Driving Effective Customer Retention for Communications
 

Driving Effective Customer Retention for Communications

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In a world where penetration rates for services like mobile have reached more than 100% in manycountries, Communications Service Providers (CSPs) are shifting their sales and marketing investment from ...

In a world where penetration rates for services like mobile have reached more than 100% in manycountries, Communications Service Providers (CSPs) are shifting their sales and marketing investment from attracting new customers toward maximizing customer value through improved revenue and retention.

Pega is at the forefront of this shift with a market-leading Next-Best-Action Marketing solution that combines sophisticated predictive and adaptive analytics, real-time decisioning and a guided user experience to help CSPs improve retention and drive incremental revenue.

Pega has identified a few key best-practices related to retention. These best-practices are partially enabled by technology, but also enabled by CSP leadership’s ability to think “outside the box” in pursuing efforts to reduce customer churn.

Learn more:
http://www.pega.com/solutions/by-industry/communications-and-media/customer-service

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Driving Effective Customer Retention for Communications Driving Effective Customer Retention for Communications Document Transcript

  • Driving Effective CustomerRetention for Communications
  • Introduction PEGA IS AT THE FOREFRONT OF THIS SHIFT TOWARD MAXIMIZING CUSTOMER VALUE WITH A MARKET-LEADING NEXT-BEST-ACTION MARKETING SOLUTION In a world where penetration rates for services like mobile have reached more than 100% in many countries, Communications Service Providers (CSPs) are shifting their sales and marketing investment from attracting new customers toward maximizing customer value through improved revenue and retention. Pega is at the forefront of this shift with a market-leading Next-Best-Action Marketing solution that combines sophisticated predictive and adaptive analytics, real-time decisioning and a guided user experience to help CSPs improve retention and drive incremental revenue. Today, Pega Next-Best-Action Marketing is powering initiatives for major CSPs like Vodafone, O2, Orange, Cox, Maxis, BSkyB, MTS and Time Warner Cable, helping them drive additional revenue and margin from their existing customer base. For example, at the largest telco in the UK, the solution is part of a multi-stage initiative where they are already generating an incremental 24M GBP of annual operating margin in the initial phases. As CSPs shift focus from customer acquisition to retention and margin, we have identified a few key best- practices related to retention. These best-practices are partially enabled by technology, but also enabled by CSP leadership’s ability to think “outside the box” in pursuing efforts to reduce customer churn. Follow Bob’s Customer Journey Bob is your typical customer. He can be lured by competitive offers, or retained by a service provider that anticipates his wants and needs. Bob’s journey is a multi-channel scenario that demonstrates how a service provider can engage customers and use Pega Next-Best-Action Marketing to drive very relevant, customer-centric experiences.DRIVING EFFECTIVE CUSTOMER RETENTION FOR COMMUNICATION WWW.PEGA.COM SHARE THIS WHITEPAPER:
  • Creating the 1:1 Business Case for Retention Marketing organizations are most familiar and comfortable with segmentation marketing strategies, where subscribers are broadly grouped and labeled. Once these groups are created, then packages or strategies are offered to each group. These mass segmentation strategies may work reasonably well for subscriber acquisition (they cast a wide net), but in retention – where you have intimate knowledge of the customer – using mass segmentation sacrifices massive amounts of profitability. As an example, imagine we create a segment called “Medium Value” subscribers and attach a “Medium Value Offer” to it for retention. We then present the offer to five THIS INDIVIDUAL subscribers in the segment as shown in the accompanying chart. In all cases but one, the “Medium Value Offer” is not aligned with the overall value of the customer. For APPROACH OPTIMIZES two of the subscribers (#1 and #4) we spend MORE than necessary, and for another PROFITABILITY BY two (#2 and #5) we are unlikely to be able to retain them. Only in one case (#3) does MAKING EACH OFFER A the offer fit. In a large subscriber base, this over/under-investment costs millions PERFECT FIT AGAINST of dollars in lost margin since we spend too much money (overinvest) for some subscribers, and spend too little (underinvest) for others, resulting in a lost save. RETENTION VALUE. OUR “MEDIUM VALUE” SEGMENT OFFER “WOW - “NO, THANKS” “PERFECT” “SEEMS LIKE A “NO WAY” I’M THAT GREAT