Is there such thing as a loyal mobile subscriber? In many saturated markets the focus is turning to keeping the high-spending customers, keeping them loyal and converting them to enthusiastic advocates. This research will provide you with clear, actionable ideas that can help you reduce customer churn.

1. Telecoms loyalty: Challenges and
opportunities to move beyond the
basics and delight customers
29 November 2010
Julio Puschel
• Network coverage and service quality are still the main drivers for churn. Operators
should address loyalty in a holistic way in order to address all the important gaps in
their relationship with their customers.
• The prepaid market is definitely important – and it is a challenging segment in which
to promote loyalty programs. Some operators are proving successful at creating ways
to keep customers for longer periods and increase the volume of their calls and SMS
messages.
• Operators are migrating customers into digital channels for customer care as way to
reduce cost and improve the customer experience. However, these channels need to be
intuitive and easy to use – they should direct the customers to the information they
are looking for without the customer having to make any significant effort.
• Customer life-time value is one of the most important metrics for driving the
operators’ strategy. They need to invest and create programs for the different customer
segments and life-cycle phases.
The new dynamics in the highly-penetrated mobile markets, significant competition and
increasing prepaid penetration are forcing operators to put customer loyalty at the center of
their strategy. Although operators have implemented new loyalty programs in the last few
years – for example, O2 Priority, Orange Wednesday and Vodafone VIP in the UK; Orange in
Niger; and US Cellular in the US – they are still facing the challenge of solving basic features
such as network quality and coverage (see fig. 1).
Fig: 1: What are the main drivers for churn?
It is not possible to detach important aspects such as service quality and network coverage
from a loyalty strategy as even a very good program will be useless if the customer cannot
use the service itself. Consequently, operators need to take a more holistic view if they
wish to offer an outstanding experience for customers in all the phases of their relationship
with them. Customer experience management (CEM) is a concept normally applied at the
operators’ customer channels, but it needs to be part of the entire process, from the operator’s
retail store and the service quality to the call-center representative (see fig. 2).
www.informatm.com © 2010 Informa Telecoms & Media

2. Fig. 2: Customer Experience Management (CEM) – A holistic view
Prepaid is another hot topic for loyalty as it has such a significant penetration of the overall
mobile customer base. This is not just the case in the emerging markets, but it also in the
Western European and North American mobile markets. The prepaid segment has churn
rates that can exceed 50% in some markets and its real-time dynamic presents a challenge
to operators aiming to implement any kind of loyalty program. Orange Niger and the pan-
African operator Zain were able to overcome this challenge and create significant initiatives
and improvements to keep their prepaid customers active and even increase their call
volumes.
The handset still has a very important role to play in customer loyalty as it provides a good
way to lock customers into longer or additional contracts. Subsidies do not appear to have
a significant impact on the customer life-time value if they are able to increase the length
of the customer’s relationship with the operator. However, subsidizing handsets should be
used wisely as a way to award the loyal customer and not as a last-minute effort to retain
customers.
In terms of customer channels, there is a clear trend that operators are trying to migrate
their customers into using digital channels as a way to reduce the cost of their customer
service representatives. However, for this to work, the digital channels need to be an attractive
alternative – they need to very easy to use and the customers need to able to find the
information they need quickly and easily. Vodafone Portugal and MTN South Africa are
examples of operators that are helping customers to use digital channels effectively; they
are integrating all their information sources, educating their customers through interactive
tools and involving different areas within the company to improve training and, consequently,
customer care.
Customer life-time value is a key metric that allows operators to really understand customer
profitability in the different phases of their relationship with their customers. This metric
will provide a better view of the customers and help the operators allocate the appropriate
investment and loyalty initiatives for the different segments in a way that does not have
an impact on their profitability. TMN in Portugal is a good example of an operator that has
devised different loyalty programs for different phases in customer life-time cycle – not just
allocating the appropriate investment but also implementing action at the right time to avoid
customer churn.
It is clear that customer loyalty should be approached in a holistic way – integrating the
operators’ different areas, technologies and systems. It is now necessary for operators to move
beyond the basics and focus on really delighting their customers.
www.informatm.com © 2010 Informa Telecoms & Media