effect of bundling of new telecommunications service: a customer life-cycle perspective its 15th...
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Effect of Bundling of New Telecommunications Service:A Customer Life-Cycle Perspective
ITS 15th Biennial Conference Berlin, September 2004
Ann Skudlark, AT&T Labs, [email protected] Ahn, KAIST, [email protected] Hsu, AT&T Labs, [email protected] Lynn Sichel, AT&T Labs, sichel @homer.att.com
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Agenda
1. Background
2. Data Collection & Segmentation
3. Churn & Delinquency Analysis
4. Customer Comments Analysis
5. Conclusions
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1. Background
Traditional view as product-focused and transactions oriented
Environmental factors (deregulation, competition, shrinking margins) have fueled the recognition of the importance of life-cycle concept – both acquiring and retaining customers to achieve profitability
Currently a proliferation of choices – Provided customers with a wide array of options.
– However, receiving services from many different service providers can be inconvenient.
Bundling service as a competitive advantage
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Objectives
To understand the impact of bundled services
– Statistical analyses were performed for a new bundled service in a major telecommunications service company.
We gained perspectives and insights for decision support
– Which customers to target.
– How to handle delinquency problems.
– How to retain customers in the buying cycle during the entire customer life-cycle.
Empirical study with numerous data sources
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Specifically,
Analyzed the churn and delinquency rates– For newly provisioned Local customers with or without
unlimited telecommunications bundle.
Collected and analyzed the calls which were made into care centers by the customers who subscribed to the bundled service
– Call frequency analyses.
– Content analysis: »Comments of those who churned during a specific study
period were analyzed through text classification.
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Quick Summary:
The impact on the bundle overall did not have the positive effect that we initially expected– Some value for current low risk accounts.
– Negative value for NEW high risk accounts.
Based on the impacts of churn, delinquency and customer care cost, the NEW customer segment, in particular, warrants careful planning for acquisition, provisioning and management
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2. Data Collection & Segmentation
Data collected on Local customers who joined AT&T in June 2003
– ~ 200K accounts
– Data analysis
» Segmented by three dimensions
» Tracked customers over 6 month time period
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Customer Segmentation First Dimension: Subscription to service bundle
– Based on whether customers subscribe to a bundled Optional Calling Plan (OCP) – referred to as All-D OCP.
Second dimension: Customer’s prior LD PIC (Primary Inter Connect) status
– NEW segment: Customers who did not have a prior relationship with AT&T and selected Local and Long Distance service in June 2003.
– OCC segment: Customers that had a previous relationship with AT&T, but switched from an OCC (Other Common Carrier) to AT&T subscribing to both Local and LD services in June 2003.
– ATT segment: Current AT&T LD customers who added AT&T Local service in June 2003.
Third dimension: Risk group determined by credit score – Split into two groups representing higher risk group and lower risk
group.
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Dependent Variables
Customer Status – Churn Analysis– As of December 31, 2003, we analyzed the customer status of
Retained vs. Churned (customers who dropped Local service).
Customer Payment Status - Delinquency– As of December 31, 2003, we analyzed the customer payment
status.
» Delinquent (2+ CPD – Cycles Past Due) vs. Paid
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3. Churn Rate AnalysisRelative churn rate for each segment - ATT with No All-D OCP is the default
Segment
Plan
New OCC ATT
No All-D OCP
+25.0% +17.2% 0%
With All-D OCP
+26.8% +18.2% -3.7%
Segment
Plan
Higher Risk
Group
Lower Risk
Group
No All-D OCP
+25.0% +0%
With All-D OCP
+27.1% -5.0%
Relative churn rate for each risk group – Lower Risk Group with No All-D OCP is default
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0%10%20%
30%40%50%60%70%
80%90%
100%
NEW OCC ATT
Higher Risk Group
Lower Risk Group
Observations – Churn Rate No OCP churn is slightly higher than All-D OCP (statistically significant)
with 1.7% difference
Significant across segments– NEW and OCC has higher churn with All-D OCP.
– ATT has lower churn with All-D OCP.
Significant between credit scores– Higher risk group more churn with and without All-D OCP.
– Lower risk group with All-D OCP 5% lower.
Importance of managing across dimensions!
Note also Chi-square statistic shows customer segment and risk group are not independent
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Delinquency Rate AnalysisRelative delinquency rate for each segment - ATT with No All-D OCP is the default
Segment
Plan
New OCC ATT
No All-D OCP
+35.8% +19.4% 0%
With All-D OCP
+39.7% +20.9% -0.1%
Segment
Plan
Higher Risk
Group
Lower Risk
Group
No All-D OCP
+46.0% +0%
With All-D OCP
+48.3% +0.1%
Relative delinquency rate for each risk group -Lower Risk Group with No All-D OCP is default
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Observations – Delinquency Rate
0.3% difference (not statistically significant) with or without All-D OCP
Across segments– NEW and OCC have higher delinquency with All-D OCP.
» Issues of Affordability?
– ATT delinquency difference not significant with or without All-D OCP.
Significant between credit scores– Higher risk group more delinquent with and without All-D OCP.
