• May 3, 2004
  • By David Myron, Editorial Director, CRM and Speech Technology magazines and SmartCustomerService.com

Vertical Focus: Telecoms Focus on Services, Not Price, to Reduce Churn

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The telecommunications industry is growing, despite high customer churn rates. Overall U.S. telecommunications spending rose 4.9 percent in 2003, and is expected to grow to $1 trillion in 2007, according to the Telecommunications Industry Association. Yet the lack of customer focus in this market has yielded one of the worst customer loyalty levels across all industries, according to a Walker Information research study, "The Walker Loyalty Report." Conservative estimates have the industry's average customer churn rate at 30 percent annually, but a closer look indicates that the market contains an even larger number of would-be churners. The Walker study evaluated four sectors within telecom: Internet service providers, wireless providers, long distance providers, and local service providers. Nationwide, only 28 percent of customers want to continue their relationship and plan to keep buying service from their current provider, the Walker report states. About half (46 percent) of telecom customers say they are trapped or not pleased with their provider, but will stay until something better comes along. Another 25 percent are considered high risk or ready to begin purchasing from a competitor at any time. The study shows that while price is important, it's not the main driver for customer loyalty. "Less than two thirds of customers rate the ease of doing business with their provider favorably, yet it is one of the most important factors in their relationship," the report states. Only 57 percent of respondents were positive about customer support services, and 54 percent had nothing favorable to say about their providers' billing processes. Competing on price has been a long-time strategy for many telecom firms, but winning customers on price, rather than on services and support, dilutes a telecom provider's value, says David Hawley, senior analyst of telecom software strategies at The Yankee Group. "Undifferentiated services force carriers into price wars, which force customers to focus on the price point," Hawley says. "When that happens it becomes difficult to dominate if you're just competing on price." To effectively compete and to lower customer churn, then, telecom carriers should focus more on bundled services, experts say. Telcos like AT&T, SBC, and Verizon are often in the unique position of having customers using several of their products (e.g., wireless, local and long distance services, Internet services). "To stem high churn rates many operators are looking to bundle services," Hawley says. "Empirical evidence shows that the more services customers purchase from an operator the less likely they are to churn." According to Hawley, bundling two services usually reduces customer churn by 25 percent. Bundling a third product reduces it by an additional 13 percent, and a fourth product reduces churn by an additional 6 percent. "It is a bigger hassle to cancel two services than one, hence minor annoyances that would lead one to churn don't lead a bundle to churn," he says. Telecom providers also need to enable their call centers and billing departments to view each customer as "a single company" using several services from the same provider, Hawley says. So when a customer dials into a call center, one agent can handle the customer's concerns across multiple products. "You may find dozens of billing systems [across multiple divisions within a company], so a system console can be implemented to provide one view [of the customer] to increase operating efficiencies," says Darren McKinney, director of marketing at Amdocs. The biggest obstacle to integrating all the systems into one for agents is not infrastructure, but cooperation, Hawley warns. A wireless division of a company, for example, might have its own Web sites, agents, and customer databases. Sharing that customer information across all divisions of a company is the ultimate goal, he says, and he expects such cooperation will be more commonplace by the end of this year. T-Mobile Netherlands' First-Call Resolution Rate Rings in at 90 Percent T-Mobile Netherlands, a subsidiary of T-Mobile International, last year had 15 different systems its 900 agents had to use to support its growing subscriber base of 1.5 million active business and residential subscribers. The telco received on average 15,000 calls per day. Agents were forced to fumble through six different screens for any customer interaction. "Training was costly. Performance was hindered. And inconsistencies were apparent," says Joop Evers, vice president of customer service at T-Mobile Netherlands. To solve these problems the carrier turned to Amdocs. After completing its deployment of Amdocs ClarifyCRM in April 2003, call center agents were able to access all customer data through one screen, and handle 90 percent of customer inquiries on the first call. Additionally, call duration has dropped by 30 percent, and upsell and cross-sell success rates have increased 27 percent. --D.M.
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