The Value of Business Analytics: Identifying the Path to Profitability

PRACTICAL EXAMPLE: REDUCING CHURN IN TELECOMMUNICATIONS

Reducing churn in telecommunications serves well as a general example; it typically has all of the core characteristics that require a fairly multidimensional business case. The problem is easily understood: The term churn is generically used to describe a current subscriber or customer going to another provider. Postpaid telecommunications services are often a key target for reducing levels of churn. Customers who use these services pay for their usage on a typical monthly subscription plan. In the retail consumer space, home phones, Internet, and mobile contracts are the most common examples. Their key characteristic is that unlike prepaid services, customers pay for their usage after they consume data or minutes.

While the logic is slightly different, churn is also a target for improvement when a rolling contract does not exist. For example, churn in a prepaid mobile situation (where customers pay for credit and then use it at their leisure) might mean the migration of customers to another prepaid service provider. Often, a distinction is made between those who actually go to another provider and those who simply never use their phone again.

Within postpaid telecommunications services, multiple elements can be considered within a business case. Although there is a direct and real financial cost to the business every time a customer cancels his or her contract, that cost only represents one element within a good business ...