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Reactive Retention Strategies in Context

Churn is the plague of the telecoms industry, and in many mature markets annual blended churn rates are at between 25% and 35% as standard and in some markets, prepay churn of 70% to 80% is not unusual. Operators are constantly trying to reduce or mitigate the effects of churn and customer retention therefore poses a major challenge for mobile operators across all markets and across all customer segments. Although many operators have implemented proactive retention campaigns, i.e. those that are designed to build customer loyalty over a period of time, these often prove deleterious to short-term revenue targets and the results are seen only in the longer-term. For short-term results, and to therefore achieve churn targets, reactive campaigns will often yield better results in churn reduction.

Customer retention is generally more cost-efficient and therefore preferable to aggressive customer acquisition campaigns, but this is not always the case if the retention includes the offer of expensive handset upgrades or the implementation of extensive customer care initiatives, and it is now not unusual to see individual customer retention costs exceed acquisition costs in the contract market. Proactive customer retention techniques tend to be associated with improved customer care and customer service and are therefore applied, in different measure, across the customer base, whereas reactive techniques are applied only at critical encounters on a one-to-one basis. Reactive techniques therefore might yield positive results in terms of retention and costs as long as they are proportionate to the customer's long-term value to the company. Balancing reactive and proactive approaches and ensuring loyalty is enhanced and that reactive offers are limited to the extent that they do not erode the bottom line (i.e. cost more than they save) is now critical to network operators.

This report examines the state of retention activities through examples drawn from multiple operators and concludes with recommendations important to MNOs seeking to optimise their retention approach.

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Table of Contents


1
Overview
1
2
Introduction
2
2.1
Background to the Report
2
2.2
Report Content
2
2.3
Currency and Conversions
3
2.4
Further Questions and Feedback
3
3
Churn Trends
4
4
Key Retention Issues
10
4.1
The Causes of Churn
10
4.1.1
T-Mobile USA
12
4.2
Customer Retention versus Customer Acquisition
13
4.3
Reactive Versus Proactive Customer Retention Strategies
15
4.4
Customer Satisfaction and Loyalty
17
4.4.1
Customer Care
19
4.4.2
Customer Value Management
22
4.4.2.1
Vodafone
22
4.4.2.2
Telefonica
24
4.4.3
Preventing Rotational Churn
24
4.4.4
Loyalty Schemes
24
4.5
Smartphones, Device Exclusivity and Subsidies
25
4.5.1
Everything Everywhere
27
4.5.2
TIM
27
4.6
Prepay Customers
27
4.6.1
Buongiorno
29
4.6.2
Freebees Campaign from Vodafone UK
31
4.6.3
Medio
32
4.7
Technology
32
4.7.1
Customer Priority Ranking
34
4.7.2
T-Mobile Austria
35
4.7.3
O2 UK
36
5
Conclusions and Recommendations
37
 
Appendix - Feedback Questions
40