Solutions

"Propensity-to-buy" models

• Introduction
• "Business Insight"
• ROI computation from the lift

Probability of default models

churn Models

• Introduction
• KDD-2009
• Loyalty program

Predictive models for "Strategic & Tactic decisions"

Customer-Life-Time-Value forecasting

Direct ROI simulation

Optimal resource allocation & planning

Next Best Activity/Offer/product

E-mail campaign optimization

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Churn models: Introduction

Why are "churn models" so important? Let's give an example. Typically, the yearly churn rate for a telecom operator (i.e. a mobile phone operator ) is 12%. That means that each year, a mobile phone operator loses 12% of its customers (this is usually not a real problem because, in a saturated market, the same telecom company gains 12% of new customer and everything usually stays "in balance").


If we manage to detect these "churners" and prevent them from leaving, the telecom operator will gain: (20 €/month x 12) x 1,000,000 x 12% = €28,800,000 euros

In the above equation, we used the following hypothesis:

• subscription fees of $20 dollars/month paid out over the course of a year
• that the small mobile phone operator has about 1,000,000 customers
• And that the annual churn rate is 12%


Let's say that we are using TIMi for our predictions. TIMi is able to correctly detect "in advance" 40% of the churners.Then, the telecom opeator can offer to the people who are about to churn "free talk time" (or another incentive) and, as a result, manages to keep 25% of the potential churners. In this example, the value of the ranking generated with TIMi is: €28,800,000 x 40% x 25 % = €2,880,000 euros.

Other classical, best-in-breed, commercial datamining software, is only able to detect "in advance" a maximum of 30% of the churners. The value of their ranking is thus only: €9,600,000 x 30% x 25% = €2,160,000 euros.
Business-Insight works hard on the prediction accuracy of TIMi because of the massive added value each predictive model has for our clients. In this example, nearly a million euros in addition to a standard modelization tool for a single predictive model. The superior accuracy of TIMi is demonstrated by its outstanding performance at the various KDD cups.


Next: the KDD2009 cup: how does TIMi compare
to other tool for churn prediction problem?


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