Wireless Firms Behind the Curve on Customer Retention

Customer retention has always been an important issue for wireless operators, and they acquired a new problem earlier this year when users gained the right to take their mobile phone numbers with them to a new carrier.

In their efforts to retain customers, most focus on services and products. “There is a big customer retention effort. But it focuses on products and services rather than marketing promotions,” Ira Brodsky, president of Datacomm Research in St. Louis, told CRM Buyer.

Some service providers, however, have found new ways to differentiate themselves, moving beyond pricing strategies and underused phone features in their efforts to reduce “churn.”

The Old Way

“Typically we’ve seen the industry try to differentiate from competitors by having a focus on the same new features, pricing and coverage areas,” said Kelly Hlavinka, a consultant with the Colloquy Group of Milford, Ohio.

Examples of such services and products would include coverage area, camera phones, push-to-talk services, high-speed mobile data services and wireless instant messaging.

But when providers lure new customers with the latest phones and lower prices, they can send a “message to [existing] customers that they’re not as valuable as new customers,” Hlavinka added.

Trying Something New

Cingular and Sprint have broken out of this mold by rolling unused minutes from one month over to the next month. Cingular calls this “Rollover Minutes,” while Sprint’s more recent introduction goes by the name “Fair & Flexible.”

“It sends a healthy signal: ‘We’re not here to make you pay a lot more for overage minutes,'” Hlavinka said.

Sprint analyzes its customer base to determine which members represent the highest profit potential, said Tole Hart, principal analyst with Gartner Group, in a conversation with CRM Buyer. He said carriers overall have reduced churn from 2.7 percent a month in 2003 to 2.3 percent a month in 2004.

Wireless providers are working toward more sophisticated customer retention, he said. “They’re all trying to find niches in which they can operate successfully,” Hart said. “T-Mobile is the low-price guy, AT&T is the moderate-price guy, Nextel highlights its customer lifetime value measurement.”

And the prevalent two-year contracts carriers require for the most attractive monthly rates resemble a reward in themselves, he contended, because their intent is to eliminate individual’s proclivity to churn.

Retention’s Next Step

However, Hlavinka would like to see providers move toward rewards and recognition programs.

“Now they are hyper-focused on acquisition,” she said. They measure themselves by the number of new customers won each quarter, but carrier consolidation and number portability continue to erode subscriber loyalty.

“The retention strategy is, ‘We’re going to wait until you complain and then switch you to the best [call center] reps and the best deals,’ and this has created further downward pressure on pricing competition and taught customers that they always have to be shopping around for the best deals,” she continued.

She recommends that U.S. wireless carriers look to the United Kingdom’s Orange company and its “Orange Wednesdays,” in which users receive rewards and perks for using their phones more frequently and in different ways, such as calling and text-messaging.

She also noted that a Taiwanese carrier’s club card includes member benefits including handset discounts and partnerships with video rental houses and fast-food restaurants.

Services Still Key

Gartner’s Hart agreed that even carriers that have reduced churn considerably must take the next step and identify the reasons behind remaining churn, including glitches in wireless service, frequent billing errors and inconsistent customer care.

But Brodsky doesn’t know that loyalty programs will work in the industry. “Mobile operators understand that anyone can replicate a pure marketing promotion such as an airline mileage program in short order with little effort,” he said.

He places his trust in new services and features.

“Once a customer gets hooked on many new services it becomes hard to switch. For example, if you and your friends sign up for Verizon Wireless push-to-talk service that lets you contact each other more quickly — no dialing, ringing, answering — then you will be reluctant to switch operators because you would lose your ability to interact in that manner with your friends,” he said.

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