Professional Documents
Culture Documents
Term Project
Group 13
ERWIN LIM TIAN CHEW LOH KAI DIH, AARON MAHAWADUGE NIPUNA NIRANJAN PERERA U057316J U057314L U035067X U035298U
Contents
Contents..................................................................................................................... 2 Section 1: Introduction............................................................................................... 3 Section 2: Overview of cellular phone service industry in the U.S..............................4 Section 3: Data description and customer statistics...................................................8 3.1 Customer Retention and Churn.........................................................................8 3.2 Phone Service Plan Choice................................................................................ 9 3.3 Phone Service Minutes Usage..........................................................................10 3.4 Customer Profitability and Lifetime Value.......................................................11 3.5 Marketing Promotion and Targeting................................................................13 Section 4: Basic database marketing models of customer metrics..........................14 4.1 Customer Profitability...................................................................................... 14 4.2 Phone Service Minutes Usage..........................................................................15 4.3 Customer Retention and Churn.......................................................................18 4.4.1 Phone Plan Choice - Upgrade.......................................................................20 4.4.2 Phone Plan Choice - Downgrade...................................................................21 Appendix A Tables................................................................................................... 1 ................................................................................................................................... 1 ................................................................................................................................... 2 Appendix B SQL and Intermediate Datasets............................................................1
Section 1: Introduction
The report presented here describes about CRM analysis of US cellular phone service provider. The project requirement is to research the U.S mobile phone service industry, with a specific focus on a particular cellular phone service provider. CRM business issues will be the major concern, including such analyses as the interpretation of the relationship between customers metrics to company profit. Before getting into the customer data and CRM analysis, an overview of cellular phone service industry is presented. This information is given to information on history of cellular phone service provider, size/prospect of phone service industry in US, marketing strategies among different providers and recent cellular phone technology. the US provide cellular service
For the analytical part of this report, three data sets have been mined to extract interesting information, as well as to generate relevant linear/logistical regressions. Some assumptions of CRM metrics related to cellular phone industry are also pointed out. The data sets used are customer monthly billing information, customer demographic profile data, and zip postal code location profile data. From the dataset, analysis of the customer billing and demographic data is performed in order to gain an in-depth understanding of the industry, technology and CRM issues faced by the cellular phone service industry. Using the data, it is also possible to tackle specific CRM business problems. Analyses and managerial solutions in terms of different customer metrics and relationship marketing strategies with the help of appropriate applications of CRM concepts, analytic tools and database marketing techniques are employed to this end. Finally, this report presents managerial qualitative implications for CRM, after undertaking rigorous quantitative database mining and statistical analyses of the customers transactional data.
Extracted from The National Market for Cellular Phone Service by Tim Kaetzer and Dana Mastin, Fall 2004.
Cellular Technology and Recent Developments When cellular phone networks were first established, everything was based on analogue technology. This is also known as AMPS (Advanced Mobile Phone System). Analogue technology is the most basic type of wireless communications, and compared to digital technology, it has various drawbacks such as weak signal integrity, poorer clarity, and lack of encryption. Over the last few years however,
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Kaetzer, T. and Mastin, D., The National Market for Cellular Phone Service, Econ 200, Fall 2004
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most firms (including all of the national firms that being mentioned) have moved towards digital technology. Digital technology is basically the better technology for wireless communications. Where Digital Service offers more clarity and privacy than AMPS, PCS (Personal Communication Services) rises above Digital Service with encryption algorithms and error correcting codes providing superior service. Several recent developments in cellular technology will be briefly mentioned. The first is a translation function which enables a cellular phone to translate voice/sound into commands with the speech recognition technology embedded into the cellular phone. Also, there are developments in tandem with GPS (Global Position System) technology that allow cellular devices to be able to determine its location anywhere on earth, guiding users direction on a map. Another technological innovation will be podcasting, whereby cellular phones play the role of podcast playback devices. WIFI or WLAN technology implemented on cellular phones also allows them to surf the internet through available wireless networks. The most recent development is 3G technology, its large bandwidth enabling video call through cellular phone to be carried out. Competitive Environment In order to compete against one another, cellular service providers in the market display a clear trend of price discrimination with their plans. Quantity price discrimination is easily demonstrated by calculating the price per minute for a given companys plans. When a consumer buys more out going call minutes, the price per minute would be reduced significantly to make the offer more attractive. Most firms offer monthly plans that typically range from 400 minutes to 2000 minutes, with decreasing prices according to how many minutes are purchased per month. The price per minute reduces significantly with more minutes purchased. In fact, per minute rate for those who purchased 2000 minutes is almost half as compared to those who purchased 500 min.3 Price discrimination also occurs with family plans, when an agreement contract is signed for the usage of a few family members, they would get more minutes with cheaper price. This is true not only with minute prices, but with phone prices too. It is quite common for firms to give discounts on phone prices when more than one is purchased at one time. Price discrimination also occurs according to location across the country. All carriers ask for zip codes when customers wish to view their plans online, allowing them to charge different prices for different locations. Similarly, carriers also print different fliers and advertise varied promotions across the country. Apart from price discrimination, there are some varieties with add-on services that different firms offer as well as service integrity in various areas. With add on
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services, firms dont have a particular service for long time before other firms follow with comparable and competing services. Sprint PCS was the first corporation to introduce picture messaging, but Verizon and T-Mobile quickly followed. Similar trends also occurred with wireless internet, email, and ring tone purchasing. Thus, add-on services do not necessarily differentiate a firms service for a long period of time.
