Henry Stewart Survival Analysis

1. Applications of Survival Analysis to Customer Management Henry Stewart Briefing for Users of Marketing Analytics 4 December 2008, Mayfair Conference Centre, Marble Arch, London William De Genst

2. Survival Analysis

3. Survival Analysis Understanding Customer Attrition

4. Survival Analysis Techniques

5. Survival Analysis Distributions of lifetimes

6. Survival Analysis Distributions of lifetimes

7. Survival Analysis Joining Time Time Survey end Actual Time Time from common origin Distributions of lifetimes

8. Survival Analysis Estimation

9. Survival Analysis Estimation

10. Survival Analysis Trial contract Non-trial contract Log-rank test (Mantel-Haenszel) Chisq= 30.2 on 1 degrees of freedom, p= 3.98e-08 Estimation

11. Survival Analysis Cox proportional hazards model

12. Survival Analysis Cox proportional hazards model Var SE( ) z p v 1 0.09 0.03 3.19 0.01 v 2 -0.35 0.19 -1.83 0.06 v n -0.34 0.38 -0.90 0.37

13. Survival Analysis Schoenfeld residuals ~ time Martingale residuals ~ covariate Cox proportional hazards model

14. Survival Analysis Cox proportional hazards model Smoothed term

15. Lifetime Value Analysis Customer Lifetime Value

16. Lifetime Value Analysis time Survival probability Customer spend time

Marketing campaign

Initial cost

Initial return

Loyal customers spend

more over time

Return on investment

Customer Lifetime Value

17. Case Study Cost of a Direct Mailing Campaign

18. Case Study Free trials Year 1 renewal Cost of a Direct Mailing Campaign

19. Case Study DD cancelation Free trials going on to other products Original Payment Method

20. Case Study Payment method as strata

Decreased hazard:

More product switches

Method payment

Downgrading (customer finds fee unjustified for usage)

Increased income

Increased hazard:

Higher household density

Cost of a Direct Mailing Campaign coef exp(coef) se(coef) z p productswitches -0.21 0.81 0.08 -2.58 0.01 methodswitches -2.76 0.06 0.15 -17.99 0.00 downgrades -1.63 0.20 0.58 -2.80 0.01 income 0.03 1.03 0.01 1.76 0.08 HHdensity 0.06 1.06 0.03 1.95 0.05

21. Case Study

- Loyal customers tend to spend more over time

- Free trial customers that subsequently subscribe to a paid subscription

gradually spend more, to reach same level as paid subscribers

Paid Free trial Cost of a Direct Mailing Campaign

22. Case Study break-even in week 65 Cost of a Direct Mailing Campaign

23. Case Study Cost of a Direct Mailing Campaign

24. Conclusions

Henry Stewart Survival Analysis

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