DEAL!” VALUABLE?” OUR “MEDIUM VALUE” CUSTOMERS Leading CSPs take a radically different approach by starting the entire process with the value of the customer. They use real-time decisioning combined with a guided interaction to present a specific retention budget and the most appropriate basket of offers for each subscriber at the moment of truth. This individual approach optimizes profitability by making each offer a perfect fit against retention value. The retention budget should be thought of as a 1:1 business case that considers subscriber metrics (such as lifetime value and influencer score), and corporate and departmental metrics (such as corporate retention budget, quarterly net add performance and even contact center queue time).DRIVING EFFECTIVE CUSTOMER RETENTION FOR COMMUNICATION WWW.PEGA.COM SHARE THIS WHITEPAPER: 1
  • Starting Retention at “Hello” When CSPs first implemented their retention initiatives they applied them against subscribers that were dissatisfied and trying to leave. This strategy, exemplified in the elite contact center “Save Group”, is an example of reactive retention. It is a fine place to start, but it’s likely the most expensive retention strategy, since it requires changing the subscriber’s mind. More advanced CSPs are now realizing that it is more cost effective to make sure customers never get on the exit path in the first place and are implementing two new types of retention strategy, preemptive and proactive. Preemptive strategies are those applied before there are any recognizable churn signals from the customer, and proactive strategies are those applied when initial churn signals first appear like complaints in service, reduced usage or repeated technical support events. Sometimes these events are not evaluated directly, but combined into predictive churn models. LEAVING? Not thinking about it Thinking about it Doing it Did it RETENTION Preemptive Proactive Reactive WinBack STRATEGY Executing preemptive strategies requires the ability to effectively predict customer lifetime value since CSPs will likely want to execute more expensive preemptive strategies first against their highest value subscribers. The point of preemptive strategies again is that they are executed without considering likelihood of churn, and executed in the name of providing an excellent customer experience. Since proactive strategies are applied against early warning indicators of churn, they introduce a new requirement – predicting likelihood of churn. The way leading CSPs NOW, WITH PREEMPTIVE accomplish this is finding common behavior patterns that are reliable churn/attrition AND PROACTIVE indicators from historical data. Once this data is analyzed and patterns are discovered, STRATEGIES, CSPS ARE it can be applied against current subscribers to find those that need proactive churn strategies applied. INTEGRATING THESE STRATEGIES AND THEIR To execute on preemptive and proactive strategies also creates a new requirement OFFERS INTO EVERY for the organization. The offers associated with these strategies must be presented at the right time. With reactive retention and win-back, the presentation of offers could CUSTOMER TOUCH POINT be limited to a small subset of a specific channel, such as the “Save Group” desktop. Now, with preemptive and proactive strategies, CSPs are integrating these strategies and their offers into every customer touch point, regardless of channel. A centralized source – a “decision hub”– provides every channel with the right offer at the right moment in the customer lifecycle. Finally, with all retention strategies, a critical factor in driving effectiveness is taking a customer-centric approach to determining ‘propensity to buy’ when presenting products and services. This propensity modeling significantly improves acceptance rates, and in assisted channels has the follow-on impact of driving more agent confidence and higher initial present rates as well. DRIVING EFFECTIVE CUSTOMER RETENTION FOR COMMUNICATION WWW.PEGA.COM SHARE THIS WHITEPAPER:2
  • Focus on Decisions, Not Data Conventional wisdom is that large data management initiatives (e.g. Master Data Management or “MDM”) are a prerequisite for effective retention. For some IT departments and system integrators, their (somewhat self-serving) position is that the data has to be (nearly) complete and (nearly) perfect before it can be safely used. The result is months of delay waiting for “data improvement” and “data quality” initiatives to complete before the business gets a solution. Leading CSPs are finding out that they can get good retention results even on incomplete and imperfect data. By starting with limited data values that are just good enough to make sensible recommendations or automate retention decisions, they get business results. Here are a couple of best-practices these companies use regarding data volume and quality: ``They construct a minimal set of data that supports the