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CRM at a Pay-TV Company: Using Analytical Models to Reduce Customer Attrition by Targeted Marketing for Subscription Services

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  • J. BUREZ

    ()

  • D. VAN DEN POEL

    ()

Abstract

The early detection of potential churners enables companies to target these customers using specific retention actions, and subsequently increase profits. This analytical CRM (Customer Relationship Management) approach is illustrated using real-life data of a European pay-TV company. Their very high churn rate has had a devastating effect on their customer base. This paper first develops different churn-prediction models: the introduction of Markov Chains in churn prediction, and a random forest model are benchmarked to a basic logistic model. The most appropriate model is subsequently used to target those customers with a high churn probability in a field experiment. Three alternative courses of marketing action are applied: giving free incentives, organizing special customer events, obtaining feedback on customer satisfaction through questionnaires. The results of this field experiment show that profits can be doubled using our churn prediction model. Moreover, profits vary enormously with respect to the selected retention action, indicating that a customer satisfaction questionnaire yields the best results, a phenomon known in the psychological literature as the ‘mere-measurement effect’.

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Bibliographic Info

Paper provided by Ghent University, Faculty of Economics and Business Administration in its series Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium with number 05/348.

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Length: 34 pages
Date of creation: Nov 2005
Date of revision:
Handle: RePEc:rug:rugwps:05/348

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References

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  1. B. Larivière & D. Van Den Poel, 2004. "Predicting Customer Retention and Profitability by Using Random Forests and Regression Forests Techniques," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/282, Ghent University, Faculty of Economics and Business Administration.
  2. B. Larivière & D. Van Den Poel, 2004. "Investigating the role of product features in preventing customer churn, by using survival analysis and choice modeling: The case of financial services," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 04/223, Ghent University, Faculty of Economics and Business Administration.
  3. Buckinx, Wouter & Van den Poel, Dirk, 2005. "Customer base analysis: partial defection of behaviourally loyal clients in a non-contractual FMCG retail setting," European Journal of Operational Research, Elsevier, vol. 164(1), pages 252-268, July.
  4. A. Prinzie & D. Van Den Poel, 2003. "Investigating Purchasing Patterns for Financial Services using Markov, MTD and MTDg Models," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 03/213, Ghent University, Faculty of Economics and Business Administration.
  5. Kardes, Frank R, 1988. " Spontaneous Inference Processes in Advertising: The Effects of Conclusion Omission and Involvement on Persuasion," Journal of Consumer Research, University of Chicago Press, vol. 15(2), pages 225-33, September.
  6. Dudoit S. & Fridlyand J. & Speed T. P, 2002. "Comparison of Discrimination Methods for the Classification of Tumors Using Gene Expression Data," Journal of the American Statistical Association, American Statistical Association, vol. 97, pages 77-87, March.
  7. Alan L. Montgomery & Shibo Li & Kannan Srinivasan & John C. Liechty, 2004. "Modeling Online Browsing and Path Analysis Using Clickstream Data," Marketing Science, INFORMS, vol. 23(4), pages 579-595, November.
  8. A. Prinzie & D. Van Den Poel, 2005. "Incorporating sequential information into traditional classification models by using an element/position- sensitive SAM," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 05/292, Ghent University, Faculty of Economics and Business Administration.
  9. Dholakia, Utpal M & Morwitz, Vicki G, 2002. " The Scope and Persistence of Mere-Measurement Effects: Evidence from a Field Study of Customer Satisfaction Measurement," Journal of Consumer Research, University of Chicago Press, vol. 29(2), pages 159-67, September.
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Cited by:
  1. V. L. Miguéis & D. Van Den Poel & A.S. Camanho & J. Falcao E Cunha, 2012. "Modeling Partial Customer Churn: On the Value of First Product-Category Purchase Sequences," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 12/790, Ghent University, Faculty of Economics and Business Administration.
  2. K. W. De Bock & D. Van Den Poel, 2011. "An empirical evaluation of rotation-based ensemble classifiers for customer churn prediction," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 11/717, Ghent University, Faculty of Economics and Business Administration.

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  1. Subscription business model in Wikipedia English ne '')
  2. Customer attrition in Wikipedia English ne '')

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