Churn Killer

Introduction

“Churn” is the name given to the phenomenon whereby a subscriber to any service decides to switch from one vendor and subscribe to a competitor’s.

There could many reasons for such a behaviour, and one of the big drives behind the deployment of CRM services was exactly the need to reduce / contain the cost of churn. However, market researchers know very well that it is not at all uncommon for a service supplier to hear from a troubled client only when s/he cancels the subscription, at which point there is very little left to do.

The damage to the service supplier is twofold: on one side, some of the revenue that was previously taken for granted is now lost; secondly, a new client must be acquired to replace the lost one, thereby requiring additional acquisition outlays.

Analysts define the “Churn rate” as the number of lost subscribers over the total number of subscribers and its value varies from market to market and from one service to another. All of this applies to all service markets: so there is a mobile telephony churn, a banking services churn – for that matter, there’s even a PR churn.

How big a problem?

The list of service industries who suffer from churn is impressive:

  • Wireline telephony services
  • Residential or business data services
  • Mobile telephony
  • VoIP services
  • Financial services
  • Retail Banking
  • Mortgage
  • Brokerage
  • Insurance

The precise amount of such damage depends on many factors, first and foremost the actual average revenue per user that particular industry achieves in that particular market; let’s take an example:

Mobile voice (Western Europe)

Mobile voice subscribers ……………………………. 473,883,990
Churn rate ………………………………………………… 24.0%
Lost subscribers ………………………………………… 113,732,158
Cost of churn …………………………………………….. USD 475 per subscriber
Total cost to service providers (per year)………… USD 54,022,774,860

No errors: churn costs to mobile telephony operators in Western Europe a whopping 54 billion dollars per year (if you would like to read the full paper, download it here); Asia/Pacific and Eastern Europe operators are burdened by a cost of similar magnitude, while for the Americas it is about a third.

Research data suggests that as much as 45% of overall churn is linked to network issues (poor voice quality, dropped calls etc.); however, even a 1% reduction in churn costs is worth a ton of money.

What if…

As we know, service providers deploy numerous systems and solutions to minimize the damage from churn once it manifests itself; however not much has been really done on preventing those problem from causing churn; what if (big if, here) we were able to identify the causes of churn BEFORE they hit? Wouldn’t that be the Holy Grail of this issue?

The idea is very simple: we can use Social Media monitoring techniques to monitor  conversations  that are related to a target service, looking for reasons for dissatisfaction; once identified, they can be quickly addressed, therefore making churn less likely; when appropriate, the measures taken could also be  proactively made known to the subscribers’ community, thereby creating positive goodwill towards the brand as it becomes clearly a brand which “listens” to its subscribers’ problems and issues.

Mini case study: ATLANET

In 2001, Pleon had Atlanet as a client for Opinion Mining in Italy. Atlanet was a small telco service provider and were the first to launch ADSL services in Italy. After initial encouraging pick up, they subscription numbers stalled, although the service quality was excellent. Monitoring revealed that early adopters got confused by some legal language used in the contract and suspected foul play, driving away potential users and convincing new subscribers not to renew after the initial trial period.

We advised the client about the “offending” language and a new version was quickly prepared. Before  switching it on, however, we went on the same boards where people had been complaining, and openly asked their opinion about the new language, explicitly saying that this was a reaction to the issue they had raised.

Reaction was extremely positive and even people who HAD NOT subscribed to the ADSL service complimented Atlanet for being so attentive to its user base.

Obviously, there will be many instances where there’s nothing that can be done about the reason for dissatisfaction (for example: a subscriber relocating to a region where the service is not available) and – equally – many instances where the service supplier is already doing  whatever it can do to address the issue (for example: a subscriber switching to a competitor because  of service quality problems) but the phenomenon in many instances is so large that even a small improvement will bring enormous financial benefits to service suppliers.

Still don’t believe me? Look at what happened to Jeff Jarvis with Taco Bell. Or to Alex‘s friend Sam with Etisalat. Or to this guy and his iced Espresso.

Enough – the only relevant question being: who’s going to be the smart telco that comes to us first? We have the experience, the technology, the know-how…

And, remember, you read it here, first !

•••••••••••••••••••••••••••••••••••••••

July 25th update: the NYT runs this story about Comcast doing at least some of that listening. Read the elated reactions of most customers who felt looked after and pampered – not churning away from Comcast any time soon, these people, I tell ya.

I am intrigued by some of the blogger’ reaction though: if you did not want anyone to listen, why on earth did you speak? Blogs can be made private if you want just to vent off to yourself…

“Die , Comcast, die!! I hate you, I wish you’d burn in hell for… oh, you were listening, weren’t you ? Sorry about that, I didn’t mean it.”

You know what? I think responsibility works both ways now, all of sudden we might be asked to stand up for what we say.

One thought on “Churn Killer

  1. Gianni,

    Excellent post. Its amazing hot a bit of prevention can go such a long way. Just imagine how much impact companies could have if they just experimented for starters by setting up listening posts to stay on top of these conversations. Dell is a great example of a company doing just that and having a big impact in the ways you describe above. Great job in putting some numbers to the theory. There is nothing like totaling something up to show the sheer impact a different strategy could have.

    Cheers. David

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