4 strategies to reduce churn rate in the telecom industry

Jivana Y Brokolyn

In the telco industry, companies who want to maintain a sustainable business will have to address the churn rate. How can you reduce it? With a few strategies: make better use of data, ensure efficient customer care, invest in new technologies, and create a memorable customer experience. For the telco industry where customer volatility is high, the churn rate is something that affects all companies in the sector. The churn rate is not just an issue for telecommunications companies. Instead: businesses of every kind need to retain their customers as much as possible, creating a stable, continuous, and high quality relationship. Various strategies can be deployed to achieve this, and digital solutions and innovations undoubtedly play a decisive role. 

But let’s take it step by step. 

 









 

What is the churn rate? 

For any company doing business, it’s normal to both gain and lose customers. Customers can  suddenly find you one day and turn into loyal customers over time; at the same time, even customers who have remained loyal to a brand for years can one day decide to go with a competitor. The churn rate in the telecom industry captures this phenomenon, i.e. the rate of customer abandonment.

Put more formally, the churn rate is “the percentage of customers that stopped using your company’s product or service during a certain time frame” (Source: Hubspot). The churn rate is naturally linked to another rate, the retention rate, which is the percentage of customers who continue to purchase a given product from a given brand in a specific time frame. 

The two values are inversely proportional: as the churn rate increases, the retention rate decreases, and vice versa, since if customer loyalty rises, it is natural that the number of customers who switch to competitors will decrease. 

 






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From churn rate in the telecom industry to churn analysis 

As you can imagine, the churn rate is an important value for a company and one that must be managed. But that’s not all. In itself, the churn rate merely quantifies an outflow. For this reason, it is essential to go further and analyze what causes it. That’s why we talk about churn analysis and its role within the company strategy: if the flow identified by this value is correctly studied, you can build a predictive analysis that makes it possible to understand which customers have a greater propensity to switch to competitors so that you can intervene in advance and avoid the switch. 

In addition, based on the churn rate, you can also make considerations about customer satisfaction and about the quality of the customer experience offered and the effectiveness of the customer journey outlined. Among other things, the churn rate can also be used as a metric for evaluating your marketing strategies, given that one of the objectives of a good marketing strategy should be to reduce the number of customers who abandon the brand. It’s sufficient to compare the churn rate before and after the use of certain communication or marketing initiatives to see whether the trend is positive or negative. 

In any case, it’s important to emphasize that it’s impossible to bring the churn rate to zero: it’s natural for customers to move from one company to another. At times, a certain outflow is also positive because it allows you to change your customer base and perhaps enter another more promising market segment. However, you’ll want to avoid situations where the rate of abandonment foreshadows a continuous hemorrhage of customers that is unsustainable over the medium to long term. 

Why is churn rate in the telecom industry so important? 

In light of the above, the churn rate is a fundamental measure to be used and monitored in order to understand a company’s health and, above all, its future prospects. However, for telco companies, a full analysis of the churn rate is important since this sector is among the most volatile and, consequently, it has a high level of competition. 

In this industry, customers tend to change operators very often, either to obtain better conditions of use, or to receive more technologically advanced services that can meet customer expectations, or (and this is the worst scenario) to find a better customer experience. Whichever way you look at it, it’s essential to retain customers, not least because there are few competitors, and therefore a slight variation can have a considerable impact on the market segments it covers. In addition, an increase in churn rate has a cost that is anything but negligible

This is confirmed by a Small Business Trends study, which found that 65% of sales are from existing customers. Furthermore, the probability of selling to a loyal customer is 70%, while the probability of buying from a potential customer for the first time stops within a rather narrow range of 5% – 20%. As if that were not enough, don’t forget that it’s the most loyal consumers who spend more on average (we are talking about almost a third more), also because they are more inclined to try new products, thus providing valuable opportunities for business growth. 

In light of all this, we can say that an uncontrolled increase in the churn rate translates into a loss of profit, which, if not controlled, can become substantial in the long run. So, what can telecom companies do to reduce the churn rate? 

