1. Lennox Industries: Attrition Probabilities Diana Batten and Maddie Kamp

2. Presentation Overview  Company Information  The Opportunity  Project Objective  Our Approach  Deliverables  Test Cases  Recommendations

3. Company Information  Residential & commercial heating and air-conditioning  Seasonality of industry  13-15% market share  Have business in 80 countries  Manufacturer & distributer  Direct relationship to customer  Customer is contractor

4. The Opportunity  Enable sales force to predetermine attrition of customers  About 1,000 customers drive about 60% of revenue  Relations between data transactions and customer attrition  2008-2010 transaction level data  “Proof of Concept”

5. Project Objective  Determine a type of predictive model and analysis to predict attrition  Use the older historical data given to test and create our model  Address seasonality in sales

6. Our Approach Data MiningT-TestsSeasonality Markov Process Sorting and Automating

7. Deliverables  T-Tests  Excel spreadsheets – Attrition Predictors  Automation  “Plug and Chug”  Transition Probabilities  Percent Correct & Test Cases  Regional and Order Type Data

8. Entering Data

9. Transition Probabilities

10. Conditionals for Decile Drops

11. Percent Correct Red/Orange Attrition Drop From and To Attrition (Purple) Count of Customers Labeled as Attriting: 336788 Count If Attrition:201770 Percent Correct Assesment: 59.9050%79.5455% Example for 2010 Monthly Data

12. Test Cases Test Case # Number of Decile Drops Percent Correct – Number of Decile Drops Drop FromDrop ToPercent Correct – Drop from and to #1 (2 Periods) 266.65%8478.77% #2 (3 Periods) 276.74%8488.40% #3 (2 Periods) 347.55%9258.71% #4 (3 Periods) 359.91%9279.10%

13. Entering Data – Order Type and Geographic Location

14. Summary of Data

15. Looking at Order Type - ZMPO

16. Variability Did Not Decrease

17. Recommendations & Functionality  Ability for expansion  Percent correctness  Use Three Period Outlook  Use red/orange to red/orange analysis  Allows for user to define attrition

18. Questions?