Not all churners are equal

D. Robert Rutledge and Guillaume Sachet, Accenture
23 Apr 2010

Overall, predictive modeling is effective in identifying high-risk customers. As telcos refine and improve their churn models, they become not only aware of potential churners, but they also have a more advanced profiling of the potential churners. For example, they now understand whether a potential churner has family members who are also the telco's customers or whether customers are well-traveled. Hence, they can tailor offerings to those buyer values or preferences. This is just the basics. As predictive modeling becomes more common, telcos need to also add an additional dimension to their analysis: customer lifetime value. Actively manage churn Customer profitability is a critical aspect of churn management as it will determine the appropriate course of action (see figure on previous page).

To be effective, retention programs must be combined with overall customer lifetime value analyses through the customer lifecycle. Not all churners should be retained as retention efforts should be focused on customers who are "salvageable" and profitable.

Conceptually, there are three types of actions for potential churners:

¥ Retain and "farm" - for high-value customers, telcos will need to make sure they proactively engage in a retention campaign (likely to be incentive based and personalized) and maintain the level of profitability of the customer, through relevant, tailored and valuable offerings.

¥ Retain and improve yield - for second-tier customers, telcos will want to retain them especially in mature markets such as Singapore or Australia where acquisition has become more difficult and costly. However, there should also be an effort, not only to retain those customers, but also to improve their yield and bring them from tier 2 to tier 1. This can be accomplished through upgraded services or reduced cost-to-serve options.

¥ Churn and discard - lastly, for tier 3 customers, this is where the opportunity exists. Telcos are resistant to letting go of these low-value customers as it will affect standard KPIs (e.g. net additions, voluntary churn, total subscribers' base) and potentially impact the markets' perception.


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