Big Data to the rescue

The first way to reduce the churn rate and consequently improve business retention is about making the most effective use of a telco’s internal data. All of this data allows telecom companies to know customers better–to the point where they can collect them into precise and consistent segments. This segmentation is of great importance because it provides telcos with an overview of their customers from which they can identify the most profitable categories, the least profitable categories, and so on. At the same time, Big Data also provides the ability to track how customer relationships evolve (purchases, renewals, problems) and detect where each customer is in the customer journey. 

The information you have is important, but so is the  information that remains “scattered” throughout your network. In this sense, telcos must put a series of techniques in place to effectively collect this data. For example, they can engage in social listening activities, which allows them to collect users’ comments and actions on social networks to know how their company is perceived and to identify consumers’ needs or expectations.  

Obviously, using Big Data requires technologies such as machine learning, which provides invaluable support both for the collection of information and in subsequent phases, since the data available must be exploited as much as possible. After all, it is through machine learning that CRM (Customer Relationship Management) platforms can be created to more efficiently manage the information about customers. Thanks to these platforms, companies can monitor, coordinate, and synchronize sales and communication activities, avoiding unnecessary repetition ù and ensuring that you don’t skip key steps in the lead generation process. In addition, CRM (and even before that, machine learning) paves the way for automation marketing, which is a key innovation for any telco that wants to maintain a constant and profitable relationship with its customers. 

Machine learning is also useful for other things, which we’ll see as we look at the next way to lower the churn rate. 

Taking care of customers makes customers stay 

Want to increase your retention rate? Consider these two words: customer careObviously, it’s not enough to have customer service, you need high quality customer service. Such service has certain characteristics. First, it must always be active: no matter when the customer reaches out, you must be available to listen and intervene at any time. Secondly, it must be efficient, which means that it should bring results as quickly as possible and require just a few simple actions from the customer. Finally, it must learn from past experiences so that it knows what to do if the problem occurs again. In this sense, customer care should be proactive, in other words, it should be able anticipate issues that customers might raise and resolve them even before they arise. 

Not just customer care, but also customer experience 

Customer care is just one element of a more important factor that plays a key role in reducing the churn rate of telcos and simultaneously increases customer retention: the customer experienceAll telecommunications companies (and companies of all kinds) must invest in the customer experience! But investing in the customer experience has many meanings and involves an effort in many areas. Customer care is just one of these areas, which, thanks to machine learning, can become a real touch point to be exploited for strengthening the relationship with customers. 

Another area of intervention is the different touchpoints. An excellent customer experience is one that is capable of effectively and consistently activating all channels, exploiting their specific features, but also ensuring their integration. For this reason, it is important to fully embrace the omnichannel approach, which involves using different channels to create a perfect synergy between them. Here, it’s about avoiding unnecessary repetition and ensuring a natural experience so that customers can seamlessly carry out an action that starts from one touch point and concludes naturally through another channel. 

This necessarily implies that the customer experience should also include the integration of all possible devices (smartphones and tablets in particular) so that each customer can use them when and how they want. Finally, for a customer to be truly satisfied, you have to make sure that the customer feels like they are at the center of a personalized experience. We’ve talked about customer centrality in other posts, and we want to emphasize that a customer-centric focus is essential for any company that plans to be in business for the long run. By necessity, this means offering them an experience that is perfectly tailored to their needs. Needless to say, new technologies – first and foremost Artificial Intelligence – play a key role in this, as they make it possible to gather information about customers, to make it intelligible, and use it to  model a certain type of experience and approach for each person. 

Innovation retains customers 

Another way to reduce the churn rate is related to the types of services you offer. From this point of view, the technological race is “ruthless”: consumers have a growing hunger for technology and this is something that telcos cannot underestimate. On the one hand, products and services must be flexible and adaptable to different customer clusters; on the other hand, they must be renewed according to market trends or user demands.

Broadband, 5G, IoT deployment, the cloud: offers should be strategically broad and well constructed in order to increase customer loyalty and company profits. A complete and competitive offer is not enough: all of these conditions must be realized at the same time and have the same weight within the strategy of each telco, since they all contribute to ensuring a lasting bond with customers.

4 strategies to reduce churn rate in the telco industry

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