Market Structure Each cellular service provider has no contribution in the manufacturing of phones. Those firms have contracts with manufacturing firms that produce phones to primarily operate only on each of their respective networks. For example, Motorola and Sony Ericsson are major manufacturers for Verizon Wireless, while Samsung and Sanyo are two of Sprint PCSs manufacturers. Due to the large market in the cellular service industry, there are firms that make use of third party distributors to expand the sales coverage. For example, Verizon Wireless has only approximately 1200 stores and kiosks nationwide. Yet, their agreement with the Radio Shack Corporation expands their outlets to 7,000 which effectively maintain their fixed cost with marginal cost increased. As Verizons business grow bigger, higher marginal cost is no longer an advantage for the firm, hence Verizon try to build more outlets so that they could balance their fixed cost and marginal cost. In term of market penetration rates, cellular phone service industry can be considered high since market penetration rates were increasing quite consistently and there was an increment of 6% for year 2001.4 Service subscribers growth rate for cellular industry is also quite high with about 20 million new subscribers every year and in average each subscriber generated revenue of $500/year. Monthly minutes usage per subscriber is quite low, however, at was about 30 minutes. Average monthly churn rate of customers in cellular industry was 2.9% in the year of 2002.5 The tables from which these findings were taken can be found in Appendix A.
Wireless Industry Indices Semi-annual Data Survey Results, Cellular Telecommunications & Internet Association, various issues
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Table 2 shows the number of months on average a customer stays with the company for each service plan. Plan type Plan 1 Plan 2 Plan 3 Plan 4 Average Tenure (Months) 14.15 4.19 14.6 9.7
It was found that on average about 234 customers churn from the company each month and on average the company has about 9331 customers using their services each month. Therefore the average monthly churn rate for the cellular phone services company is around 2.5 %.
The average monthly churn rate for the cellular phone service company broken down by service plan type can be seen from Table 3. Plan Type Avg. No. Churned Per Month 96.3 4.9 101.5 34.3 Average Monthly Churn Rate (%) 1.90 1.62 3.08 4.62
1 2 3 4
The annual churn rate for the company in 2002 was 29.2 % for all the service plans. The breakdown of annual churn rates by service plan type can be observed in table 4. Plan Type Plan 1 Plan 2 Plan 3 Plan 4 No. Churned in 2002 1389 8 1681 571 No. of Customers in 2002 6964 287 5057 1327 Annual Churn Rate % 19.95 2.79 33.24 43.03
Table 4: Annual Churn Rates for Each service Plan type in 2002
Table 6: Average No. of peak minutes used in a month under each service plan
Table 7 shows how many of the customers are over-utilizing their allocated maximum peak time minutes (by more than 5%) and how many are under-utilizing (By more than 5%) as well as how many are optimally using their minutes. Plan Type No. of Customers over-utilizing 4153 379 3076 804 No. of Customers under-utilizing 6959 1428 5149 1424 No. of Customers Optimally utilizing 3003 347 2384 585
1 2 3 4
Table 7: No. of customers over, under and optimally utilizing their allocated peak time minutes
Table 8 shows how many times/months on average a customer would over or under-utilize their maximum peak time minutes (by more than 5%) for each type of phone service plan. Plan Type Plan Plan Plan Plan 1 2 3 4 No. of Times on Avg. overutilizing 3.196 1.612 3.374 2.914 No. of Times on Avg. underutilizing 11.562 3.59 11.558 7.442 No. of Times on Avg. optimally utilizing 2.025 1.496 2.427 2.164
Table 8: No. of times on average customers over, under and optimally utilize their service plans
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Table 9: Average total phone bill per customer per month for each service plan
It is mentioned in the data that 53% of the revenue translates into gross profit. Therefore from the phone bill tabl we can derive the average profit per custimer per month under each type of service plan by applying 53% of revenue as profit. This is shown in table 10. Plan Type Average total phone bill per customer per month $ 35.59 $ 38.57 $ 47.24 $ 61.65 Gross Margin Averag e profit
1 2 3 4
$ $ $ $
Table 10: Average profit for each type of service plan per customer per month
Applying the same gross margin formula on the average total phone bill per customer per month we can derive overall average profit per customer per month for the company as follows. Average profit per customer per month = $42.08 * 0.53 = $22.30 Using the Customer Lifetime Value (CLV) formula, the average CLV of under each of service plan who has churned is calculated as the following table, assuming that monthly discount rate of 1% is applicable. Plan Type Average Gross CLV less Customer Acquisitio n Averag e CLV
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1 2 3 4
$ $ $ $
$ $ $ $
Table 11: Average CLV for each type of service plan for churned customers
