Customer Retention Strategies in Telecom Industry

Abstract:

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

Segmentation can be done in various bases:

  1. Demographics/behavior/age group based – most common
  2. Value- needs based – surveys
  3. Segmentation by usage – data driven
  4. 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.

Conclusion:

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.

Customer Experience Management – The Telecom Industry Ahead

Abstract

The telecom service providers have always followed a growth trajectory in the past decade through increase in customer base as well as adding considerable numbers to their annual revenue. They have kept the pace with the competitors and have played the game with amazing success in the past. But in the recent times, they are facing with an enormous challenge of adaptation to the matured, highly penetrated markets coupled with global recessionary effect. Therefore, a shift in paradigm to adapt their business models to the current situation is highly required and the need of the hour is the customer experience management to attain a higher retention ratio.

Challenge in modern telecom industry – Customer retention

In the modern day telecom industry which has attained high penetration level, acquiring a customer is getting even costlier. Industry analysis states that only 25% of the acquired customers stay with the company after an year’s time and on an average only 20 -30% of the entire customer base is revenue earning/profitable customers. This dugs a deep hole in the balance sheet of the telecom service providers. Due to the churning effect of the customers, there is a huge imbalance created in gross additions of the customers and net addition.

Forward path: Way to customer retention – Customer experience management

Therefore, the major challenge for the telecom operators around the world is managing customer churn. It affects profitability of the company if a customer churns before the company can earn back the investment it incurred in acquiring the customer. Therefore, it is very critical to indentify the profitable customers and retain them.

Retaining the profitable customers includes 2 steps:

1. Identifying the revenue earning customers from the entire customer base

2. Managing the customer experience and customer value for the revenue earning customers

Identifying the Revenue earning customers

The telecom service providers need to define their business logic for identification of the revenue earning customers, for example: the customers with usage more than ARPU are classified as high valued customers, or in case of pre-paid, customers recharging more than INR 250 per month (In Indian scenario) are considered as revenue earning. Depending on the business rules the entire customer base needs to be segmented into revenue earning customers and non-revenue earning customers. Managing customer ARPU Average revenue per customer. Managing customer data in scale of 40 – 50 millions is a challenge. This can be achieved with the help of various business analysis tools (eg: SAS, SPSS, Teradata, etc.).

Customer experience management

After the identification of the valued/revenue earning customers, managing those identified group of customers are of utmost importance.

Focusing on customers instead of products

Over the past years, the telecom service providers have concentrated on introduction of new products. They have originated new products/services and then sought to find or create a market for them. But increased competition among the existing service providers and lower barrier to entry for new players has resulted in the growth in predatory activities in the telecom industry. Moreover, the cost of acquisition of new customers has increased considerably. Hence, in the modern times, there is a gradual shift in focus from introduction of new products for acquiring new customers to customers’ experience management is observed. Currently, the Telco’s need to concentrate on retaining the existing valued customers and targeting more wallet share of each customer by creating more value and improved customer experience.

For example: In UK, O2 has aligned its functional silos to obtain its existing customer’s perspective for making product decisions and designing promotional offerings. They have focused on retention by placing equal weight for renewals and acquisitions. By this the company has reduced its churn figure to half of its existing number.

Nintendo has established an online community for capturing customer insights and offers incentives in return of customer information. By this Nintendo has gained valuable insights into market needs and preferences.

Customer led customization model

There is an underlying assumption that the service providers will dictate the future of telecommunication products and services. But with the growing bargaining power of the customers, there is a shift in paradigm and the service providers need to customize their model based on individual customer preferences. Now the business will follow the lead of the customers in designing and promoting services intended to meet specific needs of the customers. Under this circumstance, the service providers need to identify the unique needs of the individual customers, and then attempt to develop services which satisfy those multifaceted needs.

With this model, the mass marketing will give way to the customized market research and the survival of the service providers will depend on the company’s ability to meet customer’s demand on an ongoing basis. In other words, customers will dictate the terms of service they intend to receive.

Developing multiple channels

The service providers need to develop multiple channels for sales and support to enhance the customer experience. Increasing the footprint by adding on retail outlets is one of the options which the telecom service providers have practiced since ages. Traditional channels like call centers also had been in focus. With the increase in competition and economic slowdown, the operators are looking for economical ways to serve their customers while keeping the service quality intact. Eventually the service providers would like to move majority of its sales and services online through the web to attain better economics. Apart from attaining a cost effective solution by moving to web channels, the operators can empower the customers to perform various activities at a much cheaper price than the retail channels.

Over the web channels, a customer can perform a host of activities like:

– Bill viewing and online payment

– Online register of a complaint for support

– Altering price plan and subscriptions

– Viewing the product catalogue and buy products/services online

In addition to the above mentioned activities, the operators can offer promotional services and cross-sell other products over the web. The operators can have added revenue by ticker management on their websites and advertisements.

To provide the customers a consistent and connected experience, the operators need to integrate all the existing channels. When a customer walks-in to a retail outlet, the customer service representative should be able to retrieve his/her past interactions over all the channels to serve him/her in the best possible way.

The operator needs to analyze/monitor how the customers use these channels. Depending on the available data of customers’ usage of these channels, the operators can identify the preferences of the individual customers and mould their offering accordingly. By this the operators can build up customer experience by empowering them to perform activities and therefore increasing the service value to them.

Conclusion

There are various ways to initiate a customer centric and a value driven transformation. Operations can start with high visibility initiatives like equi-balancing spending on customer acquisition and retentions with a greater emphasis to enhance the overall customer experience and empowerment of the customers. This transformation is the key for the modern day telecom service providers to be in the race and to excel in future. Therefore the Telco’s need to reorient their business and marketing models to manage the customer experience in a better and more efficient manner