Anyone knows of a good book or resource about Survival Analysis using SAS other than Paul Allison's book? My goal is to calculate Loyalty program CLV for hotel/casino/airline customers.
I apreciate any suggestions or ideas.
I don't think you are going to find a better practical guide on survival analysis using SAS than Paul Allison's book. I did a lot of searching myself. There are good chapters on survival analysis in 'Modern Applied Statistics with S' by Venables and Ripley as well as 'Data Mining Techniques' by Berry and Linoff.
You can always start by calculating the profitability value (revenue - costs) for each customer and then take the NPV (net present value) of the customers profit. This will give you an indication of the value the customer will add to the company over a period of time. However, if you want to calculate the CLV of the customer you need to use survival analysis techniques to quantify the instantaneous risk that churn will happen at time t, given that the customer already survived till time t. The following paper is from one of the SAS SUGI proceedings and explains how to do this in SAS.
Modeling Customer Lifetime Value Using Survival Analysis
− An Application in the Telecommunications Industry
Junxiang Lu, Ph.D.
Overland Park, Kansas
I was thinking about using survival analysis to calculate life time value for non-subscription based business. In non-subscription business, you don't have the clear cut definition of a customer CHURN and turn to yout competitor. Do you have any suggestion as to first of all, a good way forward? Thanks.
I would suggest you create a hazard curve for the hazard probabilities for non-subscription based customers.
The horizontal axis would be the tenure of customers measured in days/months, while the vertical axis would be the probability that customers stop at a particular tenure point. The hazard would normally increase up to a particular tenure point after which it would decrease and it will give you a lot of insight into the customer life cycle of non subscription customers. Furthermore, it would also be good to classify your customers as new customers and long tenure customers since the churn behaviour of these two groups will be different.