However, for customers who have not churned, the average of Customer Lifetime Value under each type of service plan can be calculated as follows, assuming that an infinite time horizon of customer relationship, constant customer retention rates based on the historical monthly retention rates of each phone service plan, constant profit per customer based on historical mean profit and monthly discount rate of 1% is applicable. We also start calculating the customers lifetime value from the first month of acquisition onwards. Plan Type Average CLV to date Average CLV to infinite time horizon $ 599.37 $748.12 $567.90 $513.48 less Customer Acquisitio n $ 315 $ 315 $ 315 $ 315 Averag e CLV $ 571.42 $ 762.58 $ 679.10 $ 701.36
Table 12: Average CLV for each type of service plan for not churned customers
An interesting point to note is that Average CLV to date is markedly higher for most plans (except plan 2) in customers who are alive, as compared to those who have churned. We feel that the assumptions used to calculate the average expected CLV for customers who have not churned are realistic insomuch as they offer a glimpse of what the expected lifetime value of customers might be. It is also necessary to include the CLV from the 1st month of customer acquisition up till the point where the dataset stops, and then include the projected CLV to an infinite time horizon. Doing this makes our estimate of average CLV across the 4 plans more accurate, because we should account for the fact that these customers have been with the company and can be reasonably expected to stay on with the company.
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Table 13: Percentage of promotion offered to churned customers under each plan
Percentage of promotions for customers who have not churned is slightly different and can be seen as following: Plan Type Plan Plan Plan Plan 1 2 3 4 Percentage of promotions time 11.81 13.79 15.04 12.10 % % % %
Table 14: Percentage of promotion offered to not churned customers under each plan
From the information mined, there seems to be no clear correlation between percentage of time promotions were given to customers and their propensity for churning. Further, apart from these information sieved, we noted that Claritas Prizm codes were also included in the dataset provided. Claritas Prizm codes are used to divide US consumers into 14 different groups and 66 different segments. The differentiation of consumers is based on population, consumer behaviour segmentation, consumer spending, households and business within any specific geographic market area in US. The Claritas Prizm codes indicate that people with similar lifestyles tend to live near to each other. This marketing analysis is to target more prospective consumers hence reducing cost of consumer acquisition and growing consumer value. Finally, the SQL statements and intermediate steps taken to extract the information presented in this section may be found in Appendix B.
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Mod el
1 (Constant) cumul_tenure promo_percent age newcell ruca2 zip_res churn plan2 plan3
Unstandardized Coefficients B 28.001 -.432 .002 -.053 -.093 -.083 .034 .763 2.200 Std. Error .865 .029 .003 .006 .226 .057 .608 .279 .274 .195 .285
t 32.361
Sig. .000 .000 .509 .000 .682 .142 .955 .006 .000 .000 .000
-.185 .005 -.075 -.003 -.011 .000 .036 .068 .295 .391
-14.665 .660 -9.238 -.409 -1.468 .056 2.739 8.032 33.412 46.957
According to the regression results we can observe which variable are significant at predicting the profitability of customers. For the purpose of customer profitability analysis we took the average or mean profit of a customer over his or her tenure of patronage with the cell phone service company. From the results we can see that the customer lifetime, represented by cumul_tenure variable, is a good predictor of customer profitability. However it should noted that the type of relationship between the 2 variable is a negative one, meaning that longer a customer stays with the company the less profitable he or she becomes. However this negative effect is less than 1 unit decrease in profit for each 1 unit increase in customer lifetime. This signifies that short-lived customers are more likely to be profitable.
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Marketing promotions (promo_percent) looks to be an insignificant predictor of customer profitability as the t-stat for this variable in the regression results is less than 1.96. However age is a significant predictor of customer profitability. The negative nature of the relationship between age and average profit suggests that younger customers are more profitable. Although its still a less than 1 unit decrease of profit for each increase of age (monthly) it may still affect the company in the long run. The regression results suggest that whether the customer is a new phone adopter or an old cellular phone user has insignificant effect on the customer profitability. The locality of the customers, i.e. whether they stay in an urban area or rural area, also has no significant effect in predicting the customer profitability. The same can be said about relationship between the zip types (commercial neighborhood vs. residential neighborhood) on customer profitability.
