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Homework answers / question archive / In the communications sector, customer loyalty is the key to profitability - it costs much less to retain an existing customer than it does to win a new one
In the communications sector, customer loyalty is the key to profitability - it costs much less to retain an existing customer than it does to win a new one. As part of an organizational business transformation project, XO Communications identified an opportunity to improve its performance in the small- and medium-sized business sector by increasing customer retention, and needed a strategy that would help it achieve this in a cost-effective way. The majority of the customers in this segment spend less than $1,000 per month with XO Communications, so it was not economically prudent to allocate dedicated client service managers to each account. At the same time, it was vital to offer these clients a high level of service and ensure that any issues they had were dealt with quickly and effectively. Instead of a 'brute force' approach - simply hiring more client service managers - the company needs to identify the customers who were most at risk of changing providers, and prompt the client service team to intervene appropriately. The XO Communications team worked with IBM Education Services to build up a high level of competence in-house and transitioned away from the early models built by third-party consultants. This enabled the team to identify the factors that indicate whether a given customer is likely to change providers, and build a sophisticated statistical model that provides a monthly risk assessment for each customer. Customers are prioritized based on the score the model calculates for them, and the client service team deals with the highest-risk customers first: making contact with them, finding out if they have any problems or are dissatisfied with the service they are receiving, and then taking appropriate steps to improve the situation. By providing an analytics solution in-house and giving client managers the ability to identify the customer relationships that need most attention, XO Communications has been able to reduce customer churn without substantially increasing headcount. XO Communications has applied the skills and experience from this project to generate additional returns in subsequent projects. With additional tuning and analysis, the next phase of the customer churn project has produced another $7 million in revenue and the model is 50 percent more accurate than evaluation and deployment. During the process, the team evaluated more than 500 variables to see which had the most influence on customer retention. Ultimately, a model was built based on the 25 most relevant variables. The model assigns risk scores to each customer. The top 20 percent reflects 66 percent of the churn, so the top 10 percent are passed on to the centralized retention team, and the next 10 percent are passed to the field retention team for remedial action. As part of the project, the Customer Intelligence team received comprehensive training from IBM, which helped not only to gain technical knowledge, but also to build up a set of best practices for future predictive analytics deployments. As a result of the expertise gained, the team's churn prediction model has been able to outperform the early third-party model by 50 percent. With the success of this initial project, the team is now embarking on a number of new initiatives using predictive analytics, as well as expanding information delivery with dashboards and business intelligence.
Questions
1. What analytics solution is needed by the company?
2. What are the necessary components to solve the problem? Identify and explain.
3. Why should analytics be used instead of just hiring more client service managers?
4. Given the CRISP-DM approach that makes use of the following steps in providing a predictive analytics solution a. Business Understanding
b. Data Understanding
c. Data Preparation
d. Modeling
e. Evaluation
f. Deployment
5. Give the phases that were described in the case study given.
6.why data understanding and data preparation are important in this analytics solution.
Ans1.
Analytic solution needed by a company,to have to know about in detail the proper strategy that must be followed to retain the customers,to know more about the risky customers who are more likely to change the provider.Analytic solution will helps the company to make out certain steps
toward the customer retention
strategies.It is also helpful to know about the key indicators or variables that is necessary to the company to makes its customer services better and helpful to achieve the organizational efficency at par.Analytics solution will also helpful to get to know about the customer dissatisfaction and deal with to handle it effectively.
Ans.2 The various components to solve the problem are likely to be that ;-
1) Client service Management:- Client service management system or manger will be helpful to know the respective customers to whom.needed the services and risky one who can change the provider.
2) Statistical model:- That is helpful to assessing monthly risk customers who can change the provider and also helpful to team to priortize the customers according to the priority on the list.
3) Third party consultant:As third party consultant is an important component that play a vital role here IBM Education services which help in way to provide more sophisticated model to evaluate the customers retentions,it also provide training to the customer management department so they can perform well and provide good services.
Ans 3.Analytics will be used in place of just hiring more client services that its actually helpful to get to know about the rootcause of the problem that will be arises,it provide to know about the various factors that will affect the customer retentions,make them riskier to choose another providers,level of dissatifaction and how to rectify those problems.It is helpful to identify the customer relationship that is needed the most.Xo communications has been able to reduce customer exits without with the help of analytics solution.
Ans.4
A) Buisness understanding:-According to CRISPDM approach it tells about the procedure related to buisness understanding as for making any analytic solution for the problem understanding of the buisness obejective is necessary.what kind of buisness is?what are the policies?What are the resources it have?What are the major issue for the company? What are the projects? What are the data mining goals?etc.These understanding of buisness is necessary before making an analytical solution.
B) Data understanding:-Data understanding is deal with to acquire of data related to the projects,we can say that collection of Data loading should be done there.It deal with to acquiring the data from various sources and sees them whether it is proper,verified,realiable or there have any missing part in it.
C) Data preparation:-Data preparation deal with to selection of data where you can know about what kind of data you can used for analysis for further processing.The data can be selected in data mining is according to its relavance,quality and technical parameters.In this attributes will be presented i.e.Row and column.
D) Modelling:- In this what type of model for the assessment will be used has to be seen,in this you have to decide over modelling technique like as decision tree,neural networks etc.You have to generate the test design here and further assessment will be done.
E) Evaluation:-After selection of proper modelling technique and assessment,evalutation will done whether your all strategy will go according to the buisness objective or not.If any loophole will be there it will be rectified.
F) Deployment:- Deployment is deal with the finalization of the strategy and takes the plan into picture.
Ans.5 The phases in the given case study is:-
A) Xo communications facing with the difficulty related to their customer retentions.
B) Then Xo communications identified the opportunity to increase it growth in small and medium sized buisness segments.
C)The Xo communication worked with IBM education services to makes its services more good.
D) Than Xo communication will followed a sophisticated model which will helpful for make assessment related to the riskier customers who are more prone to choose another provider.
E) By applying analytical solutions XO communications get to know about the customer relationship need more attention.
F)XO communications churn the project and have revenue of $7 million.
G)IBM will provide a training to the team of customer intelligence to not only gain technical knowldge but also used best practices.
H) Team will now do more predictive analytics and expanding the delivery of information thorugh dashboard and buisness intelligence.
Ans.6 Data understanding and data preparation are the important part of the analytical solution as data basically related to certain factors that is readily for measuring the facts and gathering the information.Data understanding is helpful to know what kind of data will be needed,quality of data and its relevancy while Data prepration is necessary to arranging the data in row and column,and thus have to make an analysis of them,so the presence of both will have to make analytical solution more reliable.As we see in the case study 500 variable that means data will be taken,25 more imporatnt variable taken into consideration to reach out toward the result.so both the data understanding and data prepration is important to makes decisions for acheiveing the organizational goal.
