Spatial models for online retail churn: Evidence from an online grocery delivery service in Madrid

Abstract

This paper presents evidence of the significant role that geography plays in customer churn behaviour in online retail. In an urban environment, mimetic behaviours are found to affect nearby individuals. This novel approach is based on the idea that customer churn is not randomly distributed across the map. This paper analyses more than 2,000 spatially georeferenced customers and demonstrates that customers show different patterns when deciding to cease activity, and that other factors besides spatial autocorrelation influence churn probability. Finally, the results prove that including spatial spillover in models improves predictability. This improvement results in substantial economic benefits since marketing managers can consequently reduce their company's loss of customers more effectively.

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