Churn has a simple definition for a wireless operator – it is the number of net deactivations (i.e. gross adds minus net adds) divided by the average number of the subscriptions during the year. Mobile telecommunication market has changed from a rapidly growing market, into a state of saturation and fierce competition. The focus of telecommunication companies has therefore shifted from building a large customer base into keeping customers ‘in house’. Customers who switch to a competitor are so called churned customers. Churn prevention, through churn prediction, is one way to keep customers ‘in house’. In contrast to post-paid customers, prepaid customers are not bound by a contract. The central problem concerning prepaid customers is that the actual churn date in most cases is difficult to assess. This is a direct consequence of the difficulty in providing an unequivocal definition of churning and a lack of understanding in churn behavior. In the telecom service industry, churn can be of several types -
- Involuntary churn: This occurs when subscribers fail to pay for service and as a result the provider terminates service. Termination of service due to theft or fraudulent usage is also classified as involuntary churn.
- Unavoidable churn: This occurs when customers die, move or are otherwise permanently removed from the market place.
- Voluntary churn: Service termination on the part of the customer when leaving one operator and possibly for another because of better value
In reality, it is very unlikely that MNOs could differentiate unavoidable and voluntary churn and predict them separately.
Nokia Siemens Customer Acquisition & Churn Study
Churn can be shown as follows:
Monthly Churn = (C0 + A1 – C1) / C0
C0 = Number of customers at the start of the month
C1 = Number of customers at the end of the month
A1 = Gross new customers duringh the month
As an example, suppose a carrier has 100 customers at the start of the month, acquires 20 new customers during the month, and has 110 customers at the end of the month. It must have lost 10 customers during the month, 10 percent of the customers it had at the start of the month.
According to the formula:
Monthly Churn = (100 + 20 – 110) / 100 = 10% Read more…