Prepaid customer Churn Analysis

1. Prepaid customer Churn Analysis Subsidiary ABC Company, Rio de Janeiro peter.sciulli@case.edu www.petesciulli.com www.linkedin.com/in/petersciulli/

2. Factors Effecting Churn • 770,000 Pre-paid customers have no contract. • New competitors entering the market. • As prices drop due to competition, high value prepaid customers want more service and differentiated offerings. • Technological offerings by competitors are increasing. • High value customers moving to other carriers that have better text and image capabilities. • Brand disloyalty • Customers on the loyalty fringe: price wars and aggressive incentives pull them away. peter.sciulli@case.edu www.petesciulli.com www.linkedin.com/in/petersciulli/

3. Further Factors Effecting Churn • Fraud: Customers using high volumes and avoiding payment by churning to competitors. • Substitutes in the form of ISPs. peter.sciulli@case.edu www.petesciulli.com www.linkedin.com/in/petersciulli/

4. Effect of Churn on Revenue • 231,000 customers churn annually at $112.27 per month each ($311,212,440.) • Cost to acquire new customer: $778.34 x 231,000 ($179,796,540) • = $491,008,980 annual loss. • Soft costs: Loss of brand value, cross-selling potential, domino effect, high-touch costs for new customers. peter.sciulli@case.edu www.petesciulli.com www.linkedin.com/in/petersciulli/

5. Impact of Segment Profile On churn mitigation: • Relevant segment schemes are extremely important: • Churn analysis software cannot be effective without relevant and properly organized segment schemes. • Can help to determine high risk groups for churn and when they will churn. • Ensures that the most valuable at risk groups can be addressed. • Helps to weed out unnecessary and expensive service to lower value groups that will churn anyway. • Pareto Principle: top 20% of customers are 80% of revenue. • High value customers must be targeted for incentives and service. • Lowest value customers, i.e. Fraudulent customers should avoided if possible and allowed to churn. peter.sciulli@case.edu www.petesciulli.com www.linkedin.com/in/petersciulli/

6. Impact of Segment Profile On churn mitigation; • ABC’s Five segment schemes arenot enough. • 2 needed for value, 12 for behavior, 8 for needs, 5 integrated. • Usage monitoring is useful, as sudden reduced usage indicates real possibility of churn. • Age grouping is useful, as 18-24 year olds value technology and 35 to 45 year olds favor service. • Difficult to influence the lower value customer segments that ABC hardly knows. peter.sciulli@case.edu www.petesciulli.com www.linkedin.com/in/petersciulli/

7. Target The High potential value Segment: Large multinationals • Multinationals with local operations should be targeted for retention because: • Far Flung operations: ABC can support through its parent. • Spend hugely on telecom infrastructure • Happy to pay for premium services • High-security private networks • Videoconferencing. peter.sciulli@case.edu www.petesciulli.com www.linkedin.com/in/petersciulli/

8. The Facts: ABC in Rio De Janeiro: • More sophisticated churn software is needed for ABC. • More difficult to predict when churn will occur with prepaid customers. • ABC must adapt parent company business model and replicate accompanying capabilities regionally where practicable. • ABC must act localbut think global through its relationship with the parent company. • Q & A peter.sciulli@case.edu www.petesciulli.com www.linkedin.com/in/petersciulli/