Churn Managment is the Key

Churn has

assumed a lot of impor-tance for the telecom industry and is giving sleepless nights to

the strategists. Customer churn has affected almost all the telecom services

world-wide–be it cellular, paging or trunking. Telecom whizkids work overtime to come

out with winning strategies to drive this deadly monster out of their businesses. To

manage this, we need to carefully analyze different factors which have led to this

phenomenon.

The first and the foremost factor which

has led to high rate of churn in our country has been the over-enthusiasm shown by the

service providers in expanding their girth by taking in whatever came their way. The

extremely aggressive schemes launched by cellular and paging operators attracted a lot of

non-serious customers who basically took on to these technological marvels by riding the

freebie bandwagon rather than the value vehicle. In the case of cellular services, the

initial product and air-time packages were attractive enough to rope in a number of

gullible customers. They ultimately dropped by the side when the tariff structure was

revised because such customers could not find value for money. The paging companies went a

step ahead and offered expensive durables like CD players and cordless phones free with

paging subscriptions and, if this was not enough, the pagers were, subsequently, offered

free with daily use commodities. This, no doubt induced initial trails but the romance

soon wore off. A large number of customers who have churned belong to this category who

never found any true utility for these gadgets. A lesson which the telecom service

providers have learnt the hard way is that technology should never be given free since it

leads to an image crisis and ultimately devalues it.

Another major reason which has contributed

to churn has been the over-commitment by service companies. In order to take the initial

lead, the sales force of various service providers sold the technological dreams to the

customers but could not deliver as per their commitment and soon the customer delight

turned into customer plight. This was for important issues for the customers on the basis

of which they had taken the buying decisions like coverage area, roaming, etc. To cite an

example, a paging company sales executive roped in a number of subscribers by committing

that the coverage area was more than 60 kilometers. In reality, the coverage area was much

less and within four months, 70 percent of these subscribers dropped out as their

requirement was not met. Similarly, a cellular company in one of the state circles

promised seamless roaming on a major highway whereas the network actually covered only 60

percent of the specified area.

Some of the other reasons which have also

contributed to the customer being dissatisfied are quality of service, hardware-related

problems, customer-service issues, loss of hardware, relocation of the subscriber out of

the operator’s network, migration to competitor’s network or other services.

Some more reasons are the customers who have been taken off the networks by the operators

because of non-payment of bills by them and fraud detection which especially happened in

the case of mobile phones.

Customer churn is something which cannot

be completely wiped out but, with focussed, intelligent, and proactive strategies, can

definitely be managed. It is all the more important in toady’s environment for the

companies to protect their customer bases since the competition has become cut-throat and

the acquisition costs have reached an all-time high. Analysis show that the cost of

acquiring a new customer is five to ten times more than retaining the existing one.

Besides this, the high amount of subsidies and freebies which companies had doled out to

have a large subscriber base have not yet been fully recovered and each and every customer

churned, drives the company towards the red.

To manage customer churn, the companies

need to address different facets of this mounting problem. The telecom service providers

must take a major fact into account that each customer is driven by a different value

point and a detailed customer profiling needs to be done to find out the price-driven,

product-driven, customer service-driven, and network-driven customers. These key drives

must be carefully studied and analyzed to ensure that the optimal solutions are offered

according to the value driver. The operators must know the level of service that the

different market segments expect, prices that these customers are willing to pay for each

additional service. This can also help in defining the appropriate cost of acquisition for

each segment. The customer profiling can be done on the basis of demographic and

psychographic parametres. A systematic analysis of customer churn in the existing

subscriber base can provide a deep insight into the factors leading to this phenomenon

which can be used to minimize the same.

Churn is a measure that assumes that all

subscribers are equally valuable. The experience suggests that 80 percent of the usage and

60 percent of the revenues come from 20 percent of the subscriber base. This principle may

not hold much ground in the case of paging service, as far as the revenue inflow is

concerned, since it is a fixed charge revenue stream but is has a lot of significance for

cellular, trunking, and other telecom services where the revenue streams is not

pre-defined. The companies, therefore, need to go an extra mile to retain such customers

who contribute a major chunk to the revenues and profits. Some of the major segments in

this category are the large corporate and institutional customers and specific segments

defined on the basis of subscriber usage research patterns. Such segments are the most

likely candidates for the brand loyalty programmes and special incentives must be devised

to continuously reward and retain them. The companies should establish one-to-one

relationship with such key customers and evolve relationship marketing programmes to

create long term loyalty.

