Mobile customer defection method unveiled

CHURN RATE is a term whose importance is not often understood and an increasingly important buzzword in business circles, specially in the telecoms field.

For instance, you often read comments like "this carrier boasts the highest revenue per subscriber and the lowest churn rates in Latin America.", but what does it mean?. Simple: the "churn rate" is an indicator that measures how many customers dump your products or services, in a given period of time. A more precise definition can be found at the SearchCRM site: "Churn rate is a measure of customer or employee attrition, and is defined as the number of customers who discontinue a service or employees who leave a company during a specified time period divided by the average total number of customers or employees over that same time period".

Churn rate is specially important to mobile phone operators, because it's easier to dump a cellular phone provider and use another - even more so with GSM that makes the switching one SIM chip to another a "do it yourself" experience. CRM continues: "The churn rate has been an ongoing concern of telephone and cell phone services in areas where several companies compete and make it easy to transfer from one service to another. Changes in this indicator can provide feedback for a company as it may indicate customer response to service, pricing, competition and so on, as well as the average length of time an individual remains a customer. As such, churn rate is an important business metric."

So imagine my surprise when I stumbled upon a booth at Expocomm Argentina 2005 promoting a product which claims the ability to tag and identify potential future defectors ("churners") of mobile phone service, by applying a mix of data mining on the caller's patterns -along with other customer data that the telco has as well, like demographics- and applying complex math (based on complex systems on it all using proprietary algorithms. The company dubs the system "BCHI" - Binaria Churn Identificator", and claims to have a "66% detection rate".

Math wiz Travisano (right) next to consultant Jorge Crom, at Expocomm 2005 Argentina

I always hated math theory and "number jumbling in the air", so I'm not going to comment on the field of math and "complex systems" with someone who's apparently an expert on his field. The company's CEO, Matias Travizano, sports a physics degree, and assured me that his technology works and is being used on the field in the local marketplace. What is even more curious for me was the fact that I was about to skip this booth and continue with my walk, when I made some random comment to the founder of Atlantic Consulting, and this sparked a comment from the Binaria CEO, which then turned into a mention of the Internet of today vs. the BBS(s) of the past, and the realization that we were both users of the same BBS networks, and both of us were active members of the "BBS scene" in the golden years -early to mid 90s- down here. This made him mention his company's product, which instantly reminded me of the movie " The Bank" which describes the story of a math genius using chaos theory in an effort to predict the stock market's fluctuations. On second thought, I wonder if Chaos Theory has anything to do with the whole event of my encounter with Binaria, and if my random walk path across Expocomm 2005's booths could be reduced to some math formula on a blackboard. Scary! µ

See Also
The Bank (USA DVD, region 1)
Binaria Group
European Conference on Complex Systems
Restaurant Mathematics (Wendy Grossman)