Abstract
Customer migration, a.k.a. churn, is a relevant phenomenon in the telecommunications sector. Service providers may limit the extent of churning by winning back leaving customers through better pricing packages. The proposal of a new pricing package and the subsequent acceptance/rejection decision by the customer trigger a back-and-forth interaction till either the customer accepts the proposal or the providers stop providing a new proposal. The case of a pricing scheme based both on a fee and on a consumption-based rate (with a free traffic level included in the bundle) is analysed, assuming that the customer's demand is statistically known and described by either the exponential or the Rayleigh probability distribution. The service provider may adjust its offer after the customer's rejection by increasing the amount of free traffic. For this scenario we provide: a) the stopping conditions for the maximum amount of free traffic; b) the optimal sequence of proposals (i.e., that maximizing the expected marginal profit of the provider). The analysis is then briefly extended to the case of simultaneous updating of both the free traffic amount and the unit price.
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