Question

Topic: Customer Behavior

Customer Lifecycle Management In Telecom

Posted by Anonymous on 1/28/2004 at 9:10 AM ET 250 Points
Hi!

I work in the telecom industry in India, in the marketing function. Telecom market in India is one of the fastest growing in the world with subscriber numbers doubling every year. Price and customer service have become the two most important differentiating factors here.

In this high growth market one of the critical problems is also to stop churn and retain existing customers. My question is that how would one use Customer Lifecycle Management principles in this market to maximize revenues from the existing customers. Is this concept relevant in this industry?
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  • Posted by ReadCopy on 1/28/2004 at 9:35 AM Accepted
    From a UK telecoms perspective market seems split ... residential (consumer) services as heavily into reducing the churn (usually after a customer has decided to churn), whilst the business markets are more concerned with customer retention whist the customer is still in service, and probably both are right for the different businesses that they are aimed at, as retention is incredibly vital (acquisition being more expensive that retention).

    And you are absolutely right that price and customer service have been important in the industry over the last few years.

    I come from a business telecoms background, and I strongly advocate a 'wallet spend matrix' approach to retention.

    Pen and Paper ready ...... Draw yourself a 3x3 grid (matrix) ... along the left hand side (Customer Spend), from the bottom, mark off "less than 25%" and "greater than 80%", along the bottom, mark off some key customer spend amounts (these figures are based on total amount that they customer would spend on telecoms services (in business telecoms, I often use "less than £100k" and "greater than £300k").

    Now you have a matrix that you can start to start to plot customers against (TOTAL AMOUNT THEY HAVE TO SPEND against THE TOTAL PERCENTAGE OF THEIR WALLET THEY SPEND WITH YOU).

    You soon draw up a picture of who your most important customers are and where your customers are spending their money (you or competitors).
    It now easy to see what you need to do with each customer type:

    The top row of your customers (those that spend greater than 80% of their wallet with you) are Good customers and you need to retain these agressively. Use any retention technique at your disposal (hospitality, reassurance etc)

    Those in the bottom row (those that spend less than 25% with you) are really not loyal at all, and you need to work on these to get them to spend more.

    The customers inbetween these two need a little more specific analysis, but as a general rule, you need to get these spending nearer 80% with you.

    NOTE: I always term 80% as the saturation level, to get a customer to spend their last 20% with you is wasteful on marketing resources.

    I hope this helps a little, if you want to knwo anymore about this approach, or UK telecoms, get in touch.
  • Posted on 1/28/2004 at 12:23 PM Member
    there's a (very short) piece in this ballpark in the current McKinsey Quarterly on retaining telecoms customers...

    ...the nub of it is to research the 20-40% of subsribers who have volatile billing patterns - the 23% with high variation in their month-on-month billing.

    The recommendation is to use the research to understand what value there might be in creating billing plans specifically for those customer types.

    Will Rowan
  • Posted by ReadCopy on 1/29/2004 at 5:58 AM Member
    Discounts .... depends what sector you are looking at, from residential to SMB market they just want Value for Money (bundles, special 'offers etc), provide that whilst keeping in regular contact (not necessarily just sales contact, but keeping them updated and informed is KEY to retention).
    The question about network reliability ... and other issues QoS, product developements etc are a key consideration of larger businesses.

    SMB:
    The difficulty here is determining what their absolute requirement is. For the smaller end of the market (say less than 10 employees ... its definately all about Value for Money, for larger businesses (greater than 10 employees, less than 100 employees) its a massive gray area, which many UK telcos would (should) openly admit they do not fully understand. I think our approach is spot on, and we talk to every single one of them on a regular basis (at least twice a year using telephone account managers), its costly, but well worth the effort.
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