Hold onto that customer

01 Feb 2006
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While competing on price has been a long-time strategy for many telcos, the focus has shifted to bundled and personalized services as a customer retention tool. But industry watchers say Asian cellcos need to be more proactive and focus on customer lifetime value to increase their bottom lines and hold onto customers

Retention tips:

- Prioritize high-value users

- Segment user base

- Leverage back-office data

- Avoid competing on price

- Move beyond handset subsidies

- Identify prepaid customers with targeted loyalty programs

- Invest in employee training

- Invest in advanced customer care and billing systems

- Set manageable churn targets

- Regularly evaluate and refine all loyalty initiatives

Despite the continuous growth in subscriber additions, churn rates have spiraled upward in Asia over the last few years and are becoming a major problem for mobile operators, as the competition intensified and customers slip away to look for better deals.

According to the Yankee Group, Asia is the only major global region where churn has risen substantially, from an average monthly rate of 2.2% in 2002 to 2.7% per month in 2004. In western Europe mobile operators have seen their monthly average churn rate fall to 1.8% from 2% during the same period. Even North America and Latin America have seen an overall decline during the period, with annualized monthly churn at the end of March 2005 dropping to an average of 2.4% in both regions, according to the research firm.

Across Asia, churn rates vary tremendously. Operators in prepaid-dominant markets like India and the Philippines usually have consistent high churn levels, with average monthly rates of 6%-8%, as the lack of fixed-term contracts in the prepaid model means there are few barriers to moving to a new coperator, says Farid Yunus, wireless/mobile Asia-Pacific senior analyst with the Yankee Group. Conversely, DoCoMo in Japan, which has a customer base that is almost entirely postpaid, maintains the best churn rate in the industry, with fewer than 1% of its customers switching to a competitor's network each month.

Despite a downturn in the past few quarters, Yunus predicts that Asian mobile operators will see their churn rates continue to rise in the medium term and remain in the 2-3% range.

When it comes to customer retention, Asian operators use different approaches due to the disparity of the region's mobile market. In high-growth markets like China, Indonesia and India, operators' customer retention strategy is more focusing on price, quality of service and network coverage, while they continue to build their infrastructure and acquire new customers. As most operators in these countries remain preoccupied with customer acquisition and growing their market share, churn management hasn't yet climbed to the top of the company agenda.

'Most operators in large developing markets are still experiencing rapid growth and see no reason to invest in combating churn now,' Yunus points out.

But as markets become more competitive, operators have no choice but to switch emphasis from volume to value, prioritizing customer retention over acquisition and profits over revenue growth.

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