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Target the Ego or Target the Group: Evidence from a Randomized Experiment in Pro-Active Churn Management

54 Pages Posted: 9 Apr 2015 Last revised: 20 Oct 2016

Miguel Godinho de Matos

School of Business and Economics, Católica-Lisbon; Carnegie Mellon University

Pedro Ferreira

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management; Carnegie Mellon University - Department of Engineering and Public Policy

Rodrigo Belo

Rotterdam School of Management, Erasmus University Rotterdam

Date Written: August 31, 2016

Abstract

This paper analyzes outcomes from a randomized field experiment run with major telecommunications provider aimed at measuring the effect of proactive churn management among triple-play users and at determining whether using social network data may help retain them. We used state-of-the-art machine learning algorithms to develop a model to identify likely churners. We also used millions of call detailed records to identify their friends. A random subset of likely churners were selected to be contacted by the firm’s call center. We also randomly selected whether their friends would be contacted by the call center. We find that proactively listing likely churners to be contacted reduced their propensity to churn by 1.9 percentage points from a baseline of 17.2%. When their friends were also listed to be contacted the likelihood of churn reduced an additional 1.3 percentage points. We find that despite the discounts offered by the firm to retain likely churners and the false positives from our predictive model of churn, the NPV of likely churners increased 2.2% with proactive churn management. This statistic becomes 6.4% when their friends were also considered for churn management purposes. Furthermore, we provide some evidence that when likely churners obtain retention offers from the company they confer with their friends before accepting them. Our results show that managers should consider proactive churn management and that using social network data to design churn management campaigns is likely to increase retention rates.

Keywords: Churn, Retention, Client Lifetime Value, Telecommunications, Social Networks, Peer Influence, Predictive Analytics

Suggested Citation

Godinho de Matos, Miguel and Ferreira, Pedro and Belo, Rodrigo, Target the Ego or Target the Group: Evidence from a Randomized Experiment in Pro-Active Churn Management (August 31, 2016). Available at SSRN: https://ssrn.com/abstract=2591671 or http://dx.doi.org/10.2139/ssrn.2591671

Miguel Godinho de Matos (Contact Author)

School of Business and Economics, Católica-Lisbon ( email )

Palma de Cima
Lisbon, Lisboa 1649-023
Portugal

Carnegie Mellon University ( email )

Pittsburgh, PA 15213
United States

Pedro Ferreira

Carnegie Mellon University - H. John Heinz III School of Public Policy and Management ( email )

Pittsburgh, PA 15213-3890
United States

Carnegie Mellon University - Department of Engineering and Public Policy ( email )

Baker Hall 129
5000 Forbes Ave
Pittsburgh, PA 15213
United States

Rodrigo Belo

Rotterdam School of Management, Erasmus University Rotterdam ( email )

RSM Erasmus University
PO Box 1738
3000 DR Rotterdam
Netherlands

HOME PAGE: http://www.rsm.nl/people/rodrigo-belo/

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