Fighting churn with rate plan right-sizing: a customer retention strategy for the wireless telecommunications industry

Prior literature suggests that wireless customers have difficulty in predicting their usage requirements and they often subscribe to rate plans that are not financially optimized. However, the benefits of having wireless customers on optimal rate plans are relatively unknown due to limited research in this area. This paper aims to address this knowledge gap and presents a customer retention strategy for the wireless telecommunications industry. The usage and payment records of 1403 Canadian post-paid wireless customers are examined over a 3.7-year study period. Pearson's chi(2) test and hazard function graph are used to reveal how customer churn rate is influenced by rate plan suitability. The statistical analysis demonstrates that customers who are using optimal rate plans have lower churn rate than those with non-optimal ones.