Mod el
1 (Constant) cumul_tenure cumul_overUtil cumul_underUtil promo_lag1 age newcell ruca2 zip_res plan2 plan3 plan4 churn upgrade
Unstandardized Coefficients B 130.411 18.243 10.146 -20.929 12.839 -.716 -2.197 -.394 5.336 24.326 84.296 164.631 -77.896 Std. Error 2.263 .231 .310 .238 .792 .019 .735 .189 2.018 1.720 .588 1.091 1.733 2.908 4.426
t 57.616
Sig. .000 .000 .000 .000 .000 .000 .003 .037 .008 .000 .000 .000 .000 .243 .000
.641 .129 -.679 .029 -.071 -.005 -.004 .005 .028 .272 .283 -.081 .002 .013
78.867 32.725 -88.025 16.209 -37.643 -2.990 -2.083 2.644 14.139 143.367 150.935 -44.936 1.168 7.378
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The results show that customer lifetime (cumul_tenure) has a very high significant effect in predicting the phone service minutes usage. The type of relationship is a positive one that shows that the longer a customer stays with the company the more likely they are to increase the number of minutes they use per month. It is important to note that the causality of these 2 variables isare indeterminate. The same is might be true likewise a customer who uses a lot of minutes might be said to be more likely to stay longer with the company. Nonetheless, the net increase is 18.243 units of minutes for every additional month that they stay with the company. The tendency to over or under-utilize the free minutes under any plan is a significant predictor of customer phone minutes usage. By the tendency to over or under utilize it means how many time over the lifetime of the customer that he or she has over or under utilized the free minutes in a plan. The tendency to underutilize shows almost 3 times more significance in predicting the phone service minutes usage than the tendency to over-utilize (32.725 vs. -88.025). Analyzing the co-efficient of these 2 variables, we can see that the tendency to over-utilize has a positive relationship with total minutes used while the tendency to under-utilize has a negative one. An additional over-utilization of phone minutes will cause a 10.146 increase in the overall total minutes used while an additional under-utilization will cause the total minutes used to fall by 20.929 units. Marketing promotions appear to have a significant impact in predicting customer phone minutes usage. Each additional marketing promotion carried out by the company will increase the total minutes used by 12.839 units, signifying a positive relationship between the variables. Age is also a significant predictor of customer peak minutes usage. The younger customers have a tendency to use more peak minutes than the older customers. This can be observed by the negative relationship shown in the regression results. The net effect of a customer aging by one month has a less than 1 unit decrease in the number of minutes used. The significance of new phone adopters vs. old phone users on total minutes usage is also significant when compared with the minutes usage as its t-stat is above
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1.96. A conversion of an old phone user to a new phone will reduce the total minute usage by 2.197 units showing a negative relationship between the variables. The locality of the customer (measured by RUCA2 and zip code type) are also significant predictors of total minute usage. According to the results people in rural areas appears to have lower usage rates than those who live in the urban areas as the relationship is negative. However the relationship between zip types (residential vs. commercial) and total minutes usage is positive emphasizing that customers who live in commercial zip codes have higher minutes usage than those who live in residential areas.
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.638 .046 189.697 1 .000 1.893 Constant -3.880 .123 997.176 1 .000 .021 a Variable(s) entered on step 1: cumul_tenure, cumul_overUtil, cumul_underUtil, promo_percent, age, newcell, ruca2, zip_res, plan2, plan3, plan4.
The predictability of a customer churning can be observed by running a binary logistical regression on the variables that are likely to impact it. As can be seen in the results customer lifetime is significant when predicting whether they will churn. The relationship is positive meaning that the longer a customer stays with the company the more likely they are to churn. Therefore we can infer that long-lived customers are more likely to churn over the short-lived ones. The customers who tend to over-utilize their peak minutes have a higher probability to churn. The customers who tend to under-utilize their minutes are also more likely to churn. Both variables have a positive, less than 1 unit change relationship with customer churn. The tendency to over-utilize will cause a 0.164 unit change in customer churning while the tendency to under-utilize will cause a 0.043 change. Marketing promotions are also significant in predicting the customer churning rate. This relationship is a negative one which has a -0.003 change in the churn rate for each additional marketing promotion carried out. When looking at the significance of age on customer churn we can see that younger customers are more likely to churn rather than the older ones. The wald value shows a very high significance in the relationship between age and churn. The aging of a customer by one month will have a -0.18 unit change in churn rate. 18
The relationship between types of phone plan (new vs. old) is also significant and negative. This shows that customers with old phone plans are less likely to churn rather than those with new phones. The co-efficient is -0.527 units. The locality of the customer plays no significant role in predicting whether the customers are going to churn or not.
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.112 .015 55.890 1 .000 1.118 Constant -5.676 .210 729.740 1 .000 .003 a Variable(s) entered on step 1: total_minute_peak, cumul_overUtil, cumul_underUtil, profit, age, plan3, plan4, promo_percent, zip_res, ruca2, newcell, cumul_tenure.
