Analyzing Customer Churn – Pseudo-Observations

Imagine for a moment that you’ve pulled together the mother of all churn data sets. You’ve got customer lifetime data, demographic data, and usage information. You know how many support tickets your customers have submitted, what those tickets were about, and whether they were happy with the customer service they received. You know what some of your customers had for breakfast this morning. OK, maybe not the breakfast thing. But it’s a lot of data.

Excited about your work, you pop all of this into a cox regression model, and the proportional hazards test blows up. Majorly. You take most of the variables out of the model, and you’re left with some analysis that doesn’t violate any key assumptions, but that also doesn’t tell you much of anything. What do you do?

Stuck Pooh

You, sir, are stuck! Or are you?

One of the easiest ways to tackle these challenges is to create “pseudo-observations” from your survival data. These pseudo-observations can be plugged into regular statistical models that don’t have a proportional hazards assumption. It’s a great way out of a tight spot.

Continue reading