Industry observers expect portability to increase churn in 2004 as carriers iron out technical glitches and more consumers come off contract, enabling switching without financial penalty.
Posted Mar 1, 2004
Beginning last November mobile phone customers were able to switch carriers but keep the same phone number. The initial impact of the new rule has been limited--with no identifiable impact on the carriers at the end of 2003--but industry observers expect portability to increase churn in 2004 as carriers iron out technical glitches and more consumers come off contract, enabling switching without financial penalty.
Increased churn hurts a carrier even if the carrier wins the same number of new customers that it loses. This is because it takes time--six months according to the Yankee Group--to recoup the costs of initiating service to a customer.
It is essential that all carriers address portability with the best possible prediction of whether a particular customer (as defined by rate plan, place of residence, handset, etc.) is likely to churn, and perhaps even more important, why that customer is likely to churn. As an example of this approach, the analysis team at a major wireless carrier has built a churn-propensity model that assigns a unique score to every customer, corresponding to likelihood to churn. The team then identifies which churn driver most contributes to a customer's likelihood to churn, targeting retention marketing accordingly. If the customer's rate plan appears to be the key churn driver, that customer will receive an offer for a rate plan upgrade.
Continuous, rapid churn analysis
Customer behavior is subject to constant change. Prior to portability a businessperson (who receives incoming calls from a variety of contacts) might be very unlikely to churn, because she does not want to give up her phone number. After portability she might be much more likely to churn.
Carriers therefore need to be able continuously to analyze customer data and identify groups of new churners to develop proactive retention offers targeted at these different segments of customers. Some carriers have opted to receive, on a daily basis, lists of customers who churned on the previous day, allowing the analysis team to quickly append the data to existing analysis data sets and identify if there are segments of customers who appear to be churning at a relatively higher rate.
This rapid analysis should also cover the effectiveness of efforts to combat churn or if any of the retention efforts have backfired. The team could then choose to expand the campaign for those key segments, and switch to another campaign for the other segments.
Continuous, rapid analysis is very useful when tied into the efforts of marketing, customer care, and other relevant departments. Analytical tools must allow marketers to have an interactive "conversation" with their data--and allow a cross-functional team to review the latest data and design meaningful interactions with customers that are most at risk at any given time.
Better access to and understanding of customer data helps informed decision-making and helps build better customer relationships. Faster cycle times generate deeper understanding and improve time-to-market--both keys to success in an increasingly competitive marketplace. However, the cycle itself is not a sequential process, it includes cycles within cycles at each stage.
The key to effectively combating number portability related churn is a flexible, iterative approach: People are constantly reacting to changes in circumstances, and the analytic environment has to be dynamic enough to keep up with these constant fluctuations and continuously feed the process of creating incremental customer value. Only then can service providers begin to truly grapple with the sizeable phenomenon of customer churn related to number portability.
About the Author
Joshua Lewis is a Consultant in the U.S. professional services division of Quadstone. He has worked closely with Quadstone clients in the wireless and other industries. Contact him at Joshua.Lewis@quadstone.com
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