Customer Value - Managing Acquisitions through Retention in Competitive Market

3rd Annual Telecoms in Africa:
Customer Loyalty & Retention Conference

Sathya Karthik R

© Abiba Systems | www.abibasystems.com

Category 2005 2010 2014 (est.)
Subscriber
133.55 506 911
Base
Penetration 14.30% 41.00% 62.4%
ARPU ($) 14.5 10.34 >6
3G
Key Drivers Voice Voice, SMS
VAS
Acquisition,
Business Network,
Network Retention,
Priority Acquisition
Profitability
Customer
Market Share Wallet Share
Focus

Hottest: Mobile > 65% , Internet > 40%
Hot in mobile: Mobile > 65% , Internet > 40%
Hot in Internet: Mobile < 65% , Internet < 40%
Coolest: Mobile < 65% , Internet < 40%


20 105%
18
99% 99% 100%
16 97%
98%
99.30%
14
95%
12 94%
90%
10 9 90%
8
6 85%
6 5
4
4 3 3
2 80%
2
0 75%
Kenya Algeria Botswana Egypt Nigeria Sudan Tanzania

Number of Operators Prepaid Base % of Total

• Intense competition – choice for customers
• Rapidly increasing penetration
• Very high churn


Subscriber base Vs ARPU
1000 16
900 14.5 14
13.4
800
Subscriber base (Mn)

12
700
10.34 10
600 561.18

ARPU ($)
506
500 8
7.5
400 6
280.7
300
4
200 133.55
100 2

0 0
2005 2007 2010 2012

Subscriber Base ARPU


Gabon, Ghana, Kenya, So
Benin, Chad, Democratic
uth
>3 Republic of
Africa, Nigeria, Sudan, Tan
Congo, Uganda
zania
No. of operators

Africa

<=3 Ethiopia, Eritrea, Guinea, Algeria, Botswana, Egypt,
Togo Tunisia

<= 50% >50%
Mobile Penetration


• ABIBA Systems is a Business Intelligence and Analytics company based out of Bangalore, India
• Our industry focused product and services portfolio is getting wide acceptance.
• We offer a consulting based approach to identify cost effective solutions to enhance the
decision making capabilities of senior management.

Our solution approach
Domain specific
pre-built solutions

Lower TCO to ensure Rapid deployment
higher ROI for quick wins

Business User friendly
solutions
Top BI & Analytics
Companies
Our Clients


Up sell (new
product/service)
Value

Retention
Cross-sell

Re activation

Acquisition

Life stage


Differentiated Profile the customers
and employ retention
approach based on
approach to maximize
lifecycle of customer revenue from retained
to enhance value customers

Revenue

Attack ‘entry point’ Enhance revenue from
by improving quality ‘terrorist’ customers
of acquisition


High ABIBA Competition Penetration Matrix

Retention
Penetration

Life Time Value Life Time Value
Up-sell

Acquisition Acquisition
Low

Cross – Sell
Up Sell

Low High
Competition


• Additional services
• Increase wallet share

Terrorists Already taken care?

• Loyalty
• Better services
• Benefits
Profitability

Steady
??? eddies
Increase wallet share
Do not focus on retention

Average Life of Customer

Operator Focus ---- Maximise(Life * ARPU) - Cannot retain – then enhance
revenue; have to sacrifice ARPU to enhance life


Prepaid subscribers – little information

Cost of acquisition > initial ARPU

Competitive market – getting Multi SIM users

Distribution driven – differing objectives

Strategic focus – Sub.base and market share


Metrics Scenario 1 Scenario 2
No of customers Acquired 1000 750
ARPU (in USD) 6 8
Annual Churn Rate 60% 48%
Customers retained 400 390
Cost of Acquisition/Customer (in USD) 12 15
Total Acquisition Cost 12000 11250
Revenue 48600 53280
Profit 36600 42030

A targeted acquisition results in
•Lower churn
•Higher ARPU
•Increased revenue
•High Profits


Scenario 1 Scenario 2

1000 750
Customers acquired

6 8
ARPU (in USD)

60% 48%
Churn Rate/ annum

400 390
Customers retained


Scenario 1 Scenario 2

12000 11250
Cost of acquisition

48600 53280
Revenue

36600 42030
Profit


The propensity of a pre-paid customer churning is three to five times that of a
post-paid customer.

“ It is costing operators 8 to 10 times to acquire a new customer than to retain
existing customers” – Gartner

Churn rate in emerging markets is averaging > 50% p.a and is expected to go up
further with new operators and MNP.

A loss of just 10% of its high value subscriber base amounts to a loss of 85% in
revenues for the company – Dataquest. e.g. In some markets – ARPU of older
valuable subscribers is about $20 – while for new prepaid subscribers is <$2

Churn cost global telcos $10 billion annually in the form of
customer defection -Telecommunications Online


The matured
approach

Value based
WAR+Analysis Now
retention

Proactive retention – Mass, higher cost,
customer Beyond 48 months
Effectiveness

dormancy
management fatigue, low
effectiveness

Reactive, higher cost, 24 months to 48
Reconnections low life post months after launch
reconnections

high costs, low life Up to 24 months
Only acquisition after launch
post connections

Maturity


Limited customer information

Minimal customer engagement
when compared to Postpaid Very low exit barrier

Low Loyalty levels and sticky Very Low ARPU which does not
factor justify ‘generic’ retention


Set Clear CLM Objectives Value based approach

Control at entry – channel
management, brand fit, Cost of acquisition

No retention at any cost – ROI driven

If you can’t retain - ARPU enhancement

No customer fatigue OR dissatisfaction


Whom should I
retain / acquire? CLV Response Modeling
BI & Segmentation
Who will respond to
What is happening? the campaign?
How long can the
customer be
retained ? Survival Analysis

Why is the customer
churning ? Profiler

Churn Prediction
Actionable Decisions
Which are the
Who is churning? better campaigns ? Recommendation


Data Mart

Campaign Planning
Pre Campaign Post Campaign
Analytics Target Analytics
Campaign
Location Analysis Sampling Analysis

Hot Spot Analysis Reports
What -if


Understand
customer behaviour
and drivers for
churn
Assist good quality
and foil poor quality Retain the high
acquisitions value subscribers

Improved
ARPUs by
upselling
Effective resource Extend life of
utilisation – better desired
campaign ROIs subscribers

Quick response
to market

Manage internal reviews with little ‘sweat’ – Makes you an internal Champion

Customer Value - Managing Acquisitions through Retention in Competitive Market

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