When we speak with customers and prospects in the telecom space, our primary goal is to understand what their biggest pain points are so that we can determine how we can help with their needs. Inevitably, within the first five minutes of every conversation, the topic of customer churn comes up. The next telecom discussion we have that doesn’t mention churn as a pain point will be the first – probably because the cost of acquiring a customer is so much more than the cost of keeping one. It’s an industry with customers that often view its services as a commodity – conditions that make telecom companies ripe for considerable customer turnover. In fact, most major telcos can count on a churn rate of 15-20 percent annually, representing massive potential revenue loss.
The reasons for churn are diverse –and telecom companies need to develop a nuanced understanding of why their customers are moving on in order to target the best customers they have the best shot of retaining. So what are the reasons customers churn?
- Fake acquisitions: These are customers that have benefited from an acquisition promotion and are now looking ahead for new promotions from other organizations. The prepaid market is filled with these customers, and subscription-based customers are always looking for a better deal from someone else.
- Rotational churn: These are customers that see promotions that only apply to new customers and make the effort to disconnect and reconnect in order to take advantage of those promotions – a common phenomenon found across TV, Internet and phone deals. For mobile telecom, some estimates suggest that nearly 30 percent of all churn is rotational churn.
- Bad payers: These are customers whose services are cancelled due to lack of payment, and are not ideal customers to target.
- Real churn: These are loyal customers who make the decision to churn based on a number of reasons, including high prices, poor service or lack of use. This category makes up roughly 26 percent of all customer churn.
With so many different customer segments, each having very different motivations for churning, telecom companies can easily get lost trying to develop strategies for retaining all of them. We’ve found when working with customers in the telecom space that results are significantly better when we focus on a single segment – e.g. the real churners. Doing so gives organizations a targeted profile of the customers that delivers the most potential value to the bottom line, allowing for a better understanding of the reasons for churn. Going one step further, we are able to focus on individuals to ensure they’re being targeted with appropriate offers. At the same time, every dollar spent on retention strategies goes further when it’s targeted at this subset, instead of toward the entire base of churning customers.
By aiming coupons, special offers, added value programs and/or discounted services to this base of loyal customers, our Big Data solutions help telecom organizations dramatically reduce churn. Put simply, the best way to avoid churn from these customers is to make sure they’re using more of your products and services. With every service they use, the cost of switching becomes higher. Rather than determining the reasons a customer left six months after they left, Lily helps our clients target these customers quickly and efficiently by providing a full, 360 degree customer view at all times. We can automatically identify red flags for churn–whether it’s increased customer calls to help desks or reduced call volume, and make sure that telcos can identify the customers they’re at risk of losing.
As participants in a commoditized industry, telecom companies will always be at risk for churn (e.g. change of behavior, change of competitive offers, etc.). But we’re working with customers day in and day out to ensure that they’re developing and executing the right strategies targeted at the right customers to minimize its impact.