With as many as six wireless operators to choose from in some markets, wireless carriers have to work overtime to keep their customers from jumping ship. While customer churn industrywide remains steady in the 2-percent to 3-percent range per month, wireless carriers are seeing about one-third of their customer base switch to another provider each year. Billing systems provider Amdocs noted carriers are spending nearly 7 percent of their annual revenue on trying to keep customers from leaving.
Attempting to keep customers loyal, carriers are implementing a variety of strategies ranging from offering discounts on equipment to analyzing rate plans yearly to make sure customers are on the right plan for their needs. A recent Yankee Group report showed that 71 percent of wireless customers who did not consider themselves churners would switch to another carrier if they were offered a 10-percent reduction on their average monthly bill. A free phone upgrade would convince 66 percent of non-churners to switch. Daunting numbers from customers who are thought of as being loyal.
“The best way to attack subscriber churn is to build loyalty,” said the Strategis Group in a report. “Handset subsidies, personalized portals and features of self-expression such as ring tones and handset faceplates serve as powerful examples of a carrier focus on subscriber loyalty.”
While carriers would like to think service alone can keep a customer from switching, just being offered free or discounted services can keep customers happy.
A recent churn report from Telephia/Harris Interactive found that 80 percent of wireless subscribers who switched service providers in the last year said they were not offered an incentive to remain with their original provider. More than half of those who did switch said their providers might have been able to entice them to stay with an incentive.
“There is a huge opportunity for carriers to retain potentially lost customers by improving customer `save’ programs that offer targeted incentives, such as service upgrades or additional minutes, to remain with them,” said John Oyler, president of Telephia. Based on our survey findings, the major national carriers would generate tens of millions of dollars annually by retaining an additional fraction of the millions of subscribers who switch their service.”
Telephia predicted if nationwide carriers retained an additional 5 percent of those customers who were open to incentives, they would have saved between $10 million and $55 million per year, excluding the cost of the incentive.
While these measures initially cost the carriers money to implement, most find the long-term payoff is worth the investment.
“It might not be as profitable, but it pays off by keeping customers longer,” explained Donald Murnan, executive vice president of customer service for Cingular Wireless.
Murnan said that most customers who call in to churn are not aware of what Cingular can offer them. The education process includes letting customers know they can change their rate plans anytime to a plan that better suits their needs.
“Wireless is typically thought of as whatever you bought when you signed up was what you got and only the new customers got the best plans,” Murnan noted.
In addition to allowing customers to change rate plans, Cingular offers customers free equipment upgrades every two years. Verizon Wireless offers a similar program through its “New Every Two” program.
“Sometimes we have people who call in thinking they have to change carriers to get the latest and greatest equipment, when we can offer it to them for staying with us,” Murnan explained.
The Yankee Group said these types of plans “could become a successful strategy for carriers in retaining subscribers who seek upgrades to more sophisticated handsets that allow access to advanced applications.”
Carriers also know they have to be careful with the amount of plans they offer to customers. While it’s good to offer plans designed to fit almost all calling needs, too much of a choice can leave customers more confused and more likely to churn.
“Churn is an issue across the industry,” said Danielle Perry , a spokeswoman for AT&T Wireless. “As competition increases and carriers introduce different plans, it’s almost a blur for the customer.”
To try and clear up the blur its customers might experience, Perry said AT&T implements a three-step plan. First, the carrier allows customers to change rate plans up to three times per year at no charge to make sure they are on the right plans. AT&T Wireless also offers discounts on equipment so customers always have access to the latest technology. In addition, Perry said AT&T Wireless does a rate plan analysis for customers to help them find the right plan for their usage patterns.
One carrier that has been very successful in keeping its churn rate below the industry average is U.S. Cellular Corp., which reported second-quarter churn for this year of 1.68 percent. U.S. Cellular said its success is based on its attempt to stay ahead of its customers’ needs.
“It’s our strategy to be proactive with our customers, to think of their needs before they know what they are,” said Linda Baker, vice president of customer service for U.S. Cellular Corp. “We use a pretty sophisticated, in-house-generated, churn modeler that allows us to track potential churners before they make any decisions.”
If U.S. Cellular notices a customer may not be happy with their service, they try to contact the customer to see if another rate plan or service offering may suit the customer better. The carrier also offers an analysis of its customers’ calling plans once a year at no cost to make sure they are on a plan best suited to their needs.
U.S. Cellular’s success in keeping its customers also proves that giving away or discounting services, a practice the carrier avoids, is not the only way to reduce churn.
“We feel our plans are competitive, and we can usually match the customer’s needs with one of our current plans,” Baker said.
While carriers know they can never eliminate customer churn, they know with a few tweaks of their current customer retention management plans, lower churn figures are possible.
