The Markov chain approach to the analysis of credit card customers in strategic marketing

Pao Yue-kong Library Electronic Theses Database

The Markov chain approach to the analysis of credit card customers in strategic marketing


Author: Lam, Yat-ming Eddie
Title: The Markov chain approach to the analysis of credit card customers in strategic marketing
Year: 1996
Subject: Credit cards -- China -- Hong Kong -- Marketing
Markov processes
Hong Kong Polytechnic University -- Dissertations
Department: Multi-disciplinary Studies
Pages: vi, 67, [35] p. ; 30 cm
Language: English
InnoPac Record:
Abstract: The credit card market is always under vigorous competition in Hong Kong. Individual banks start the focus on adopting marketing strategy on relationship management to expand the penetration rate, and the usage of Customer Information System (CIS) in one of the emphasized approaches for many bankers. With the manipulation of detail customer profile and transaction information obtained from CIS, the bank can predict the future trend of customers, to associate with suitable marketing action to maximize profit. The aim of this research is to illustrate the use of Markov analysis as a predictive tool to determine the transition relationship between pre-defined states. Customer information for a medium sized bank in Hong Kong has been extracted for analysis. The model will be defined with the most appropriate definition of sub-states and transition matrix, and targeted to be the most predictive one among all possible combinations. The final model is developed out of twenty proposed models, with different combinations of sub-states and transition matrices. It achieved with the best result in chi-square testing, and passed in two validation tests. A lot of information is obtained from the model to identify potential customers in specific states, such as low and high spending utilization, attritor, dormant and overlimit customers. The model is also capable to predict the number of customers in various states over a certain period of time and perform marketing planning. In the research, various suggestions are recommended to the final model for marketing activities to suitable customers. It is concluded that the result and implication from the research should be beneficial to card business of the bank, specially in the strategic planning of credit card product. The Markov chain model can furnish the interrelationship between customer spending behaviour and transaction characteristic, to become a valuable tool in business application.

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