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Customer Propensity Modeling
The use of predictive analytics to estimate the likelihood of a customer taking a specific action, such as making a purchase, based on their past behavior.
Implications
A statistical approach used to predict the likelihood that a customer will engage in a specific behavior, such as making a purchase, upgrading a service, or canceling a subscription, often used to optimize marketing and sales efforts.
Example
Example: A telecom company uses customer propensity modeling to identify customers who are likely to switch to a competitor, allowing it to proactively offer retention incentives.
Related Terms
Different from customer segmentation, which categorizes customers based on characteristics, propensity modeling predicts future behaviors based on those characteristics.
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