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Churn in telecom and the H1N1 Flu comparison

I clearly remember when my previous employer was referring to Telecom churn as a disease that should be treated as a Flu. As happens with today’s Flu A (H1N1) where most of the prevention messages come from the ability to detect and treat it correctly, Telecom churn should be firstly understood, then detected and finally treated.

I think there are real similarities between how to face a churn reduction program and a H1N1 infection. For that reason, I would like to share an introductory document to churn management, where we would like to briefly share the slides that were presented in a customer value management project where churn reduction was one of the key objectives.  We have already written a lot about the subject in this blog (when we discussed on channel fraud management techniques or churn retention levers) but we never wrote concretely about the different types of churn options present in the industry and their detection and treating measures.

Please find embedded after the post one of our presentation with an executive summary of the churn types you will normally find in both prepaid and post paid segments. One common message that applies to any of these churn variations is that:

A. Understanding is mandatory…

With the increasing complexity of the mature and developing markets (e.g. multi-SIM environments as a rule, channel fraud in emerging markets, increasing presence of pure data clients, etc) it comes the time when churn has to be managed differently depending on the target segment (prepaid vs. post-paid) and service (voice vs. data). The churn implications (and reasons) in prepaid have significant differences with those affecting to the post-paid customers. In order to design efficient techniques of churn reduction, it is key to differentiate the existing churn practices across segments, services and customer cycle.

B. Accurate detecting is required…

Starting with an aprioristic churn characterization, most of the operators where we work stop the exercise in identifying the churner reasons and diagnosing the symptoms. This model has to evolve including (or detecting through different analytical techniques) the key moments of truth across the lifecycle to accurately detect (and therefore, prevent) why the client leaves.

C. …but Prevention is the solution.

The complete characterization of churn practices will allow us to design efficient strategies focused on the reduction (on the eradication, in some cases) of the different types of churn considered.

The Telecoms have two significant advantages over other industries: 1) The operators have the names and addresses of their customers, and 2) the operators have the customer’s monthly revenue and consumption. Telecoms can use a method that is more cost effective than mass marketing: database marketing.

Using database marketing (or how we call it: Customer Value Management), it is possible to build a relationship with customers that will keep them from leaving. The secret? Personalized communications. If you can develop a dialogue with your customers, you will effectively treat churn before it appears and your customers will rarely leave.

It seems then, going back to the H1N1 comparison that Tamiflu is to Flu A what CVM is to churn in Telecom. The only difference resides in the fact that operators that use a CVM approach dont ever leave this methodology on client management, while those who get the influenza seem to be cured once they finish the medical treatment (and hopefully never have Tamiflu again). In any case, I have to agree once again with my former colleagues.

Best regards.

CVA