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&DVH$QDO\VLV;2 XO Communications has applied the skills and
&RPPXQLFDWLRQV 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 the
 original. Not only has this prevented churn, but it has
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&RPSDQ\%DFNJURXQG also increased the revenue stream. Other areas of focus
include profitability analysis, bad debt write-offs, and
In the communications sector, customer loyalty is the some further levels of granularity with predictive
key to profitability it costs much less to retain an modeling on a per-product basis.
existing customer than it does to win a new one. As
part of an organizational business transformation The project originated as part of a full-scale
project, XO Communications identified an opportunity transformation initiative to increase business
to improve its performance in the small- and medium- efficiency at XO Communications. During the
sized business sector by increasing customer retention, consultation phase of this initiative, the company
and needed a strategy that would help it achieve this in decided to look into an analytics solution, and began a
a cost-effective way. small project with a third-party consulting partner. The
results of this project convinced XO Communications
The majority of the customers in this segment spend that analytics could be a vital tool, and also
less than $1,000 per month with XO Communications, highlighted the benefits of building up a capability in-
so it was not economically prudent to allocate house.
dedicated client service managers to each account. At
the same time, it was vital to offer these clients a high The company formed a Customer Intelligence team,
level of service and ensure that any issues they had tasked with purchasing and building a solution. The
were dealt with quickly and effectively. Instead of a team performed a very thorough vendor evaluation
brute force approach simply hiring more client before selecting IBM SPSS Modeler and IBM SPSS
service managers the company needs to identify the Statistics. This decision was based on the perceived
customers who were most at risk of changing superiority of the SPSS products in terms of
providers, and prompt the client service team to functionality, scalability, licensing terms and ease of
intervene appropriately. use.

The XO Communications team worked with IBM The team utilized the Cross Industry Standard Process
Education Services to build up a high level of for Data Mining (CRISP-DM) methodology to manage
competence in-house and transitioned away from the the project through six main phases: business
early models built by third-party consultants. This understanding, data understanding, data preparation,
enabled the team to identify the factors that indicate modeling, evaluation and deployment. During the
whether a given customer is likely to change process, the team evaluated more than 500 variables to
providers, and build a sophisticated statistical model see which had the most influence on customer
that provides a monthly risk assessment for each retention. Ultimately, a model was built based on the
customer. 25 most relevant variables. The model assigns risk
scores to each customer. The top 20 percent reflects 66
Customers are prioritized based on the score the model percent of the churn, so the top 10 percent are passed
calculates for them, and the client service team deals on to the centralized retention team, and the next 10
with the highest-risk customers first: making contact percent are passed to the field retention team for
with them, finding out if they have any problems or remedial action.
are dissatisfied with the service they are receiving, and
then taking appropriate steps to improve the situation. As part of the project, the Customer Intelligence team
received comprehensive training from IBM, which
By providing an analytics solution in-house and giving helped not only to gain technical knowledge, but also
client managers the ability to identify the customer to build up a set of best practices for future predictive
relationships that need most attention, XO analytics deployments. As a result of the expertise
Communications has been able to reduce customer gained, the teams churn prediction model has been
churn without substantially increasing headcount. able to outperform the early third-party model by 50

 
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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. 

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1. What analytics solution is needed by the 


company? What are the necessary components
to solve the problem? 
2. Why should analytics be used instead of just
hiring more client service managers? 
3. 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
Give the phases that were described in the
case study given.
_________________________________________
4. Identify how the opportunity was identified
and explain why this solution was feasible. Copyright IBM Corporation 2013
5. Explain why data understanding and data IBM Philippines
preparation are important in this analytics IBM Plaza, Libis, Quezon City
solution. May 2013