Customer lifetime is a significant predictor of a customer's choice to upgrade the phone plan. Each additional month that the customers stay with the company will have a 0.112 positive unit change in the customers choice to upgrade the plan. Therefore the long-lived customers have a higher probability to upgrade their plans rather than the short-lived ones. The tendencies to over or under-utilize the free minutes are also significant predictors of the choice of a customer to upgrade their plans. Each unit increase in the number of time a customer has over-utilized their free minutes will have a positive change in the upgrade choice unit by 0.076 units. The tendency to underutilize the minutes will have a negative 0.023 change in the choice to upgrade a phone plan. The age of a customer is significant in predicting the choice of that customer to upgrade his or her phone plan. According to the results the younger customer are more likely to upgrade their phone plan rather than the older ones. This can be seen in the negative relationship between the 2 variable where each additional monthly increase in age has a -0.003 change in the upgrade choice.
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Another significant variable in predicting the upgrade choice is the number of marketing promotions carried out by the company. Each additional increase in the percentage of promotion will have a 0.002 increase in the choice to upgrade a phone plan. The users of new cellular phone plans are more likely to upgrade their plan than the ones who are using old phones. This can be seen by the significant relationship between the variable which show a positive 0.238 change in the upgrade choice for each additional new phone plan user. No significance is found for the predictability of upgrade choice based on the locality of the customer. The total number of minutes used by a customer in a month has a significant effect in predicting whether the customer is going to upgrade his or her phone plan. Each additional minute used will have a 0.004 unit positive effect on the choice to upgrade the plan type.
-2.033 .170 142.729 1 .000 .131 Constant -4.101 .336 149.344 1 .000 .017 a Variable(s) entered on step 1: total_minute_peak, cumul_overUtil, cumul_underUtil, profit, age, promo_percent, zip_res, ruca2, newcell, cumul_tenure, plan2, plan3.
In the case of predicting the choice of downgrading a plan total minute usage of a customer has a significant effect. For every additional minute used the customers
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choice to downgrade the current plan increases by an amount of 0.002 units. Therefore it is a less than one unit change, positive relationship. The tendency to over-utilize the number of free peak minutes is not a significant predictor of the choice to downgrade a plan as the wald value of this that was found from the logistical regression is not significant. However the tendency to under-utilize the minutes has a very significant effect on predicting the downgrade choice. For each unit increase in the number of times a customer has under-utilized the minutes the choice to downgrade the plan increases by 0.176 units. The percentage of marketing promotions carried out during a customers tenure has a very high wald value which translates as it being a significant predictor of the choice to downgrade a phone plan. For each unit increase in the percentage of marketing promotions the value for choice of downgrading increases by 0.013 units. Once again we find that the locality of the customer plays no significant role in predicting the choice of that particular customer to downgrade their phone plan. The phone type (new vs. old) is also a significant predictor of the customers choice to downgrade the phone plan. It shows that customers with old phone plans are more likely to downgrade their phones rather than those who have new cellular phone plans. The regression results for the relationship between age and the customers choice to downgrade a phone plan suggests that age is a significant predictor of the downgrade choice. According to the figure we can infer that younger customers are more likely to downgrade their plans rather than older customers.
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Action Plan Since our findings shows that the tendency for a customer to change his plan is quite high, it is advisable for the company to adopt promotion strategy on existing customer. From those existing customers, the company can target their promotions on younger age customers, long lived customers and customers who over utilize their monthly peak, encouraging plan upgrades. Promotions on new cell phone could also be given to the customers as customers with new cell phones tend to upgrade their service plan. Incentives like trade-in old cell phone for new cell phone or price discount when customers upgrading plan could be introduced to customers. With the right promotion and CRM strategy, customers can be driven to upgrade their plans instead of downgrading. Phone service minutes usage From customer data analysis, age, tenure, promotion and locality are variables that have significant effect on minutes usage. Younger customers, long lived customers, customers in urban/commercial areas and customers who receive promotion have higher minutes usage than otherwise. However, from our overall data findings we can see that most customers of each available plan tend to under utilize the peak minutes usage of their service plan. Action Plan Even though locality does not affect the profitability directly, it has a significant relationship with the minutes used by the user. The company should try to target more on younger customers in commercial and urban areas, considering higher minutes usage by the customers from these areas. While looking on the utilization of service plan, customers who are over-utilizing their plans and stay longer with the company tend to use more minutes compared to others. As such, the company should concentrate their promotional efforts on these customers and provide incentives to convert them into more profitable users. Customer profitability and lifetime value With the gross profit margin assumption 53% of revenue, profitability of customers for each plan can be calculated. From the profitability analysis, it can be seen that plan 4 generated the highest profit with the average profit of $32.67 per customer. From the overall perspective, monthly average income per customer is $22.30. While from the data regression, age and tenure are the two significant factors which have highest influence on profitability. Younger customers tend to generate more profit for the company. However long lived customer tend to contribute less profit to the company although they have high minutes usage and have low churning rate.
