Customer loyalty in a fragmented market with many competing consumer choices can appear as a desert mirage to companies: an unobtainable oasis on a distant horizon. It is, however, a goal that companies must strive for to survive in the highly competitive business environment. This is especially true for wireless communications service providers.
As in any industry, loyalty programs are a key part of reaching this goal for service providers, but the aim of these programs should be to go beyond providing the standard service. Service providers must proactively create an intentional customer experience that is based on understanding their customers’ values and needs. Not all customers are created equal, and not all will react in the same manner to a campaign. So it is imperative that providers use the information they have to increase the likelihood of success. Otherwise loyalty campaigns can turn into a game of “throw it against the wall and see what sticks.”
‘The company was already the market leader, but it needed to maintain that lead.
Fundamental to improving loyalty is an understanding of the customer. This understanding is derived from all of the information gathered about the customer through all of the interactions the company has with him or her throughout the customer journey. From the initial contact to purchase and service, to ongoing communications and relationship management, companies are constantly gathering and storing information in operational systems.
One wireless service provider in Southeast Asia has successfully developed a targeted retention campaign. The company has increased not only retention but also usage. It did this by undertaking a targeted loyalty campaign based on a detailed knowledge of the customer base.
The Southeast Asia market already has a very high mobile penetration rate, and therefore, customer retention became a higher priority than acquisition. The company was already the market leader, but it needed to maintain that lead and grow average revenue per customer to thrive.
The provider had many different programs that span the entire customer lifecycle of acquisition, development, harvest and win-back—the way the company defined the lifecycle stages. These were all underpinned by the appropriate analytic technologies and customer information. Where the provider put most of its focus, though, was on its revenue enhancement and churn prevention/reduction programs.
The company took all of the customer data it had in its different operational systems—such the CRM and billing systems—mined three months’ worth of historical data and built a model of random sample behavior. It, then, correlated this with a set of customers who churned. Then it determined a set of significant variables from the list. Out of 358 original and transformed variables, the company ended up with five significant variables: significant reduction in bill size; significant reduction in voice call amount; SMS usage level; overall incoming call level; and fewer outgoing calls versus incoming calls.
By mapping these variables to the current customer dataset, the model produced 13 segments of subscribers with different behavior and churn probability. The model also identified seven times more churners than that of a random sample from the population, with some sub-segments’ churn probability as high as 90 percent. Based on this segmentation, the carrier enacted proactive loyalty campaigns by targeting these segments of high-risk customer with save offers on a monthly basis. The provider also had a control group, for which it conducted no retention campaigns. And it had three different save offers that it proactively offered to the high-risk segments.
At the end of the measurement period, the provider had come a long way toward reaching its goal of customer retention and loyalty. Seventy-five percent of the control group remained active customers, five percent suspended their accounts and 20 percent churned. In comparison, of the group that was targeted with retention campaigns, 91 percent remained customers, 1 percent suspended their accounts and only 7 percent churned. This translates to a net save of 13 percent as a result of the proactive loyalty and retention campaigns, underpinned by effective and relevant customer intelligence.
An unexpected bonus from this campaign was that the targeted group also increased usage by 36 percent, versus an increase of just 9 percent for the control group, reflecting a net increased usage of 27 percent. So not only did the provider meet the churn reduction objectives, but also they met their revenue enhancement objectives—all from the same loyalty and retention campaign.
In a nutshell, loyalty programs and retention campaigns do work. The key to success is to effectively leverage customer information to provide an intentional customer experience.