Churn Reduction Strategies for Telecom Industry

The telecom industry has evolved a lot during the past decades and has undergone vast technological changes from old Public Switched Telephone Network (PSTN) technologies to new Internet Protocol (IP) based equipments and technologies. As technology evolved, many players started offering variety of products at competitive rates thus creating choices for customers. This competition has created loosing of customers to other companies for many telecom players.

According to Hughes¹ (2010) in an article published by database marketing institute, says that all industry faces with customer churn, especially telecom companies whose churn ratio would average between 10 to 67 percent per year. It costs a lot of money to acquire a new customer in most telecom companies. When a customer leaves, the company loses not only the expected future revenue from the customer but also the resources they spent to acquire the customer in the first place.

Educating Customers or Database marketing

Industry retention surveys published by few researching companies have shown that while price and product are significant, most people leave any service because of displeasure with the way they are treated. They would not be looking around for other products or services if they were happy with their current provider.

A telecom provider has many opportunities for customer education. They have to explain how their services work, why their customers need them, how they can use them, why their services are better than all the other competing providers, what they are doing to support their community, how to save money with their special promotions etc.

The more dialogue a company can create with their customers, the better the relationship. Better educated customers are higher revenue-generating customers.

Next thing to focus more on will be related to issue solving. This could be related to billing or something related to their financial. Company need to take a look at their problems and realize what they exactly want. It is always better to keep a track of their problems which will help the company back in future. Next best thing that can be done is that ‘always let customers know about what the company is going to do with the problem, like how we are going to solve it or whom to contact if the problem is not solved.

Next thing to focus more on is about ‘Tracking customer Emails’ and exploit in a proper way. Know what each customer wants and let them know what the company has to offer them through these emails.

Another strategy is to pick the customers who have been using the service for long and generating money since beginning of the concerned service. Offer them a gold or platinum status. Send a ‘thank you’ letter or a gratefulness letter telling them that we appreciate doing business with them.

The Dual or Triple Play in Telecommunications

According to Hughes² (2010), one of the most productive strategies is to sell the customer a second or third product. This is particularly effective in reducing churn if the product prices are structured so that the purchase of second and third products reduces the monthly price to the consumer of the first product. Otherwise known as “bundling,” this tactic can also greatly reduce the acquisition cost of the second and third product or what is said to be the ‘switching cost’. This also helps customers to find what he /she wants from a single basket rather than looking for buying different services from different suppliers. If targeted at the right audience, this would definitely help a company to boost their retention rates.

In the industry there are basically two types of buyers which include 1) Early adopters and 2) Mainstream buyers.

Early adopters are the one who always wanted to try new product. It includes 10% of the consumers. So the bundling offer will work better on them.

Considering Mainstream buyers, it includes two categories. One who always looks forward to save money the other who always cares about quality and service. So for the first category it is comparatively easy to offer these bundled services as they look for a good cheap deal rather than paying different companies, different deposit amounts and monthly rentals. A good economical plan would definitely bring them to our customer base. But for the second category in mainstream buyers it may not work well as they will only focus more on the quality of service they get from their internet or Video TV they already have.

A recent topic by Pyramid research³ also supports these, as they say that the telecom companies who adopted these kinds of bundling offers are generating 1 to 1.5 revenue generating units per customer compared to a normal single play telecom company.


Other Strategies which could be adopted:

Reviewing price plans:

Study each customer individually, and develop price plans for each of them that recognize their value and reward them. Make a personal message to each customer rather than making it a public announcement.

Predicting Churn:

The database always says about the potential churners. Find them and send them a personal message with a brilliant offer.

Good referral programmes:

It helps the customers to become the advocates of a company’s products. Let them decide whether the product is better or not. This also helps to bring transparency in the transactions.

Knowing the Calendar:

Customer churn will normally happen in certain months compared to other. So understanding this and identifying active churn months will also help to reduce churn rate.

1) Hughes, A.M (2010), Churn reductions in the telecom industry, Database Marketing Institute, http://www.dbmarketing.com/telecom/churnreduction.html
2) Hughes, A.M (2006), Is the Triple Play Working? Database Marketing Institute, http://www.dbmarketing.com/telecom/files/Artic276.pdf
3) http://www.pyr.com/