FEATURE CEM – RETENTION
The long goodbye
Keeping hold of your customers in a hyper-competitive marketplace is notoriously difficult and requires a strategy that goes way beyond unsophisticated loyalty programs.
By James Middleton
fastest, most significant way of improving your bottom line.” Although operators are rightly focusing on growing ARPU and aver- age customer spend, winning the loyalty of existing customers and extending their stay on the network arguably plays a stronger role in maximising customer profitability. Churn is a serious issue for the vast ma- jority of operators. It has steadily increased on a global scale in recent years, from three per cent in 2009, to 3.5 per cent at the end of 2010 and almost 3.9 per cent towards the end of 2011. Take Sprint as an example of a tier-one operator in the US: With a churn rate of 1.91 per cent for the third quarter of 2011, the company lost a net of 44,000 postpaid subscribers, each bringing in an ARPU of $58 for the quarter. That’s a potential loss of $2.5m for the quarter outright, and a far greater sum over a contract lifespan. Obviously, no carrier wants to see their
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valuable subscribers move to competitor networks, yet it’s only recently that opera- tors have changed tack to focus on building a relationship with the end user in order to actively prevent churn, rather than retain customers in a reactive, last-ditch attempt. By and large, it’s still something that’s only really addressed at the last minute. In a late 2010 survey of operators by Infor-
ma Telecoms & Media on customer loyalty, 66 per cent of respondents commented that they thought customers had become less loyal in the two years since the last survey. Only nine per cent thought they had become more loyal, yet 79 per cent of the same respondents said they expected competition in their market to increase dramatically over the next 18 months. So why is it that in the same survey, these operators that so clearly expressed concerns
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an Hesse, the CEO of major US opera- tor Sprint, recently commented that “improvement in churn is the quickest,
about the fickle nature of their customers, admitted that their main focus when it came to customer relations was on churners (65 per cent) and potential churners (91 per cent), suggesting that retention and loyalty efforts rely on last-minute actions? “There’s an issue with priority in terms of customer segments,” says Michal Harris, director of marketing insight & strategy at Amdocs. “We should be talking about a dif- ferent customer lifecycle now, which needs a different approach to how you treat your customers. Many carriers are still focused on last minute efforts,” she says. This attitude is somewhat bewildering given
that, by the reckoning of Firstsouce CEO, Iain Regan, the cost of acquiring a new customer is six times that of retaining an existing one. And, of course, there is a cost attached to that last ditch attempt to appease a customer. However, he says that, with a well thought out reactive process in place, it is not uncommon that an exit interview can provide an opportunity to fix a problem and hold onto a customer. That’s all well and good, but common sense—and numerous balance sheets—argue that there are great savings to be made by tack- ling customer restlessness before it gets too late, with a proactive focus through analytics. Accenture recently boasted that a leading
US wireless provider—one of its clients—was able to cut churn by 15 per cent in six months, retain more than one million subscribers and generate hundreds of millions of dol- lars in incremental net OIBDA, all thanks to analytics-driven customer segmentation, and the company’s creation of a ‘Churn Command Centre’ dedicated to driving customer lifetime profitability. By leveraging a diversity of data—demo- graphic and behavioural—retention analytics can predict just when and why customers are likely to churn. They determine the customers’
value to the company in terms of both current and future revenue and profitability, as well as their influence on other customers. Paul Bultema, executive director, UK and Ireland strategy lead, for the communications, media and technology operating group of Accenture, says: “Analytics is playing an im- portant role in tailoring and defining services for customers. It gives operators the ability to dynamically link customers to their products and services and then to the financials and back to the network quality, so they can pro- actively respond to and address the customer experience. This is a great differentiator.” The consultancy also believes operators
can infer the drivers of churn by using multi- dimensional analysis in novel ways, such as correlating churn with the interactions a customer has had with the company in order to trigger retention treatments, as well as identifying areas where the customer experi- ence needs to be improved. This is a strategy which may sound straightforward, but is one that requires the ability to build a service in- teraction history across all channels to identify these churn ‘hot spots’. But Firstsource’s Regan suggests that, as
operators measure and incentivise or penalise against the performance of their divisions with regards to the customer experience, the real question is whether all the incoming data is providing operators with tangible insight? His company’s approach is perhaps more
material. Firstsource uses analysis tools to gain insight into customer interactions to identify broken processes or pinpoint where competitors are ahead of the game. A big part of this is reactive analytics around pre-churn customers; the ones that are in the process of drifting out of the zone of contentment. “With voice analysis tools on care calls we
listen for emotional strain in the customer’s voice. Or keywords like ‘sorry’. This allows the
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