Transcript of "Stopping Churn In Its Tracks - Proactive Retention Strategies for Mobile Operators - March 2011"
Stopping Churn in Its Tracks –Proactive Retention Strategies for Mobile Operators March |2011
Stopping Churn in Its Tracks – Proactive Retention Strategiesfor Mobile OperatorsWhile almost every mobile operator has a reactive retention strategy in place forpreventing subscriber churn, few have developed proactive retention strategies fordoing so, failing to benefit from this practice proven to stem the tide of customerloss…Retaining customers in the telecom industry is becoming increasingly difficult. Notonly are competitors able to mimic tariffs and offerings at the drop of a dime andthus diluting product / service differentiation, subscribers are only a phone callaway from porting out to them.The process for switching between mobile operators is now more easier than ever– in Canada, the mobile number portability (MNP) process only takes 10 – 20minutes to complete, with the subscriber ported over and using the services oftheir new subscriber in less than a half hour! While MNP in most markets won’tbecome this easy for quite a while, it’s quite clear that the churn issue willcontinue to grow for mobile operators around the world.For many years now, mobile operators have been trying to address the churnissue through reactive churn efforts – that is, trying to convince a subscriber tonot close their line when and only when that subscriber calls the contact center orvisits a dealer to do so. The traditional method used to stem churn has been tooffer the subscriber some incentive to stay (like a handset if he or she signs a year-long contract, or, a certain number of minutes for a certain number of months forfree).While such efforts have been effective in some markets at improving retentionrates, they are not, and never will be, in others. The reason is quite simple –reactive retention strategies only work in trying to keep postpaid subscribers. Thestrategy requires the operator have a chance to make an offer to the subscriber, achance which presents itself when postpaid clients give notice as to their desire tochurn. Prepaid subscribers, on the other hand, just churn – they simply put asidetheir existing SIM card and start using a new one from a competitor. And in mostmarkets globally, prepaid subscribers dominate the market – in Italy, Mexico, andIndia, for instance, more than 90% of the market is prepaid.As such, mobile operators (with the exception of those in markets like the USAand South Korea, where most subscribers are postpaid) are unable to intervene inpreventing a large majority of their subscribers from churning at will. What’s atelco to do? Launch proactive retention strategies.
Proactive retention is all about reaching out to a subscriber and addressing churnbefore it becomes something a mobile operator has to react to, thus the name.Rather than wait for a subscriber to… Port out, using the process defined by the given nation’s telecom authority Call the contact center or visit a dealer to close their postpaid line Pull out the SIM card in the case of a prepaid line…a mobile operator can proactively contact those subscribers it predicts will churnin the coming weeks or months and try to stop it from happening.To set up proactive retention strategies, we recommend mobile operators followthe below four steps:1. Effectively Define ChurnAs the first step in building a proactive retention practice, mobile operators needto first define properly what churn really means, for both prepaid and postpaidsubscribers. This is not as easy as it may sound, as the definition used by telecomsglobally can be quite different. If a prepaid subscriber does not make a chargeabletransaction (i.e. make a call, send an SMS, use data, etc.) for a period of threemonths but does receive calls on the line, has he or she churned? Or, if a postpaidsubscriber pays the subscription fee for six months in a row but has no inbound oroutbound activity, has he or she churned?Driving variations in the ways telecoms define churn are several factors, such astelecommunications authorities with their own definitions stepping in, subscriberswho may be more mobile / go abroad for extended periods of time in a givenmarket, competitive landscape, etc. To effectively define churn, telecoms need toconduct analysis regarding their consumer’s behavior, identifying at what point ofbehaving in a certain manner a subscriber does or does not leave.Analyzing past churners to identify the number of weeks / months of inactivitypreceded their leaving will help nail down a definition around churn, allowing fora standardized view across the organization on this issue. This definition will in alllikelihood be different for prepaid and postpaid customers, and will serve as thedriving measurement principle going forward.2. Build Predictive Churn ModelA predictive churn model, for those who may be unfamiliar with it, is a tool thathelps telecoms (or companies in other sectors as well, for that matter) identifywhich of its subscribers will churn within a given coming time period. If a telecomloses 100,000 customers each quarter, for example, the predictive churn modeltries to identify who those 100,000 subscribers will be in the coming quarter.
