar survival characters (churn trend). Secondly, each cluster’s survival/hazard function is predicted by survival analyzing, the validity of clustering is tested and customer churn trend is identified. The method mentioned above has been applied to a dataset from China Telecom, which acquired some useful management measures and suggestions. Some propositions for further research is also suggested.