In the telecommunication industry, customers are able to choose among multiple service providers. In such a fiercely competitive telecommunication market, organizations should predict a 30-35 percent annual churn rate and it might also cost them 5-10 times more to recruit a new customer than to retain an existing one.
As some customers are evidently more valuable than others it is important to have a critical tool for customer segmentation hence improving profitability among different customer groups. Segmentation is also considered as one of the best ways to have more targeted communication with the customers.
In any industry, customers could vary greatly on different attributes such as values, demographics, behavior, frequency of purchases etc. In the past, most of the segmentation was done on the basis on these attributes. Whereas, today, this model has changed and moved towards ‘Value-Based Segmenting’, which focuses more on the revenue generated by each customer.
Data Collection or Mining:
Data mining is a process to understand the data and use it towards further application development. There are several methods to collect data; but the basic data could be fetched based on the following seven questions;
1. How: How can a customer cause a call detail record? By making a voice call, or receiving voice call.
2. Who: Who is the customer calling? Does he call to fixed lines? Does he call to mobiles?
3. What: What is the location of the caller?
4. When: When does a customer call? A business customer can call during office daytime, or in private time in the evening or at night and during the weekend.
5. Where: Where is the customer calling?
6. How long: How long is the customer calling?
7. How often: How often does a customer call or receive a call?
Segmentation can be done in various bases:
- Demographics/behavior/age group based – most common
- Value- needs based – surveys
- Segmentation by usage – data driven
- Segmentation by billing
1. Demographics/behavior/age group based – most common: Demographic segmentation is one of the highly effective segmentation types, where most of the segmentation data will be drilled down using factors such as age, gender, behavior social status etc. It is basically done by the study of population. This segmentation helps an organization to chart customers into various groups based on common variables. Thus, based on the results, organizations can target these groups and devise better strategies. The availability of data is the main advantage of this segmentation.
2. Value- needs based – Surveys: Here, the organizations will be sending out surveys based on the information what they need from the customer to improve their products and services they are offering. This segmentation will help organizations to evaluate themselves as well as to know what is needed for a customer. Value – needs based surveys are often be considered as an efficient means of communication with customers.
3. Segmentation by Usage- Data driven:Organizations can categorize their customers based on the usage he/she is having. So the basic values would be; No: of minutes he/she has called in the last 30/15 days, To which destination he/she makes the most no: of calls, top 5-10 destinations where he/she have made calls/send SMS, etc. Segmentation based by usage data is one of the most focused areas in telecom. Based on this organizations can work on creating a database which need to be updated daily.
4. Segmentation by Billing: Though billing systems are often perceived as business back end operations, billing plays a vital role in the communication service providers’ (CSP) marketing & sales strategy. Here, customer billing data such as monthly or annual billing datas will be extracted and transformed into usable analytics for segmentation.
A better segmentation strategy can bring a great amount of gains such as better profitability, growth and communications for telecommunication companies by better understanding their customers and their needs.