Without a predictive churn model in place, proactive retention efforts cannot beput into action. It is this tool that defines which customers to contact proactively,in order to prevent the churn occurrence from happening. Otherwise, a mobileoperator would have to guess which subscribers may churn, causing severeinefficiencies in retention efforts as well as yielding little results.A churn model must be tested before it can be relied on to support retentionefforts, as it may not be predicting accurately enough which subscribers mayactually churn. If the model, for example, predicts that 10,000 of a group of20,000 subscribers will churn, but two months down the road only 5,000 havechurned, the model has a 50% error rate, essentially unusable. As an entireproactive retention effort will be designed around the models, it is critical thattheir accuracy be tested and ensured before going live. To learn more aboutbuilding such models, please contact email@example.com. Design Offers & Channel StrategyBased on the findings coming out of the predictive churn model, the next step willbe to design offers to be made to the various groups predicted to churn. Thevariables to be considered in designing the offers are as follows: Churn Likelihood Customer Product (Prepaid or Postpaid) Customer Value Customer Usage Behavior (Local / International Minutes & SMS, Data, VAS, etc.)Utilizing these variables, a dozen or more subscribers groups for targeting shouldbe defined (i.e. postpaid subs with ARPU 500+ USD and above, with 25 – 50%churn risk, with 50+% of MoU international). Based on the defined groups, thenext step is to design customized offers that appeal to their uniquecharacteristics.It is critical that the offers be relevant to the groups; using one or two standardoffers won’t cut it, as an unattractive benefit won’t do much towards keeping thecustomer from churning. For example, an offer to a prepaid subscriber whoseARPU is 30 USD, has a 25% likelihood of churning and only sends SMS in terms ofbehavior must be drastically different than that offered to a postpaid subscriberswhose ARPU is 150 USD, has a 50% likelihood of churning and is active across theboard, using data, VAS, etc.The offers to be used should be of the kind that at least ensure the subscriber stayfor a certain amount of time, preferably of the kind that even drive up ARPU. In itssimplest form, the offer could be one that gives the customer a certain amount offree minutes each month for a certain number of months. In a more complexform, it could be one that gives a discount on a fixed postpaid plan fee for acertain number of months if and only if the subscriber migrates from their prepaid
plan (this would be an example of driving up ARPU). One-off offers should beavoided, as the subscriber can churn immediately after depleting the benefits (i.e.50 USD discount on a bill this month). One additional note – loyalty programbenefits can also be used here, giving the subscriber additional points or servicesthrough the program for a certain period (i.e. if you stay with us, we’ll give youaccess to our platinum level service of our loyalty program for the next year).Once a primary offer is defined for each target group, a secondary offer shouldalso be defined, in case the subscriber rejects the primary offer. Not all offers willbe attractive to all subscribers in a given group; having a secondary offer willensure higher retention rates are realized through churn prevention efforts.The above, of course, must all be in line with telecommunications regulations inthe marketplace – in some markets, such offers must be made available toeveryone – in others, such below-the-line offers are allowed.Once the offers are designed and ready in the billing systems, the next step is todetermine the contact strategy – who will be contact by what channel in whatorder. Using a contact center is the most effective method in retainingsubscribers, but doesn’t make financial sense in many cases – a breakevenanalysis will help determine which subscribers should be called (i.e. only thosesubscribers who have over 100 USD ARPU and have a 25+% likelihood ofchurning). Those not to be called can be contacted via SMS, e-mail, or auto-dialer(again, regulations need to be reviewed here).4. Prepare Operations & Pilot EffortsThe final step, before going live, will be to design the enablers to drive theretention efforts – including alternate scripts, SMS text, training materials, etc.The importance of these cannot be stressed enough – a poorly trained call centerrepresentative with an ineffective script in his or her hands may cause more harmthan good. The piloting phase is a perfect opportunity for examining theeffectiveness of the materials as well as the agents.At this point a critical fact about proactive retention efforts must be mentioned –such efforts only work when the retention offers are made mainly only to thosesubscribers who are about to churn. Even the most sophisticated and advancedpredictive churn models in the world are unable to only pinpoint churners; that is,a model is able to state that 50 of a specific 100 subscribers will churn, notpinpoint the specific 50. The trick lies in making an offer to the 50 who will churn,and not to the 50 who won’t. If offers had to be given to all 100 subscribers, thebusiness case around proactive retention efforts would not make sense.As such, call center representatives need to have a target around the percentageof subscribers they can make offers to – thus, their goal is to gauge thesatisfaction level of the subscribers during the conversation to determine whetheror not to make an offer. This can be done with excellent scripts and effective
training, arming the representative as much as possible to ensure the desiredoutcomes are realized.The final step, before going live, will be to pilot the churn prevention efforts, toensure the optimal strategy is in place, taking into consideration several differentfactors: Reach Rates, by Channel Response Rates, by Channel % Satisfied % Accepting Primary Offer %Accepting Secondary Offer % Rejecting All Offers % Saved % Change in ARPUThe above findings must then be used to fine-tune the offers, the timing of theoffers, the scripts, the training materials, etc. More importantly, the impact on thebottom line can be assessed, to determine what channel strategy makes sense,helping fine tune which customer is contacted by what channel (based onresponse and retention rates as well as % change in ARPU).Mobile operators that haven’t yet launched their own proactive retention effortsshould seriously consider doing so at this point. Such strategies are proliferatingthrough the telecom industry, as the challenge of retaining subscribers isincreasingly becoming more and more difficult. To learn more about building yourown proactive retention strategies, please contact firstname.lastname@example.org
About Forte Consultancy GroupForte Consultancy Group delivers fact-based solutions, balancing short and long termimpact as well as benefits for stakeholders. Forte Consultancy Group provides a varietyof service offerings for numerous sectors, approached in three general phases –intelligence, design and implementation. For more information, please contact email@example.com Forte Consultancy Group | Istanbul Office www.forteconsultancy.com