Why experience matters – Part 1
Although churn is a global issue in the telecoms industry, a detailed look at the problem in a single market is instructive in putting it into context.
In the United States, roughly 92% of adults own a cellphone. This translates to 400M subscribers in the US telecommunications industry. The churn rate across the top four carriers (AT&T, Verizon, T-Mobile, Sprint) is reportedly just under 2% of a collective customer base of 100M subscribers. Monthly revenue per customer is estimated at $62 (€51.99), gross profit $34 (€28.51). Weigh this against the acquisition cost of a new customer $315 (€264.16) and an expected customer lifetime of 52 months and customer lifetime value is $1,782 (€1494.40), says Keith Brody, director of Global Marketing at DigitalRoute.
Churning customers tend to depart at or around nineteen months so the lost revenue for a churned customer can be estimated at a little over $1,000 (€838.61). This means churn takes a lot of money (or profit) off the table. The question for CSPs is what to do about it?
One approach to combatting churn is deploying a new Use Case, or solution we term Experience Based Charging (EBC). In domain terms, we categorise it as an OSS-related implementation because using information from the network itself is central to the solution. EBC enables customer-problem solving decisions to be made quickly, close to the network source where an issue may have occurred. Importantly, this enables near real-time solutions, to problems that threaten customer loss (churn), to be implemented.
EBC sets out to empower telcos to adapt their charging plans to estimated or actual customer experience. In doing this, it directly confronts one of the main drivers of churn – unhappiness with the service received and the failure to recognise or compensate for the issue. It stands to reason that the more data that is sourced from the network, the more accurate the knowledge of the customer’s experience will be and, thus, the more impactful the remedy the telco will be in position to impose.
The key to EBC lies in answering the question “what is acceptable experience?” Once that’s defined, a plan can be put in place to handle anything that falls short of the required standard and the execution of the plan is not reliant on the problem being brought to the carrier’s attention by an unhappy customer. In fact, it’s quite the opposite; remedies for unsatisfactory experiences can be imposed before the customer has complained. Given that we know that many customers churn without complaining because, now, switching carriers is so easy, this is a critical advantage.
When the experience proves unacceptable, or below identified thresholds, (regardless of whether the customer expresses dissatisfaction or not), mitigating action can be immediately taken.
This might include:
- Adapting a rate plan
- Offering a top-up bucket
- Proactively notifying subscribers of an issue or remedial action
Given the numbers quoted at the start of this blog, it’s clear that EBC addresses a multi-million dollar problem for telcos. In the next installment, we’ll dig deeper into how EBC works and the impact it can be expected to make.
The author of this blog is Keith Brody, director of Global Marketing at DigitalRoute
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