How churn is breaking the telecoms market – and what service providers can do about it
This is a guest blog post by Brendan O’Rourke, head of design at BriteBill, an Amdocs company.
It’s no secret that today’s customers are more demanding than previous generations. They share their experiences online, they expect instant gratification 24-7, and the competition is just a mouse click away.
The communications and media sector hasn’t traditionally been one that impresses customers with great service, but just how badly does it fare compared with other industry sectors? The latest UK Satisfaction Index, published in July 2018 by the Institute of Customer Service, has the answer. It found that satisfaction among UK consumers, across all verticals, rates at 77.9/100. Telecoms scored 74.3, making it the second lowest scoring vertical – only the transport sector fared worse (72.5).
Unsurprisingly, this low level of customer satisfaction translates into high levels of customer churn. A new TM Forum Quick Insight Report, titled ‘Inspire loyalty with customer lifecycle management’ sponsored by BriteBill, found that postpaid churn currently ranges from 5% to 32% per year.
While it’s difficult to put an exact figure on the cost of churn, consider this: The average mobile operator in a mature market spends 15-20% of service revenues on acquisition and retention, compared with the average Capex spend on infrastructure (networks and IT) of just 15% of revenues.
Canada’s BCE and Telus revealed in 2017 that it cost almost 50 times less for them to keep an existing mobile customer than to acquire a new one, with retention costs of CAD11.04 and CAD11.74 respectively, while average subscriber acquisition cost weighed in at an eye watering CAD521. In a saturated market, it would seem sensible for service providers to focus on keeping existing customers, rather than trying to lure new ones away from competitors.
There is, of course, a direct link between customer experience and churn rates. It’s obvious that a positive customer experience aids in retention, but can it be quantified? According to the TM Forum report’s main author and senior analyst, Catherine Haslam, yes it can. Australian service provider Optus achieved a 1.4% reduction in churn amongst its retail post-pay customers by raising its net promoter score (NPS) by six points, while another large service provider saw a 3% decrease in churn following a 25-point boost in NPS.
So, how do you boost NPS?
“It’s so simple yet easy to forget: Nothing is more important than engaging with your customers in a proactive and positive way,” says Haslam. “All too often, communication between service providers and their customers is reduced to the monthly bill – hardly a positive experience for most – and occasional calls to customer care when there is a problem. Service providers are missing a trick by not using opportunities to interact in positive ways, throughout the customer lifecycle.”
Billing, for example, should be a retention tool, rather than a churn agent. The truth is that customers find bills boring and difficult to understand. According to a study by the UK’s USwitch (June 2018), one in six mobile users haven’t even checked their bill in the last six months. When asked why, 18% (or 1.3 million mobile users) said they simply couldn’t be bothered.
Sadly, while service providers may have spent millions upgrading their IT systems to support the digital customer experience, they tend to overlook simple outputs such as the bill. As Haslam puts it, “the first bill is so important, but often it’s very different from a customer’s expectations.” Even if the charges shown on a communications bill are correct, they can be confusing. Factors such as device leases, proration (partial month billing), billing in advance for some services and in arrears for others, overages and vague descriptions all contribute to the complexity, leaving the user utterly befuddled.
It’s high time service providers took a fresh approach to bills that can pay measurable dividends. Cricket Wireless, for example, a subsidiary of AT&T, ran a campaign called ‘Let’s Look Inside Your Bucket’. This inventive campaign used a video-based approach to not only communicate information, but they combined offers and a healthy dose of humour. The campaign was incredibly successful and lead to a whopping 37% reduction in early customer churn.
For service providers looking to transform their bill, the TM Forum recommends the following: communicating billing information accurately, clearly and concisely, demonstrating value, and including new information – such as making customers aware of new products and services that are relevant to them. If a service provider can do this, and do it well, they can change their bill from a churn driver into a valuable retention tool. And quite possibly put an end to the era of boring bills.