– Lower risk group not significant with or without All-D OCP.
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4. Customer Comments Analysis
Customer care cost is one of the major costs in providing telecommunications service
By studying customer comments, we can identify root causes of why customers call and fix and prevent additional problems.
Ultimate Objective– Reduce customer care costs and increase customer
satisfaction.
Collected and analyzed 800K comments
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Call Frequency Analysis
1. Customers who churned call more frequently.
2. Higher risk group call more frequently than the lower risk group.
3. NEW segment are most likely to call on a per customer basis.
Risk Group
Higher Risk Group Lower Risk Group
Segment Retained Churned Retained Churned
NEW 0.80 0.78 0.67 0.79
OCC 0.50 0.49 0.38 0.45
ATT 0.41 0.49 0.29 0.41
Call Frequency Index
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Call Contents Analysis
Calls Category Definition
Account Inquiry Customer inquiring about services, products or features. Also changing account information such as address or name change.
Account Issue Customer investigating an order issue; following up on incomplete order.
Account Order Customer placing an order to add, change or drop service or a product.
Billing Billing explanations, disputes, credit requests or pricing issues; also payment and balance.
Cancel Cancel an order. Drop a service, product, plan or feature. Used interchangeably with Disconnect.
Escalate or Complaint Customer is escalating an issue to be resolved by a supervisor or any other complaint.
Misdirected A call that was meant to go to another center or part of the business.
No Dial Tone/Repair Report of no dial tone or other phone line problem requiring Repair work.
Other Dead air, no one on the call when the CCA picked up; internal or batch notations.
Status Customer inquiring about order status; when will installation or service change will be completed.
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Distribution of Overall Comments
Account Issue
Account Order
Billing
Misdirected
NDT/Repair
OtherStatus
Account Inquiry
Cancel
ESC/Complaint
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Observation on Overall Comments
Billing, NDT (No Dial Tone), and Misdirected are reasons to call which warrant process improvement
Customers’ comments in ATT segment differ significantly (Chi-square at 0.05 significance) from those of OCC and NEW segments
Proportional difference between Retained and Churned (z-test 0.05 significance)
– Results are similar on the Account Inquiry and Billing categories.
– Statistically different on the Account Order, Cancel, Misdirected, and NDT/Repair categories.
Need for Machine Classification Tool – We identified additional reasons why the churned customers called.
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Using Machine Classification Tool
Established a set of “reasons for churn” based on keyword analysis
– Different perspective than the categories used by the Care Representatives.
Example of findings– Identified comments related to Move as a reason for churn:
» Reasons such as Sickness, Death, and Abandoned Line are a subset of Move
– Issues labeled previously as Account Inquiry by Reps are now classified into more detailed reasons such as Error/Delay, Move, Alternative Local Provider, and Repair.
A training sample was developed with 1,000 customer comments with assigned reasons for churn
– The classification tool was then used to build the training model, and to classify about 20,000 randomly selected comments for each segment.
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Reasons for Churn
Analysis by Machine Classification Algorithm
Reasons for churn using machine classification
Segment Category
NEW Higher Risk
NEW Lower
Risk
OCC Higher Risk
OCC Lower Risk
ATT Higher Risk
ATT Lower Risk
No Dial Tone/Repair 36.0% 37.0% 20.5% 23.6% 20.2% 23.3% Move 27.9% 27.0% 31.6% 28.6% 30.1% 30.1%
Error /Delay 14.7% 15.4% 17.4% 18.8% 18.0% 17.8% Billing 9.1% 7.7% 14.1% 11.4% 14.1% 11.2%
Alternative Local Services 2.3% 2.6% 3.3% 3.9% 3.5% 4.4% No Specific Reason 1.7% 1.6% 3.4% 3.1% 4.2% 3.3%
Poor Service 0.5% 0.7% 0.7% 0.7% 0.8% 0.7% Other 7.8% 8.2% 9.0% 9.8% 9.3% 9.1%
Total 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
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Observations on Machine Learning Results
1. Comment distributions by risk group are significantly different (Chi-square test at 0.05 significance level).
2. Similar to the results of analyses based on Rep categorization, issues such as Billing category happen equally across NEW, OCC and ATT segments.– while customers in the NEW segment reported more on issues
related to NDT/Repair.
3. the Billing category is compared by risk group across all segments, the higher risk group tends to have more comments than the lower risk group.
4. Move turned out to be a primary reason for calling with all the segments.
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5. Conclusions The impact on the All-D OCP bundle overall did not have the
positive effect that we initially expected
Bundling service appears to have more retention effect in the ATT with lower risk segment
– Customers segments and risk group provided much more important information on customer churn and delinquency rate.
All-D bundle has a negative effect on the churn and delinquency rates in the high risk group
– Customer are financially challenged to pay the price of the service.
Significant differences of call frequency by customer segment and risk group
– Customers in the risk group of the NEW segment tend to call more frequently.
Depending on the customer segment and risk group, customers call in to care centers with different reasons
Based on the impacts of churn, delinquency and customer care cost, the NEW customer segment, in particular, warrants careful planning for acquisition, provisioning and management
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