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Churn/CPS Improves Profits for Bouygues Telecom

Published
  • January 01 1998, 1:00am EST

PLATFORMS: Platforms: HP, SUN, IBM RS 6000. Operating Systems: Windows 95, Windows NT, UNIX.

BACKGROUND: France-based Bouygues Group has a large number of diverse holdings. Bouygues Telecom launched its DCS 1800 mobile telephone network in May 1996 and has achieved remarkable success: it has more than 300,000 customers and roll out of its national mobile phone network is ahead of schedule, while revenue per customer has exceeded expectations.

PROBLEM SOLVED: Historically, new telecom operators enter the market with aggressive acquisition policies aimed at building market share in order to secure a profitable part of the market and achieve a positive return on investment for the operator in the shortest time possible. The result for the end customer is greater choice, lower prices, better packaging, more services--the downside for the operator is a dramatic and potentially long-term increase in customer churn (the switching of customers from one operator or service provider to another). Churn figures tend to vary by market, but it is not uncommon for operators to lose between 1 and 3 percent of their customer base to their competitors each month. Bouygues Telecom established a customer retention and development department responsible for all marketing activities to the existing customer base in order to minimize churn. The next key element in the customer retention strategy was the ability to identify customers having the highest probability to churn and to take actions proactively to prevent defection before it occurs. Churn/CPS (Customer Profiling System) allows Bouygues Telecom to rate customers with a "probability to churn" score, simulate the potential actions for preventing churn and calculate the impact that will have on the lifetime value of the customer base.

PRODUCT FUNCTIONALITY: Churn/CPS lets Bouygues Telecom easily segment and score (rate) customers, build models to predict churn, calculate the customer's lifetime value to Bouygues Telecom and recommend optimal intervention.

STRENGTHS: Churn/CPS' greatest strength is its ease of use. It allows Bouygues Telecom analysts to apply fairly complex statistical analysis and data mining methods to build a model in a guided, point-and-click environment. It allows end users to create multiple models and continually update and improve models.

WEAKNESSES: Apart from minor bugs, the only weakness we found was that we wanted to be able to identify five or six proactive solutions and simulate which would be the most cost effective. Sometimes the more expensive solution ends up being the most cost effective because you retain a greater proportion of customers. SLP is adding this simulation capability to the next version of Churn/CPS.

SELECTION CRITERIA: Bouygues Telecom selected Churn/CPS based on four things: functionality, cost, support and proof of concept. Bouygues Telecom was able to run a test of the product on its customer database and get results immediately.

DELIVERABLES: During the initial test phase, Bouygues Telecom developed a model from its customer database. From this model, Bouygues Telecom identified the top two percent of customers likely to churn. With further analysis, Bouygues Telecom found that 40 percent of those customers had actually switched to another provider. Using Churn/CPS has essentially increased Bouygues Telecom's ability to proactively identify potential churners by a factor of 20.

VENDOR SUPPORT: Bouygues Telecom is SLP's reference site in Europe, so support has been unparalleled. SLP has been very serious about the product and working with Bouygues Telecom on its requirements because it is committed to this product and to the telecom industry.

DOCUMENTATION: The fifteen-day training program was very complete.

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