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Millions of unhappy customers can shed the yoke of oppression and change carriers, while holding on to their phone numbers. This could create churn rates higher than the wireless industry could imagine.
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Wireless providers have held all the cards for some people. Sure, the service is spotty and the rates are often questionable, but one thing has kept the balance of power in the providers' favor: phone numbers. Since the beginning of the mobile revolution, your phone number lasted only as long as your service contract. Until now, that is. With the Local Number Portability Act (LNP), which takes effect this fall, millions of unhappy customers can shed the yoke of oppression and change carriers, while holding on to their phone numbers. This could create churn rates higher than the wireless industry could imagine, says Richard Wolniewicz, Ph.D., vice president of engineering for the analytics division of CSG, which handles billing and customer care for communications firms. "This could put wireless providers in a similar situation that Internet providers found themselves in a few years ago," he says. "People used to be tied to their email address, but with free email services like Hotmail and Yahoo!, people have become more choosy, and Internet service providers now have to compete on price, service, and stability." Wolniewicz says wireless companies will have to up their service, providing extra add-ons and advanced service levels to retain customers. "The good news is that this is a very addressable churn issue," he says, meaning that service is under the provider's control, unlike a customer moving out of the service area or refusing to pay bills. Channing Rollo, business intelligence manager for ClientLogic, which has been helping prepare firms for the change, agrees. "Service is always key in deregulated industries," she says. But before providers can retain these customers, they first need to take a long look at their customer base, Wolniewicz says. By analyzing service call and payment records, providers can create segmented customer lists that identify high value and low value customers, based on cost-to-serve and profitability metrics. "Every cloud has a silver lining," Wolniewicz says, noting that providers can use the opportunity to create a customer base that is highly profitable with low cost-to-serve.
Being proactive is never a bad thing, Wolniewicz says, and wireless companies can start by making outbound service calls to customers identified as having a high potential to churn. "Many companies already do outbound calls for first-time users, making contact to make sure they are comfortable with the service and had no problems getting set up," he says. "This type of proactive measure could reduce a significant amount of churn." Rollo says that incentive programs that get progressively better over time, ones that include perks like lower rates and extended minutes, could lead to retaining customers and extending potential lost contracts. All in all, the LNP mandate may turn out to be win-win for both carriers and customers, Rollo says. "As customers get better service from wireless providers, those who were hesitant to drop their land lines and go wireless may finally do so, making for greater overall market penetration," she explains. "People have been crying out about poor wireless customer service for years," Rollo says. "The LNP may finally force providers to rise to the occasion in terms of service."
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