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From the Customer lifetime value analysis, it can be concluded that CLV of customers who have churned is significantly low compare to CLV of customers who have not churned which take into account the customers retention rate. Action Plan The company should target more on young customers. These young customers are prospective group of customers although extra miles need to be covered in execution of respective CRM strategy in order to retain this group of customers which have higher churning rate. The company could encourage long lived customers to upgrade their service plan since they have higher minutes usage and tendency to upgrade their plan so that they can be converted into more profitable customers. By offering promotion and retaining existing long lived customers into more profitable customers, the company can accumulate more profit by increasing CLV and reducing customer acquisition cost. Marketing promotion and targeting Comparing table 13 and 14, it can be derived a conclusion that percentage time to offer promotion to churned customers was higher than promotion offered to existing customers (not churned). From the regression table in section 4, it is proven that marketing/promotion have quite significant effect on customers churning rate, total minute usage, and change of service plan. Promotions offered to customers will reduce churning rate of customers, increase total minute usage of customers but it has higher tendency to downgrade the customers service plan. Action Plan Company should have better marketing promotion strategy to accurately target more prospective customers and should not spend too much on non-prospective customers (churning customers). Promotions offered should focus on new customers to increase their minutes used, on younger customers who have higher churning rate compare to older customers and on customers who are more likely to upgrade their service plans in order to reduce number of downgrade which can translate into less profit for the company.
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Appendix A Tables
A-1
A-2
3.2 What is the average number of months a customer stays with the cellular phone service company from the start till end of a phone service subscription? Total rows / total customers = 195956/12499 = 15.7 months
3.3 How many customers are there for each type of phone service plan?
SELECT COUNT (DISTINCT cust_id) as "Customers for Plan 1" FROM cs4266.dbo.cellphone_billing WHERE plan1=1 AND bill_year=2003 and bill_month=5
Plan 1: 3414 (as of May 2003) + 2022 (churned) = 5436 Plan 2: 1443 + 39 = 1482 Plan 3: 2141 + 2132 = 4273 Plan 4: 589 + 721 = 1310
B-1
3.4 For each type of phone service plan, what is the number and percentage of customers who churned?
SELECT COUNT (DISTINCT cust_id) as "Customers for Plan 1" FROM cs4266.dbo.cellphone_billing WHERE plan1=1 and churn=1
SELECT COUNT (DISTINCT cust_id) as "Customers for Plan 1" FROM cs4266.dbo.cellphone_billing WHERE plan1=1 and bill_year=2003 and bill_month=5
Plan 1: 2022 / 5436 = 37.20% Plan 2: 39 / 1482 = 2.63% Plan 3: 2132 / 4273 = 49.89% Plan 4: 721 / 1310 = 55.04%
3.5 For each type of phone service plan, what is the average number of months a customer stays with the company from the start till end of a service subscription?
SELECT( SELECT count(cust_id) FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 1 ) / (SELECT count(distinct cust_id) FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 1)
B-2
Plan 4: 9.7
3.6 What is the average monthly churn rate for the company?
SELECT COUNT (DISTINCT cust_id) as "Churned" FROM cs4266.dbo.cellphone_billing WHERE churn=1
= 234 (there are 17 months with customer churning, hence avg of 289. if we consider all 21 months recorded in the dataset, then the figure is 233.95 234 per month)
3.7 What is the average monthly churn rate for each type of phone service plan?
SELECT COUNT (DISTINCT cust_id) as "Churned" FROM cs4266.dbo.cellphone_billing WHERE churn=1 and plan_chosen=1
Plan1 = 96.3 Plan2 = 4.875 divide by 8 months only Plan3 = 101.5 Plan4 = 34.3
(again, choose total churned divide by total months (21) instead of only choosing months were people churned)
B-3
3.8 What is the annual churn rate for the company in 2002?
CREATE VIEW churn_rate_per_year AS SELECT bill_year, COUNT (DISTINCT cust_id) as "No. of Customers Churned" FROM cs4266.dbo.cellphone_billing WHERE churn=1 GROUP BY bill_year
= 3649
3.9 What is the annual churn rate for each type of phone service plan in 2002?
CREATE VIEW churn_rate_per_year_plan1 AS SELECT bill_year, COUNT (DISTINCT cust_id) as "No. of Customers Churned" FROM cs4266.dbo.cellphone_billing WHERE churn=1 and plan_chosen=1 GROUP BY bill_year
Plan4 = 571
3.11 What is the number of customers who kept their phone service plans unchanged throughout the duration of their phone service subscriptions?
CREATE VIEW test AS SELECT cust_id, plan_chosen FROM cs4266.dbo.cellphone_billing GROUP BY cust_id, plan_chosen
SELECT cust_id, COUNT(cust_id) FROM test GROUP BY cust_id HAVING (COUNT(cust_id)=1) ORDER BY cust_id
Total = 9992 3.12 What is the number of customers who changed their phone service plans at least once at some point during their phone service subscriptions?
SELECT cust_id, COUNT(cust_id)
B-5
Total = 2507
3.13 What are the numbers of customers who changed their phone service plans once, twice and thrice at some point during their phone service subscriptions?
