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CRM at a Pay-TV Company: Using Analytical Models to Reduce Customer Attrition by Targeted Marketing for Subscription Services

J. Burez () and Dirk Van den Poel ()

Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration

Abstract: The early detection of potential churners enables companies to target these customers using specific retention actions, and subsequently increase profits. This analytical CRM (Customer Relationship Management) approach is illustrated using real-life data of a European pay-TV company. Their very high churn rate has had a devastating effect on their customer base. This paper first develops different churn-prediction models: the introduction of Markov Chains in churn prediction, and a random forest model are benchmarked to a basic logistic model.
The most appropriate model is subsequently used to target those customers with a high churn probability in a field experiment. Three alternative courses of marketing action are applied: giving free incentives, organizing special customer events, obtaining feedback on customer satisfaction through questionnaires. The results of this field experiment show that profits can be doubled using our churn prediction model. Moreover, profits vary enormously with respect to the selected retention action, indicating that a customer satisfaction questionnaire yields the best results, a phenomon known in the psychological literature as the ‘mere-measurement effect’.

New Economics Papers: this item is included in nep-cul and nep-mkt
Date: 2005-11
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