highest value decisions and then use predictive analytics and decision strategies to confirm the key data elements THE REAL-WORLD that will deliver actionable results. This is usually a fraction of what’s available – out of a 1,000 customer data elements, only 5-25 may actually wind up in a good quality EXPERIENCE GAINED, predictive model and decision strategies may focus on 50-100 key fields overall. AND THE POWER OF THE ``They make sure the decision strategies automatically prompt for missing data ANALYTIC CAPABILITIES elements that are used as input to the rules or predictive models embedded in IMPLEMENTED CAN that strategy. ACTUALLY SIGNIFICANTLY ``They set up the solution to statistically analyze data and make it either useful (after ACCELERATE THE DELIVERY dealing with outliers, missing values, weird distributions, etc.) or automatically reject the offending data element. OF DATA QUALITY RESULTS. ``If after (automated) data analysis not enough data remains to create and support an accurate predictive model, they simply deploy a model with known lower predictive performance. These CSPs find that even models with low predictive capability are likely superior than assumptions or guesswork. They also find that using these lower quality predictive models as seed models for more advanced adaptive capabilities significantly speeds time to market without sacrificing performance. With this approach, CSPs are turning conventional retention strategies around, taking an incremental approach and using the business results of the early phases of their retention solution implementation to fund additional data quality initiatives. The real- world experience gained, and the power of the analytic capabilities implemented can actually significantly accelerate the delivery of data quality results.DRIVING EFFECTIVE CUSTOMER RETENTION FOR COMMUNICATION WWW.PEGA.COM SHARE THIS WHITEPAPER: 3
  • Who Owns Retention? Finally, leading CSPs are realizing that their existing functional organizational silos do not enable a holistic approach to retention. Since sales, marketing and service organizations are all compensated based on different customer metrics, it is difficult to get the entire organization thinking about retention across the entire customer lifecycle. So leading CSPs are changing their organizational structure, and empowering a senior leadership position focused on “Base Management” or “Customer Value Management”. The individual in this role executes across functional organizations, and is totally dedicated to using analytics, decisioning and CRM best- practices and technology to drive incremental margin per subscriber and maintain low levels of customer churn. DRIVING EFFECTIVE CUSTOMER RETENTION FOR COMMUNICATION WWW.PEGA.COM SHARE THIS WHITEPAPER:4
  • Conclusion CSPS NEED TO DISCOVER MORE EFFECTIVE WAYS TO RETAIN THEIR BETTER CUSTOMERS LONGER IN ORDER TO ENSURE PROFITABILITY. In its most basic form, the subscription business model employed by CSPs is driven by three major levers – acquisition cost, monthly margin and customer tenure. Over the next few years, competition is likely to significantly drive up the cost of acquisition, as CSPs spend more in marketing and subsidies to attract an ever shrinking pool of new customers. It is also likely that the multiple competitors in every market will continue to put pressure on monthly margins. As acquisition cost increases, and margin decreases, CSPs need to discover more effective ways to retain their better customers longer in order to ensure profitability. The above ideas represent what is likely only the beginning of the road toward much more sophisticated retention best practices. Technology advancements, in the form of core computing power able to analyze massive amounts of data; the emergence of social influence as a major factor in defining customer value; and the advancement of technology solutions that put real-time decisioning power in the hands of front-line employees are all contributing to rapid advancement of the state-of-the-art solutions. CSPs that fail to start down the path toward applying more advanced thinking to retention will be left behind.DRIVING EFFECTIVE CUSTOMER RETENTION FOR COMMUNICATION WWW.PEGA.COM SHARE THIS WHITEPAPER: 5
  • About PegasystemsPegasystems, the leader in business process management and software for customer centricity,helps organizations enhance customer loyalty, generate new business, and improve productivity. Ourpatented Build for Change® technology speeds the delivery of critical business solutions by directlycapturing business objectives and eliminating manual programming. Pegasystems enables clientsto quickly adapt to changing business conditions in order to outperform the competition. For moreinformation, please visit us at www.pega.com.SHARE THIS WHITEPAPER:© Copyright 2012 Pegasystems Inc. All rights reserved. All trademarks are the property of their respective owners. 2012-12