Assignment on

Cell2Cell: The Churn Game

Business Intelligence and Data Mining

PGP31 | 2015-2017
Instructor: Prof. Ashwini Kumar

Submitted by:
Group B14
Abhisek Pattojoshi
Siddharth Arun
Arpit Mohapatra
Ameya Thakur
Anup Gholkar

PGP31004
PGP31055
PGP31192
PGP31242
PGP31321

Date: November 26, 2016

Contents
Introduction................................................................................................................................1
Business Objectives...................................................................................................................1
Data Mining Objectives.............................................................................................................1
Data Set......................................................................................................................................1
Data Modeling............................................................................................................................1
Model in SaS Enterprise Miner 13.1..........................................................................................1
1.

Decision tree 2 way......................................................................................................2

2.

Decision tree 3 way......................................................................................................3

3.

Neural Network without variable transformation...........................................................3

Cumulative lift...................................................................................................................3

4.

Neural network with variable transformation.................................................................4

Variables transformed.........................................................................................................4
Cumulative lift chart..........................................................................................................4

Comparing neural network with and without transformed variables.....................................4

Cumulative lift chart..........................................................................................................4
5.

Regression.......................................................................................................................5
Effects plot.........................................................................................................................5

6.

Regression with variable transformation........................................................................5

Variables transformed.........................................................................................................6
Cumulative lift chart..........................................................................................................6
Effects plot.........................................................................................................................6

Comparing regression with and without transformed variables............................................6

Cumulative lift chart..........................................................................................................6
Evaluation of multiple models...................................................................................................7
Cumulative lift and cumulative percent response values at 50 percentile.........................7
Profitability of a Proactive Retention Plan.................................................................................8
Possible Incentives Offered........................................................................................................9

Cell2Cell: The Churn Game

Introduction

Cell2Cell is the 6th largest wireless company in the US, giving service to nearly 10
million subscribers, serving more than 210 metropolitan markets & 2900 cities
(covering nearly all 50 states). The company is currently facing a major problem
of customer churn. We are using SAS EM 4.3 to develop a model for predicting
customer churn at Cell2Cell.

Business Objectives
1. To develop a churn management program to reduce the customer churn
by devising innovative incentive plans
2. Improve profitability

Data Mining Objectives

1. To predict churn accurately
2. To identify key factors that drive customer churn

Data Set
The given data set consists of 71,047 rows & containing a total of 78 variables
(including a variable named CHURN, signifying whether the customer had left
the company two months after observation). One of the variables named
CALIBRAT was used to differentiate the validation dataset from training
dataset. Training dataset contained data of 40,000 customers and validation
dataset contained 31,047 customers.

Data Modeling
Total of 6 different models were used to predict the churn of customers. These
models were:
Decision Tree (binary)
Decision Tree (three way tree)
Neural Networks
Neural Networks after transform variables
Regression
Regression with Transform Variables

Model in SaS Enterprise Miner 13.1

1. Decision tree 2 way

2. Decision tree 3 way

3. Neural Network without variable transformation

Cumulative lift

4. Neural network with variable transformation

Variables transformed

Cumulative lift chart

Comparing neural network with and without transformed variables

Cumulative lift chart

5. Regression
Cumulative lift chart

Effects plot

6. Regression with variable transformation

Variables transformed

Cumulative lift chart

Effects plot

Comparing regression with and without transformed variables

Cumulative lift chart

Evaluation of multiple models

Cumulative lift and cumulative percent response values at 50 percentile

As can be seen from table, the performance of Regression with transformed

variables is best among the different techniques used.

Cumulative lift value at 10 percentiles for regression with transformed variables

is 2.3478

Profitability of a Proactive Retention Plan

Using regression model with transformed variables as inputs, the following
values are calculated.
Assumption: Subscriber in the 1st deciles is targeted.
= Base line churn rate= 1.96 %
= Lift = 2.3478
= Success rate = -1= 1.3478
LVC= Lifetime value of customer
C= Cost of incentive
Profit =

Probability of Churn* Success Rate* LVC-C

= * * * LVC C
LVC = Monthly Revenues * (1+r)/(1+r-Retention Rate)
r= discount rate= 10%
Total average monthly churn rate= 2%
Retention Rate (annual) = (1-(.04*12))= 0.76
Average Monthly revenues per customer = 58.8528
Average LVC per customer = 58.8528*(1+.1)/(1+.1-.76) = 190.406

Thus Cell2Cell can spend a maximum of 190.406 on a customer.

Total number of customers = 10,000,000 subscribers
Using 1st deciles, who have highest probability of churning:
Average incremental revenue
*(Average LVC)

= Number of customers contacted* * *

= (10% of 10 million)*1.96*2.3478*1.3478*190.406
= 1.181 billion
Thus Cell2Cell can afford a maximum incentive cost of 1.181 billion.

Possible Incentives Offered

Based on above derived important variables, the following incentives plan can be
offered to the customers to reduce the possible churn

From the model we got EQPDAYS as one of the primary factors for churn
prediction. It makes business sense, as a customer who changes his old
cell phone is likely to churn, because many mobile service providers give
new cell connection bundled with cell phone. From decision tree we can
see that after 304 days customers change their handset.
o So the company can come up with a plan of offering customers new
cell phone (at a price slightly higher than the cost price) without
changing their connection. This offered after 9 months. This offer
will allow the company to retain their customers (ensuring future
revenue) without any incremental cost.
From the decision tree it is visible that the probability of churn increases if
EQPDAYS is more than 304 and CHANGEM value is less than -131% (i.e.
decrease in minutes by 131%). Hence the company should try to increase
the usage minutes by the customers having old cell phones.
o This can be done by providing discount plan to these customers.
Customers with CHANGEM value less than -131% along with MOU value
less than 416mins and the customers with CHANGEM value more than
-131% along with MOU value less than 1875mins have a very high
tendency of churn.
o Such customers can also be offered with discounted calling plans to
increase their minutes of usage.
In case of LCV customers, the company should offer little more incentives
to such customers. This is because even if in the short term the company
incurs more cost, but retaining such customers will increase cash flow to
the company in the long run.