Understanding Your Customer: Segmentation Techniques for Gaining Customer Insight and Predicting Risk in the Telecom Industry

Abstract

The explosion of customer data in the last twenty years has increased the need for data mining aimed at customer relationship management (CRM) and understanding the customer. It is well known that the telecom sector consists of customers with a wide array of customer behaviors. These customers pose different risks, making it imperative to implement different treatment strategies to maximize shareholder profit and improve revenue generation. Segmentation is the process of developing meaningful customer groups that are similar based on individual account characteristics and behaviors. The goal of segmentation is to know your customer better and to apply that knowledge to increase profitability, reduce operational cost, and enhance customer service. Segmentation can provide a multidimensional view of the customer for better treatment targeting. An improved understanding of customer risk and behaviors enables more effective portfolio management and the proactive application of targeted treatments to lift account profitability. In this paper we outline several segmentation techniques using SAS ® Enterprise Miner™.