1. The rejection of credit card applications is negatively impacting customer retention rates, as 93.65% of customers who left the bank had previously been rejected for credit cards. 2. Further analysis found that rejected customers who left were more profitable than rejected customers who stayed, and that the main factors influencing profitability were overdraft fees and account balances. 3. The report recommends improving credit card approval rates for profitable customers, considering additional factors like accounts and balances, and retaining rejected customers through other offers to improve loyalty and reduce churn.

1. BIG EAST BANK CASE ASSIGNMENT: GROUP 8
COMPREHENSIVE CASE
ASSIGNMENT
B A D M 5513
Guyyala Ajay
Mandapaka Arun
Reddy Kiran
Shaik Bramhanapalli Sami

2. BIG EAST BANK CASE ASSIGNMENT: GROUP 8
Big East Bank deals with product lines that are mainly Deposit Accounts, Credit Cards and Consumer
loans. In the last few months almost 90% of the credit card applications have been denied. Karen Singh,
vice president of consumer deposits group has hired consulting group to determine whether the customer
retention is dependent on the approval or disapproval of the credit card customers. We will also try to
determine the factors influencing the profitability and whether the disapproval of credit card applications
is affecting the profitable customers to leave the bank. Thus suggesting ways to increase the customer
retention for the bank.
Executive Summary
The effect of approval or disapproval of the
credit card applications on the customer churn is
determined using the data with various
parameters which include profitability of the
customers, revenue, number of deposit accounts,
cost of transactions, monthly service and
overdraft fees.
Based on the initial analysis we say that the
rejection of credit cards of the customers might
affect the relationship of the customers with the
bank because of the total customers who have
left the bank, 93.65% of them have also been
rejected credit card request.
This is a cause of concern and on further credit card application are more profitable than
analysis based on the rejected and declined the customers who have been given credit cards.
customers we found that: Refer analysis 1
3. The customers who have been rejected the
1. The customers who have left the bank are credit card and left the banks are more profitable
more profitable. than the rejected customers still with the bank.
2. There is only 2.85% defection in the total We might say that customer relationship is
accepted applications but 9% defection in the important for the bank based on the initial
total rejected credit card applications. analysis. Refer Analysis 2
3. The customers who have been rejected the
We have analyzed the data further to check on the factors affecting the profitability and the customer
churn.
Factors Affecting Profitability for the Bank
As we can see that the initial analysis revealed
that customers who have been rejected and left
the bank are more profitable. The main factors
which are actually playing a significant role in
the profitability of the customers whose
applications have been rejected is mainly due to
Over Draft Fee and secondly the Balance.
However it revealed that the cost of the
customer transactions also plays a significant
role in profitability. Refer Analysis 3

3. BIG EAST BANK CASE ASSIGNMENT: GROUP 8
Further analysis revealed that the number of retail deposit accounts of the customers is a significant
factor in profitability of the customers when the population is taken as a whole but it does become
insignificant when it is analyzed based on the customer data who have been rejected. Refer Analysis 3,4,5,6
Customer Retention
Customer Retention is nothing but the strategic process to retain the customers from shifting their base. It
is very important to develop a model which actually predicts the profitable customers who are leaving so
that we can take steps to retain the profitable customers from leaving the Bank.
Initially we have run a Logistic Regression
model where we have taken the Customer
Profitability for January, Over Draft Fee
Revenue, Declined Customers and number of
Retail Deposit Accounts to predict the defection
in customers. The analysis revealed that only
1.6% of the predictions on the customers who
will be defected are true.
Further Analysis revealed that for customers consideration.
who have been declined, the defection is likely
to be 2.95 times more than the people who have
not been declined over 8 months period of time.
We have noticed that the data is skewed so we
cannot consider the default probability as
prediction probability. So in order to choose the
best model for the predictions we have taken the
probability as 0.08 and we have seen a drastic The prediction model sensitivity is bit higher for
change in the sensitivity of 68.7%.This means the model built for the prediction of profitable
that this best model could predict about 303 customers which is about 71% and means that
customers who are leaving the bank which really the manager can actually know about 222
helps the manager to take decisions based on it Profitable Customers who are leaving the bank
to increase the customer retention. in the future months. This analysis would help
Refer Analysis 8 him to take preventive actions to stop the
In the same way a Logistic Regression model customer churn. Refer Analysis 9
has been built for only the profitable customers,
taking the same criteria as above into
Recommendations to the Bank Management
The bank needs to consider the profitable customers for the credit card approval as there are many
profitable customers leaving the bank due to the bad approval rate. Thus profitability should be an
important criterion request. Apart from the profitabity the Bank
also needs to consider the factors like number of retail deposit accounts and balance of the customers in
approving the credit card request. The customer relationship is important as we can see that 90% rejection
rate of credit cards will reflect bad on the bank, if the customer does not deserve a credit card he needs to
encouraged with other offers like cash back offers, checking account offers so that he stays loyal to the
bank even after rejection. The overdraft fee is the driving source of profit for the bank, but it should think
about reducing the fees as it does help the bank to retain some customers from leaving the bank. Thus on
an overall perspective we can say that the bank management should seriously think of profitability of the
customers and improve the credit card approval rate.

4. BIG EAST BANK CASE ASSIGNMENT: GROUP 8
Analysis using JMP Software
A nalysis 1: C ross T abulation for Defected
C ustomers versus Declined C ustomers A nalysis 2: Profitability means values of
customers
A nalysis 3: Two Sample T test

5. BIG EAST BANK CASE ASSIGNMENT: GROUP 8
A nalysis 4: Two Sample T T est Profit Vs. Defected for Declined C ustomers
A nalysis 5: C ustomer Profitability for Defected / Declined C ustomers

6. BIG EAST BANK CASE ASSIGNMENT: GROUP 8
A nalysis 6: C ustomer Profitability with Cost
A nalysis 7: C ustomer Profitability for
Declined and Rejected C ustomer
A nalysis 8: Prediction Model for C ustomer Defection Using Logistic Regression
Stepwise Model

7. BIG EAST BANK CASE ASSIGNMENT: GROUP 8
A nalysis 9: Prediction Model for C ustomer Defection only for Profitable C ustomers Using
Logistic Regression
Stepwise Model
Note:
We have taken the level of significance as 5% which means that all the tests have been
performed with 95% confidence interval.
The data taken is for only for the month of January 2001 and it is only of the customers
with retail deposit accounts.