Building loyalty

High rates of customer churn are putting pressure on telecom operators to find new ways to retain customers.

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Building loyalty Peter Kaliaropoulos: 50% of telcos have launched loyalty programs.
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By  Nithyasree Trivikram Published  November 14, 2010

With mobile ARPUs continuing to decline in the MEA region and competition growing, operators are being forced to find new ways of holding on to their main asset – their customers. Indeed, churn continues to be a problem for many operators in the region, particularly those operating in the markets with the highest levels of competition and the lowest ARPUs.

Matthew Reed, a senior analyst for Middle East and Africa at Informa Telecoms and Media, sees a clear trend towards increasing competition for customers. The MEA regional market contains wide variations in terms of a growing number of providers, he says.

“As a result, it is becoming increasingly important for operators to limit or ideally reduce and eliminate churn, and to improve customer loyalty and retention,” he says.
Peter Kaliaropoulos, group CEO of Batelco, is just one industry insider to feel the effects of the twin challenge of falling ARPU and rising competition. He says that the entry of new operators in the MEA region has created a sharp decline in ARPU levels.

“Operators have now started to look for ways to increase their per-user revenue, and accordingly, VAS (Value Added Service) has become a key focus,” he says.

Scott Gegenheimer, GM and CEO of Wataniya Telecom, agrees: “As mobile penetration increases, so does the churn which is becoming more of a factor,” he says. “Of course, for operators there is a saturation point when it comes to penetration levels. When it comes to churn, the obvious fact is the multiple SIM card use by customers that affects operators, and operators are trying to get their share of the wallet from each one of them.”

Kaliaropoulos believes that the cost of churn should be assessed according to different segments and market situations. “In developing MEA markets, which are characterised by the arrival of new entrants, and specifically in the prepaid market, the main churn trend is upwards.

“In more mature markets, however, we can see that competitive stability and improved subscription management is exercised to bring the churn rates down. As market dynamics are changing in different markets, it is vital that the value of churn and its relevance as a performance indicator is accounted for. Telecom operators need to examine the data that is available on customer segments, lifetime value and buyer preferences,” he says.

Customer segmentation

Kaliaropoulos believes that segment-driven customer strategy is one effective method to reduce churn and that operators should invest in “unique solutions” that are tailored based on customer segments, lifetime value and buyer preferences, as these give customers better value for their money.

This is a view that appears to be shared by a number of the region’s operators. For example, Wataniya’s Gegenheimer insists that while “low-end prepaid customers” are more price-sensitive, pricing is not the only reason people leave an operator.

“Sometimes, it is due to competition in the market as well,” he says. “There is no one type of approach to specifically address a market.

“There is customer segmentation going on and there are different views as to what the customer needs are, to effectively address them and try to reduce the churn levels.

“At Wataniya, we try to cover the different needs of customers by segmenting the market and offering packages such as a high-end prepaid plan which gives promises after certain usages; a low-end mass market prepaid, and a student plan which has closed user groups.”

Gegenheimer adds that operators can also take segmentation a stage further. “Another thing that a lot of operators try to do, especially mobile operators, is to go in for below the line segmenting or micro-segmentation. If you know the customers’ behaviour, and you start to see less users on the line, then you can do something below the line – for example, you offer the customer a bonus if they recharge within the next 30 days,” he adds.

Fostering loyalty

Loyalty schemes can offer another means of reducing churn.  Batelco’s Kaliaropoulos says that studies show that about 50% of telecom companies have launched a points-based loyalty programme. While a small percentage of telcos opt for discounting their services, the rest choose different promotional and marketing initiatives.

“Retention strategies should be tailored based on customer segment, lifetime value and buyer preferences. In addition, our retention tools are based on understanding the subscriber base accurately to create specific retention strategies, using trigger-based campaigns to achieve real-time results, implementation of an effective and cost-efficient loyalty programme, leveraging on innovative product offerings to drive acquisition and retention strategies,” he says.

Informa’s Reed has also noticed a greater emphasis on loyalty schemes, particularly among African operators.

“Typically, loyalty schemes allow customers to accrue points that they can redeem against further services from the operator, or against goods and services from third-party retailers – and efforts to introduce unique services that help them to attract and retain customers,” he says.

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