Another area which the companies need to

address is to increase the usage of a particular service to enhance its value in the minds

of the consumers. For increasing the usage, we need to develop newer applications for the

services. A number of service providers have been introducing newer value-added services

which have not only increased the usage but also led to increased revenues and profits for

these companies. In order to develop new applications, we need to do extensive consumer

research on regular basis since a number of ideas emerge from customer interaction. A good

idea would be to organize customer meets on the basis of customer segments where ideas can

be shared. Whenever the newer applications are developed, all existing subscribers should

be made aware of these. But a world of caution here. The value-added services should not

be offered free for very long since it leads to dilution of the importance of these

services and also affects the potential revenue-generating opportunities. The service

providers should definitely make trial offers to the customers so that the customers can

choose the services of their interest.

The companies also need to innovate by

making investments in newer technology which result in improved service quality. Some of

the areas which companies should look at are the coverage and integration of the existing

services with the emerging technologies and roaming. With the introduction of global

mobile satellite telephone, the cellular operators have to forge strategic alliances with

the satellite telephony service providers to extend the coverage in the areas not covered

by cellular telephony till date and should also push manufactures for multi-mode phones.

Besides this, the mobile phone should be positioned as a virtual mobile office by taking

advantage of the latest technologies like automatic Internet connectivity on mobile

phones, etc. Similarly, the paging companies can provide two-way paging, Internet paging

and should also invest in auto roaming, etc. In addition, companies, directly or via their

channel partners, should make an offer to the existing subscribers to exchange their old

models with the new ones incorporating the advanced features. The customers can have a

clear upgrade path available to them and the models bought back can be offered to the

customers looking for cheaper alternatives.

Customer education is another area which

needs constant attention. If we analyze, we will observe that even after four years of

paging, 60-70 percent of all the alphanumeric messages are call-back messages and this is

one of the important factors which is hampering the popularity of paging. The paging

companies need to devise a concrete strategy to educate the subscribers who can in turn

work on the regular callers. In addition to this, even the paging service operators can

educate and encourage the callers to send complete messages. This, no doubt, will affect

the efficiency but will go a long way in making paging a meaningful communication tool.

The service providers should also conduct product training programmes since research has

shown that a large number of customers are not familiar with a number of useful features.

To develop a strong bond with the

customers, the telecom companies need to invest in creating world-class call centres since

it is a critical direct link with the customers. The companies not adopting best-in-class

practices could face decreasing customer satisfaction and revenue-generating capabilities.

The companies shall endeavour to deploy the relevant technologies for customer call

handing and also have to build an effective human resource strategy which should strike a

balance between people, processes, and technologies. It should also be capable of driving

the entire organization towards customer-oriented corporate vision. In order to make the

services more useful to the subscribers, the telecom service directories on the line of

telephone directories should be published. This would make a lot of sense for the paging

companies where the air-time charge is not an issue and the subscribers can be accessible

to a larger audience. This should also be feasible, in the near future, for the cellular

subscribers whenever the free incoming call system is implemented. The directories can

also have specified yellow pages in which specific groups like architects, chartered

accountants, surveyors, electricians, plumbers, courier agencies, etc., can figure which

can actually help in increasing their businesses manifold. This in turn would result in

enhancing the customer loyalty and, hence, customer retention. width="100" height="128" alt="nagraj.gif (8925 bytes)" align="right" hspace="4" vspace="4">

Though customer churn is a major problem

plaguing the telecom service providers, the companies should not get overwhelmed by this,

since, in some of the cases, the cost of retaining a customer is far higher than the value

added in the long run. The companies, therefore, need to take a balanced view to maximize

the return on customer investment. To stay ahead of the competition, the service providers

need to continuously innovate to drive the customers up the value chain so that they

become an integral parts of the organization.