Churn Analysis

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CELL2CELL: THE CHURN GAME It was a cold and cloudy morning at Cell2Cell Headquarters as Sarah A. Stanford headed to her cubicle holding a cup of cappuccino in one hand and a bulky database manual in the other. Although a veteran in the database marketing field with a doctorate in Statistics, her new assignment was more challenging than she had imagined. Churn Management in the wireless industry was really complicated, but Sarah was excited to be working on perhaps the most important marketing issue facing Cell2Cell, one of the leading providers of cellular telephone service. Sarah’s mission, as described by her boss, Charles R. Morris, was to (1) develop a statistical model for predicting customer churn, (2) use the model to…show more content…
By 2001, there were an estimated 128,000,000 subscribers in the US. THE CURRENT CELLPHONE INDUSTRY Industry Structure During the late 90s, the number of subscribers doubled every two years, wireless stocks grew as fast as those of many dot-coms, and IPOs raised record amounts of money. These vertiginous events shaped the new telecommunications landscape we know today (Exhibit 1– US Wireless Industry Statistics) However, recently things changed dramatically as industry growth began to level off. Growth in new subscribers went from 50% yearly to 15%-20% in 2002 and analysts predict a meager 10% for 2003 and stabilization in the low single digits by 2009 (Exhibit 2 – Wireless Penetration). The first victim in this scenario was the ARPU (Average Revenues per User). Companies enticed new subscribers by offering them “better deals” while sacrificing margin. Before long, roaming revenues (fees a company receives when another carrier’s subscriber utilize its network) had become the most important ARPU growth engine. Unfortunately this source of cash didn’t last long. Recent statistics showed that in spite of an increase in minutes of use, US roaming revenues consistently have declined approximately 5% year to year (Exhibit 3 – Roaming Services). With high-margin revenues relegated to the history books, wireless carriers focused their efforts on expanding their geographic availability, lowering their service costs and ultimately
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