African Operators Need to Know Their Subscribers to Keep Churn Down
African operators that want to keep churn rates within their subscriber bases at a low level need to focus their energies on building closer relationships with their subscribers, customer segmentation strategies and the development of premium services.
That's the word from Ian James, business consultant at Ericsson's market unit for sub-Saharan Africa. He says that managing churn is becoming a critical business issue for African operators as cellular markets in many of the countries on the continent begin to mature.
"Churn rates in Africa are high, with some operators reporting 30 percent churn in their prepaid subscriber bases and 10 percent among their contract customers. In markets where average revenue per user may be as low as US$5 or US$10, managing churn is a significant concern," says James.
"Keeping churn rates down will be particularly important for operators as addressable markets in many African countries start to become saturated," he adds.
"Operators want one-way churn: In other words, they want to hold onto their own subscribers while winning customers from their competitors. To achieve that goal, they need to offer the services and pricing that entices subscribers from other operators into their fold, and offer service levels that keep existing customers happy," says James.
"In order to better understand churn, operators need to consider the factors that would prompt their customers to leave as well as the factors that would attract subscribers from other operators onto their networks."
However, most African operators have focused on subscriber acquisition and the introduction of new services while paying little attention to customer retention. One aspect that many operators overlook is the importance of customer service.
"Many customers only have direct contact with the operator when they interact with the call centre for support or advice, and an unsatisfactory experience at this touchpoint may cause a subscriber to abandon the network," notes James.
Subscribers may also be enticed to churn from one operator to another when offered special promotions, lower pricing, innovative packages and attractive handset subsidies.
"However, operators constantly leapfrog each other by frequently coming to market with new deals and packages. These factors do not help to create long-term loyalty and are not a sound basis for sustainable competitiveness," says James. "There is also little an operator can do to stop the especially price-sensitive customer from churning as soon as a better deal comes along."
"In mature markets, most operators offer comparable network quality, coverage, reliability and services. Up until now, operators have used their brands and pricing models as their major differentiators," adds James.
"Effective marketing of the brand and an attractive price model are vitally important in attracting and retaining customers, but they are no longer enough to drive subscriber loyalty. Operators need to look beyond these traditional tools if they are to prevent high levels of churn in their subscriber bases."
Building closer relationships with subscribers and understanding their needs better is key to preventing churn. One way for operators to strengthen relationships with their subscribers is to offer them premium services such as information, ring tones, games, and messaging bundles. For business and contract customers, operators can offer value-added solutions such as data connections and mobile email.
"Once subscribers start using these premium services, an operator can start to draw a clear picture of each subscriber's interests and needs, and even how much money he or she has to spend on mobile services. This provides a foundation for clearer segmentation of the subscriber base," says James.
Segmentation of the customer base will allow an operator to target services and campaigns to its subscribers more accurately. In addition, the operator will be able to interact with its subscribers and create a relationship that will help drive long-term loyalty.
James notes that low subscriber loyalty presents African operators with some unique challenges. Many prepaid subscribers have a SIM card from more than one operator and switch SIMs almost on a call-by-call basis. These subscribers will switch depending on which operator offers the lowest charges for a call at a particular time of the day (e.g. peak or non-peak) or for a call to a particular network.
"One could almost say that churn happens hour by hour in many African countries. To ensure loyalty and to dominate the spend of a particular subscriber, an operator may need to act in ways that seem unintuitive - for example, by rewarding a subscriber with airtime credits for receiving calls on the operator's SIM card,"
"Operators need to become more sophisticated in their interactions with customers and apply lateral thought if they are to meet the challenges that churn presents," concludes James."
Posted to the site on 29th November 2005