SELECT cust_id, COUNT(cust_id) FROM test GROUP BY cust_id HAVING (COUNT(cust_id)=2) ORDER BY cust_id
Once = 2371
SELECT cust_id, COUNT(cust_id) FROM test GROUP BY cust_id HAVING (COUNT(cust_id)=3) ORDER BY cust_id
Twice = 128
SELECT cust_id, COUNT(cust_id) FROM test GROUP BY cust_id HAVING (COUNT(cust_id)=4) ORDER BY cust_id
B-6
Thrice = 8
3.15 How many customers are over-utilizing their allocated maximum peak time minutes (by more than 5%) for each type of phone service plan?
SELECT COUNT (DISTINCT cust_id) as "Over-utilized customers for Plan1" FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 1 and total_minute_peak > (200*1.05)
3.16 How many times/months on average are customers over-utilizing their maximum peak time minutes (by more than 5%) for each type of phone service plan?
select count (cust_id)
B-7
Answer: Plan1 = 13275 / 4153 Plan2 = 611 / 379 Plan3 = 10379 / 3076 Plan4 = 2343 / 804 = 3.196 = 1.612 = 3.374 = 2.914
3.17 How many customers are under-utilizing their allocated maximum peak time minutes (by more than 5%) for each type of phone service plan?
SELECT COUNT (DISTINCT cust_id) as "Under-utilized customers for Plan1" FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 1 and total_minute_peak < (200*0.95)
B-8
3.18 How many times/months on average are customers under-utilizing their maximum peak time minutes (by more than 5%) for each type of phone service plan?
select count (cust_id) from dbo.cellphone_billing where plan_chosen = 1 and total_minute_peak < (200*0.95)
Answer: Plan1 = 80459 / 6959 Plan2 = 5127 / 1428 Plan3 = 59511 / 5149 Plan4 = 10598 / 1424 = 11.562 = 3.590
= 11.558 = 7.442
3.19 How many customers are optimally utilizing their allocated maximum peak time minutes (within 5% of maximum) for each type of phone service plan?
SELECT COUNT (DISTINCT cust_id) as "Optimally utilizing customers for Plan1" FROM cs4266.dbo.cellphone_billing WHERE plan_chosen (200*1.05)) = 1 and (total_minute_peak BETWEEN (200*0.95) and
3.20 How many times/months on average are customers optimally utilizing their maximum peak time minutes (within 5% of maximum) for each type of phone service plan?
select count (cust_id) from dbo.cellphone_billing where plan_chosen (200*1.05)) = 1 and (total_minute_peak between (200*0.95) and
B-9
Answer: Plan1 = 6081 / 3003 Plan2 = 519 / 347 Plan3 = 5787 / 2384 Plan4 = 1266 / 585 = 2.025 = 1.496 = 2.427 = 2.164
B-10
3.22 What is the overall average total phone bill (fixed subscription charge plus variable excess usage fees) per customer per month for the company?
CREATE VIEW test AS SELECT 30 as "Bill" FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 1 and total_minute_peak <= 200 UNION ALL SELECT (30 + (total_minute_peak - 200) * 0.4) as "Bill" FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 1 and total_minute_peak > 200 UNION ALL SELECT 35 as "Bill" FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 2 and total_minute_peak <= 300 UNION ALL SELECT (35 + (total_minute_peak - 300) * 0.4) as "Bill" FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 2 and total_minute_peak > 300 UNION ALL SELECT 40 as "Bill" FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 3 and total_minute_peak <= 350 UNION ALL SELECT (40 + (total_minute_peak - 350) * 0.4) as "Bill" FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 3 and total_minute_peak > 350 UNION ALL SELECT 50 as "Bill" FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 4 and total_minute_peak <= 500 UNION ALL
B-11
SELECT (50 + (total_minute_peak - 500) * 0.4) as "Bill" FROM cs4266.dbo.cellphone_billing WHERE plan_chosen = 4 and total_minute_peak > 500
Answer = 42.0754057033211
3.23 What is the average profit per customer per month under each type of phone service plan?
From the case, we know that 53% of revenue translates to gross profit.
Hence, average profit per customer per month for: Plan1 = 35.59 * 0.53 = $18.86 Plan2 = 38.57 * 0.53 = $20.44 Plan3 = 47.24 * 0.53 = $25.04 Plan4 = 61.65 * 0.53 = $32.67
3.24 What is the overall average profit per customer per month for the company?
B-12
3.25 For customers who have churned, what is the average customer lifetime value under each type of phone service plan? Assume a monthly discount rate of 1% and compute the lifetime value as of the month of customer acquisition onward.
