Customer Retention in the Telecom Industry – New Thinking


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With the telecommunications industry at saturation point, and with services largely commoditized, providers suffer from exceptionally high rates of churn. Accenture reports that 77% of consumers are no longer loyal to any particular brand, telcos must work harder than ever to retain their customer bases. Acquisition costs far outweigh those of keeping current customers, further motivating companies to implement innovative strategies to boost customer retention in the telecom industry. This is further underscored by research suggesting that a mere 5% increase in a company’s retention rate can increase profits by 25% to 95%.

Churn in the telecom industry

A recent study of the phenomenon of churn revealed that 39% of Americans who canceled a contract with a company in the past 24 months cited poor customer service as the primary reason. Over half – 52% – canceled a phone, internet, TV or cable contract and 64% of them canceled after an ongoing negative experience, while only 17% canceled after a one-time crisis.

Even though 61% of the telcos in question tried to retain their customers after they canceled their contracts — usually by offering a discount or an apology — their efforts were evidently unsuccessful.

Enhancing customer retention in the telecom industry

To reduce churn and improve loyalty, telcos are utilizing a number of strategies:

Loyalty programs

When Verizon restructured its operation in April 2019, one of its first actions was to merge its wireless and wireline customer loyalty programs in order to expand reward possibilities for customers. Verizon Up now allows customers to benefit from a range of perks in exchange for loyalty, including hardware upgrades, content, internet service and Fios.

Advanced technologies

Telcos are increasingly investing in advanced technologies to reduce their churn rates. Customer analytics and insight tools predict customer behavior, enabling providers to strategize the best tactics to improve retention rates. Vodafone compiles comprehensive customer profiles using data from a wide range of communication channels – including online, paid ads, and owned media – and uses AI to target the customers who are most likely to churn. Armed with this data, Vodafone matches customers with the most relevant retention plans, offering some discounts and others perks from partner companies.

Preventive maintenance

The vast amounts of information collected from customers and their behavior provide telcos with a data pool that can be used to enable preventive maintenance. This allows providers to anticipate possible outages before they occur and makes it possible to proactively address any customer issues. Dutch telco KPN analyzes the notes produced by its contact center agents, and uses the insights generated to make changes to its interactive voice response (IVR) system. KPN also tracks and analyzes customers’ at-home behavior – with their permission – such as switching channels on their modems, which may signify a Wi-Fi issue. Once identified, KPN follows up on these problems, driving greater successes for technical teams.

Customer feedback

Customers have clear expectations about the products and services they are paying for, and telcos must always know whether they are successfully meeting them. Some survey their customers at various points along the journey, learning about any hiccups before they become full-blown crises that can affect retention. Comcast, for example, questions customers who disconnect their service to identify the root cause of their complaints and address them.

Which approach is the most effective?

While all these strategies have their merits, the focus on delighting customers with rewards may be on the way out. Research has shown that wowing customers may create short-term feelgood moments but has only a low impact on long-term loyalty. The research indicates that there is little difference between the loyalty of customers whose expectations were exceeded and those whose expectations were simply met. This lack of ROI further calls into question the practice of over-delivering when delighting customers increases operating costs by 10-20%.

New metrics are also needed. Although Harvard Business Review states that 80% of businesses use customer satisfaction scores to analyze customer experience, data from a Gartner survey indicates that a high CSAT score is an unreliable predictor of customer loyalty. Instead it suggests that the best way to increase loyalty is by reducing effort. 96% of customers who experience a high-effort interaction become more disloyal compared to just 9% who have an effortless experience. It seems clear that reducing customer effort is the way to enhance customer retention in the telecom industry.

How telcos can reduce customer effort to increase loyalty

By identifying inefficiencies that cause high customer effort, businesses can make the necessary improvements to enhance processes in order to provide an effortless customer experience and boost loyalty. Examples of high-effort interactions include:

Repeat contacts

Joan contacts her telecom company to complain about sporadic internet coverage. She is instructed to reboot her router, reports that she is now connected and hangs up. However, the issue persists, and she finds herself calling multiple times about the same issue because the root cause has not been properly addressed.

Wasted customer time

David has found a discrepancy on his cable bill and contacts his provider. After explaining the issue in depth, the call is accidentally dropped. When David calls back, the rep has no record of David’s call and he must begin the conversation again. Later, he waits on hold for a full five minutes while his call is transferred to the Finance department, only to learn that the transfer went through to Human Resources by mistake.

Shoddy self-service

Susan wants to know how to set up her voicemail system. She searches the telecom provider’s website but cannot find the information she’s looking for, nor can she find it in the knowledge center or community forums. Unable to solve her problem on her own, she must contact customer service.

Robotic service

Shannon is about to board her plane and realizes in a panic that she has forgotten to upgrade her plan to include roaming. She contacts customer service and stresses the urgency, but the rep insists on following a script and reviewing her current plan in depth before addressing Shannon’s simple request.

Complicated instructions

Paul has purchased a new smart TV and is looking forward to a nice binge of his favorite show. He reads the instruction manual, but 32 steps are too complicated for him to follow. Instead, he accesses the instructions online, navigates through steps one and two, but step three leads him to a dead link, ruining his experience.

To compete, telcos must refocus their efforts and find solutions to provide their customers with an effortless customer experience, boost loyalty and reduce churn. For more information, click here to download the telecommunications-focused survey report, “Crash and Churn” and take the first step toward improving customer retention in the telecom industry by slashing effort.

This article was first published on the TechSee blog.

Andrew Mort
With extensive experience of writing compelling B2B and B2C copy, including press releases, thought leadership articles and marketing content, as well as a track record of originating, selling and producing factual TV series for all the major UK broadcasters, I'm a proven creative with top-level writing, editing and proofreading skills.


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