Customer retention information at the service rep’s fingertips

Customer retention information at the service rep’s fingertips

Spurrier, Greg

Within the telecommunications industry today, both wireline and wireless service providers are increasingly faced with a critical issue; “How do I keep my most profitable customers from going to my competition?” In fastgrowing competitive markets, acquisition and retention of customers is key. Your company’s success is not measured only by profits, but also by the number of net (versus gross) customers and the ability to consistently derive positive revenue streams from these customers over a period of time.

Most service providers today have implemented some aspect of a customer retention lifecycle (CRL). An example of a CRL for a service provider is shown in the illustration on page 48.

Whether via loyalty programs, dedicated save teams or proactive outbound dialing to the customer segment generating the highest level of revenue, service providers are trying to leverage the fact that it costs five to ten times as much to acquire a customer as it does to retain one. For those service providers that have already dedicated some level of capital and expense dollars in an attempt to efficiently manage retention and customer churn, the question being asked is; “How can I increase, by an order of magnitude, the effectiveness of my customer retention organization?”

The execution of an effective retention strategy manifests itself through a number of different channels, one being the customer service representative (CSR). Particularly within a proactive outbound campaign, the CSR is the critical component for effectively managing the customer “touch point.” Arming the CSR with key customer retention profile information can have a dramatic effect on reducing churn and optimizing customer lifetime value.

Application solutions are available today that integrate predictive churn information with front-office applications utilized by the CSR. These solutions analyze usage data, customer data, demographic data and network data to score and profile those customers exhibiting the highest propensity to churn. In addition, lifetime value, length of service and intervention options are analyzed to determine the optimal action to take for a particular customer based on return on investment (ROI). This is accomplished by:

* Gathering customer data from sources such as activation information, billing records, demographic data, etc.,

* Applying proven statistical methods to model the variables that are heavily correlated to churn,

* Applying these models to a production customer database that creates “scores” for every customer for churn, lifetime value, length of service and optimal intervention recommendations,

* Utilizing these results to effectively intervene at an individual customer level.

As the CSR is talking with the customer, this retention profile information is utilized to determine the optimal intervention action to take.

Predictive churn solutions have been proven capable of accurately identifying 40 percent (or greater) of customers who are going to churn within only 2 percent of the total subscriber base. With this refined level of identification, the efficiency and accuracy of proactive retention campaigns is dramatically improved. The CSR is able to spend time saving those customers who are already proven to be susceptible to churn. By utilizing lifetime value, length of service and optimal intervention recommendations, the CSR is also saving those customers in the most cost-effective way for the service provider. Proactive intervention campaigns, utilizing a predictive churn application, have proven to be less costly than win-back campaigns due to efficiencies gained in reduced CSR talk time, dramatically improved save rates and reduced direct costs associated with the actual intervention implemented.

The economics associated with effectively managing retention and churn can be compelling. For example, a service provider with the following profile could have an estimated nine– month ROI associated with implementing a predictive churn solution.

* Monthly Revenue per Subscriber: $45.45 – Save Rate (proactive): 40%

* Beginning Subscriber Count: 350,000 – Save Rate (reactive): 20%

* Current Monthly Churn Rate: 2.1% – Cost of Call (reactive): $20

* Current Gross Monthly Growth Rate: 4.1% – Cost of Call (proactive): $5

* % Profit per Subscriber: 25% – Cost of Intervention/Save (proactive): $100

* % Reduction (proactive) in Monthly Churn Rate: 10 % – Cost of Intervention/Save (reactive): $500.

Another example would be a service provider that has 1.5 million subscribers, an annual growth rate of 30 percent and is experiencing 20 percent churn annually. By decreasing churn one percent, this service provider can increase the “company valuation” by $150 million. Needless to say, the potential ROI related to effectively managing customer retention is getting the attention today of CFOs, COOs and CEOs.

Let’s look at the example of Best Service Cellular (BSC), a fictional cellular service provider with just over 500,000 subscribers. BSC is facing a significant increase in competition in almost all of its markets. Customer retention has become a very important issue for the company. About six months ago, BSC launched a loyalty program. In addition, BSC has already implemented save teams dedicated to retaining customers who have churned. BSC believes it has had some success in more effectively managing retention, but wants to dramatically reduce churn, maximize lifetime value and optimize interventions.

Deciding a proactive strategy was the best solution, BSC implemented an outbound, proactive retention campaign. A key aspect of the initiative is the implementation of predictive churn capability. By identifying those subscribers exhibiting a high propensity to churn before they actually churn, determining subscribers lifetime value and then identifying the optimum intervention, BSC believes it can significantly reduce the rate of churn.

An example of a customer who is very valuable to BSC is Tom, who has been a BSC customer for about six months. Tom is part owner of a small software business, Blue Star Software, Inc. Tom relies on his cellular phone as a business tool, utilizing it on average two hours a day. Recently, Tom has noticed other service providers offering deals that, if he were to take advantage of them, could save him more than 20 percent a month on his bill. In addition, these deals have interesting features, such as voice mail and call waiting, bundled in as part of the offering. Tom had never really thought about subscribing to these features on his own, but now that they have been brought to his attention, he can think of ways these features could increase his professional productivity.

Mary is a Best Service Cellular CSR and a member of the outbound intervention team. Mary has been alerted by the marketing department that Tom has characteristics of a customer with high potential to churn. As Mary is calling, Tom’s profile is displayed on her monitor. Based on Tom’s profile, BSC’s retention management system has calculated a churn index of more than 800 and an associated lifetime value of $5,500. Because Tom has been identified as primarily a price-sensitive customer, the retention management system is prompting Mary to change Tom from rate plan 1A2 to 2B4, which will reduce Tom’s monthly bill by $30. In addition, because of Tom’s lifetime value index, Mary is also being prompted to offer Tom 30 minutes of free usage a month for the next three months. Tom, surprised to hear from BSC, is impressed with the speed at which Best Service Cellular is handling his concern. Tom completes his call with Mary feeling good about Best Service Cellular customer service and management. In fact, the next day he talks to a co-worker in the office who is thinking about getting a cellular phone. Tom relays the great experience he had with Best Service Cellular to his co-worker.

BSC has also found significant value utilizing the churn, lifetime value and intervention recommendation information in support of inbound customer calls. As the customer calls in and the profile information is displayed, new information is now presented to the CSR, including churn index, lifetime value index and potential intervention options. By providing this information to the CSR, better decisions can be made at the critical customer touch points.

Does BSC sound like your company? Does BSC have the type of information technology you would like your CSRs to have? These technology-based business solutions are available today and have been proven in real-world situations. The retention war is on among competing service providers. Those providers that utilize customer information in the most aggressive way are going to be best positioned for increasing shareholder value and long-term success.

For information and subscriptions:

call TELEMARKETING(R) 203-852-6800

or Fax to: 203-853-2845 or 203-838-4070

Greg Spurrier (gspurrier@slp-infoware. com) is vice president of worldwide telecommunications for SLP InfoWare, Inc., a leading provider of data-mining-enabled customer retention and churn management solutions for telecommunications, banking and insurance companies.

Copyright Technology Marketing Corporation Feb 1998

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