Descriptive Statistics N plan_chosen gross_clv Valid N (listwise) 2022 2022 2022 Minimum 1 31.33 Maximum 1 1331.23 Mean 1.00 220.0497 Std. Deviation .000 118.48312
Descriptive Statistics N plan_chosen gross_clv Valid N (listwise) 39 39 39 Minimum 2 204.08 Maximum 2 1207.31 Mean 2.00 341.0047 Std. Deviation .000 171.62993
Descriptive Statistics N plan_chosen gross_clv Valid N (listwise) 2132 2132 2132 Minimum 3 41.77 Maximum 3 1246.37 Mean 3.00 302.2703 Std. Deviation .000 130.62447
Descriptive Statistics N plan_chosen gross_clv Valid N (listwise) 721 721 721 Minimum 4 52.22 Maximum 4 1497.92 Mean 4.00 327.3002 Std. Deviation .000 193.55797
Therefore, the customer lifetime values for churned customers are: Plan 1: 220.05 315 = $-94.95 Plan 2: 341.00 315 = $26.00 Plan 3: 302.27 315 = $-12.73 Plan 4: 327.30 315 = $12.30
B-13
3.26 For customers who have not churned, what is the average customer lifetime value under each type of phone service plan? Assume a monthly discount rate of 1% and compute the lifetime value as of the month of customer acquisition onward. Beyond the timeline of the data set, assume an infinite time horizon of customer relationship, constant customer retention rates based on the data sets historical monthly retention rates of each phone service plan, and a constant profit per customer per month based on the specific customers historical mean profit. Are these assumptions realistic? Comment on your results based on these assumptions.
Descriptive Statistics N plan_chosen gross_clv Valid N (listwise) 3415 3415 3415 Minimum 1 247.44 Maximum 1 1192.18 Mean 1.00 287.0564 Std. Deviation .000 70.04214
Descriptive Statistics N plan_chosen gross_clv Valid N (listwise) 1443 1443 1443 Minimum 2 249.68 Maximum 2 1078.18 Mean 2.00 329.4659 Std. Deviation .000 86.53899
Descriptive Statistics N plan_chosen gross_clv Valid N (listwise) 2140 2140 2140 Minimum 3 304.71 Maximum 3 1329.93 Mean 3.00 426.2016 Std. Deviation .000 92.27429
Descriptive Statistics N plan_chosen gross_clv Valid N (listwise) 587 587 587 Minimum 4 297.00 Maximum 4 1312.36 Mean 4.00 502.8758 Std. Deviation .000 120.32428
B-14
B-15
Retention Rate Plan 1: 0.9810 Plan 2: 0.9838 Plan 3: 0.9692 Plan 4: 0.9538
B-16
Descriptive Statistics N plan_chosen avg_profit Valid N (listwise) 3415 3415 3415 Minimum 1 15.90 Maximum 1 76.63 Mean 1.00 17.7418 Std. Deviation .000 4.26070
Descriptive Statistics N plan_chosen avg_profit Valid N (listwise) 1443 1443 1443 Minimum 2 16.03 Maximum 2 62.80 Mean 2.00 19.9240 Std. Deviation .000 4.72936
Descriptive Statistics N plan_chosen avg_profit Valid N (listwise) 2140 2140 2140 Minimum 3 19.18 Maximum 3 81.89 Mean 3.00 23.8903 Std. Deviation .000 5.17337
Descriptive Statistics N plan_chosen avg_profit Valid N (listwise) 587 587 587 Minimum 4 18.03 Maximum 4 73.49 Mean 4.00 30.2287 Std. Deviation .000 7.06978
B-17
1: 2: 3: 4:
+ + + +
= = = =
B-18
Descriptive Statistics N plan_chosen promo_percent Valid N (listwise) 39 39 39 Minimum 2 .00 Maximum 2 92.31 Mean 2.00 16.9523 Std. Deviation .000 26.37283
Descriptive Statistics N plan_chosen promo_percent Valid N (listwise) 2132 2132 2132 Minimum 3 .00 Maximum 3 95.00 Mean 3.00 14.4385 Std. Deviation .000 25.60862
Descriptive Statistics N plan_chosen promo_percent Valid N (listwise) 721 721 721 Minimum 4 .00 Maximum 4 93.33 Mean 4.00 15.4135 Std. Deviation .000 22.04033
1: 2: 3: 4:
B-19
For customers who have not churned, what percentage of time at the monthly level are promotions offered to customers for each type of phone service plan?
Descriptive Statistics N plan_chosen promo_percent Valid N (listwise) 3415 3415 3415 Minimum 1 .00 Maximum 1 95.24 Mean 1.00 11.7655 Std. Deviation .000 22.73825
Descriptive Statistics N plan_chosen promo_percent Valid N (listwise) 1443 1443 1443 Minimum 2 .00 Maximum 2 95.24 Mean 2.00 13.7782 Std. Deviation .000 22.26880
Descriptive Statistics N plan_chosen promo_percent Valid N (listwise) 2140 2140 2140 Minimum 3 .00 Maximum 3 95.24 Mean 3.00 15.0426 Std. Deviation .000 28.30752
Descriptive Statistics N plan_chosen promo_percent Valid N (listwise) 587 587 587 Minimum 4 .00 Maximum 4 95.24 Mean 4.00 12.0975 Std. Deviation .000 19.16240
1: 2: 3: 4:
B-20