A large telecom company in Asia utilized customer lifetime value (CLTV) analytics to identify valuable customer segments in order to prevent churn due to mobile number portability. By segmenting customers based on usage and calculating their CLTV, the company was able to focus retention efforts on 'valuable-vulnerable' customers, leading to informed investments in rewards programs. Results showed significant variations in CLTV across five customer segments, aiding in retention strategy during a crucial time for the business.

1. 1
Customer Life Time Value
What is the customer worth over his Life Time?
New Developments in Measurement and Analytics

2. 2
Background
• Client : Large Telecom Player inAsia
• Voice & Data Services
• 87 million customers in a highly competitive environment
• Wanted to prevent customers from churning due to the
introduction of “mobile number portability” where
customers can switch operators and yet retain their
number

3. 3
Task at Hand
• Identify the “Valuable-Vulnerable” segments of the
customer base
• Ring Fence such customers with a rewards based
retention program
• Key Question – “How much to invest in each customer,
today, so as to recoup the investment over the
customer’s life time with the operator
• Corporate customers, employees were not included as
their bills were paid by their employer

4. 4
Solution
• Segment the customers into usage based segments –
“all customers are not created equal”
• Compute the “Customer Life Time Value” (CLTV) for
every customer in the segment
– The net present value of all future cash flows, accruing from
the customer, over the life time of the customer
• If the allowable cost of retention was less than a specified
fraction of the CLTV of the customer, we invest in
retention, else ignore

5. 5
Methodology
• Compute the “Life Time” of the customer – an estimate in months of
how long the customer is likely to stay with the operator, given the
past usage characteristics, geography and demography
– Cox’s Proportional Hazards Model
• Sum up the projected monthly revenue from the customer over this
tenure
• Components of revenue included revenue from
– Voice
– Data Services
– Other Value Added Services (Ring tones, Roaming etc.)
– Projected revenue from future cross sell programs
– Subtract the “cost of service” to get net revenue
– Project the net revenue from customer over his life time
– Discount the projected revenue to today’s dollar value using an
appropriate discount value
– Validate the computed CLTV on a set of customers who had already
churned on both value and tenure (margin of error 12%)

6. 6
Results
• 5 segments emerged
– “Talkative Tom” -high number
of calls with high duration
– “Roaming Rob” -high roaming
charges
– “Texting Tim” -high proportion
of text communication
– “Data Danny” – high value
due to data downloads
– “Normal Norman” the typical
average customer
• The customer life time value
varied across these segments
from $ 486with a tenure of 54
months (Normal Normans) to
$ 2088with a tenure of 34
months (Data Dannys)
• Withthis CLTV in place, the
client was able to invest in a
rewards and retention program
during a very crucial period of
time – the “mobile number
portability” period byfocusing
retention dollars on the
“valuable –vulnerables”

7. 7
Results
00:00
Hrs
23:59
Hrs
Time
Roaming
R
RR
Data
Talkative
Tom
Roaming
Rob
Data
Danny
Normal
Norman
Texting
Tim
1 2 3
4
5
CLTV:
$ 1287
CLTV:
$ 1688
CLTV:
$ 887
CLTV:
$ 486 CLTV:
$ 2088

8. 8
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