One little number means so much-it’s a sign of customer satisfaction, implies network quality and is closely tracked as an indication of the health of wireless service providers.
Steve Bamberger, vice president of media, communications and utilities for Oracle, describes three strategies for tackling churn: instituting specific loyalty programs, improving the overall customer experience, and trying to lock customers in by up-selling additional services. While some carriers abroad have instituted loyalty programs similar to those offered by airlines, Bamberger said that U.S. carriers tend to focus on the latter two tactics.
Unified, efficient back-office systems can remove annoyances that might drive customers to other providers, he said. And while pricing is important initially, it may not lead to a loyal customer.
“Churn is caused by general customer dissatisfaction, not by price,” Bamberger said. “You might be able to get somebody in with a really great offer, but they won’t stay with you unless you can provide them the kind of service that they want.”
In terms of additional services, carriers are always competing to have the next-best-thing that will draw-and hopefully keep-new subscribers, said James Colby, vice president of marketing and business development for Comverse Americas.
“It’s constantly almost like a bit of an arms race in terms of trying to add new, exciting services that the customer doesn’t want to do without,” said Colby.
However, some ways may be more successful than others in trying to build loyal subscribers. Content, Colby said, doesn’t seem to be taking hold as a successful ploy to encourage customers to stay with a particular carrier. Bamberger envisioned a more successful mobile content world that may eventually move toward an Amazon.com model, where users are offered content suggestions based on their purchases and those of other subscribers who bought the same content.
“The content stuff has been around for at least three years now. That doesn’t appear as though it’s having the stickiness that carriers had hoped it would,” Colby noted.
Instead, he thinks personalization is key. Colby said that tools such as tailored user interfaces are being explored as a new frontier. T-Mobile USA Inc. recently introduced a new user interface, myFaves, which allows users to choose five wireless or wireline numbers for unlimited calling. Such personalized tools offer multiple benefits: they may make switching less desirable for a customer, while giving a carrier a new way to “stop that phone from appearing as just another Nokia phone or another Motorola phone” and build its own brand, Colby said.
“If the customer really feels that you can get everything you want from the network in one intuitive package, that’s what we firmly believe is going to make them happy and less likely to churn,” Colby said.
However, for the carriers themselves, the single most significant factor that can reduce churn is something else: network quality.
“What makes [customers] sticky is our network,” said Tom Pica, spokesman for Verizon Wireless, which consistently leads the industry with low churn. “We spend our first and last dollar on our network, and that’s the primary reason that people stay with us.” Verizon Wireless does take other measures, he noted, such as moving to pro-rate its early termination fee to be more customer-friendly and providing credits for handset upgrades every two years. “We’re always tweaking the formula, but it all comes back to the network,” Pica said.
Cingular Wireless L.L.C. has cited improved network quality for helping it cut its churn rate in recent quarters-although the carrier did see a small bump in churn last quarter, which it blamed on seasonal fluctuation and customer migration from its TDMA network to GSM. Cingular executives said that network investments and integration have helped it reduce its blocked call rate by 35 percent and its dropped call rate by 15 percent, and that “network quality continues to be the single largest driver of reduced churn.”
