At the heart of any mobile operator’s marketing department efforts is the goal of driving down churn. A segment that is relatively ignored by telecoms – small to medium enterprises (SMEs) – have their own unique set of reasons for churning, reasons which need to be explored then addressed with the right solutions. In this article, we highlight the key 15 factors which drive SMEs to churn…
Churn, in the mobile telecommunications industry, is simply the discontinuation of the customer using the service of an operator. It is a never ending issue, one that requires constant addressing; as long as there are subscribers there will always be churners (simply even due to factors that can’t be addressed, such as subscribers moving abroad, passing away, etc.). Churn management is at the heart of all mobile operator marketing operations, with the common objective to drive down subscriber loss rates.
To be able to effectively address churn, operators need to identify the root causes behind this phenomenon, and then address them. This could require developing new services, changing prices, fixing broken processes, revising policies, etc. The factors that drive subscriber churn vary based on customer segment – different factors (or set of factors) will be at play in driving away consumer, SME, government, wholesale, or enterprise subscribers.
Our experience in working with telecom operators around the world has shown that many fail to pay particular attention to managing SME churn. Too often, this segment falls between the cracks – too unlike the critical consumer segment, too small (on a subscriber level) relative to large enterprise subscribers.
Though the SME segment may not generate as much revenue as the other two key segments (consumer and enterprise) do, they are nonetheless a critical segment for operators. Two key reasons behind this:
SMEs in most markets employ over 2/3rds of the given country’s workforce – with a trend of SMEs towards providing their employees with mobile lines increasing, there is bound to be an increase in demand from the SME segment from most operators.
The experience individual subscribers have as SME subscribers of a mobile operator naturally affects their relationship on a consumer and ultimately household level – each and every SME mobile line is essentially a potential or existing consumer line as well. This inter-linkage requires that subscribers receive a consistent and positive experience, regardless of whether they are a consumer only, SME only, or consumer + SME subscriber.
Numerous operators have over the last several years increased their focus on this segment – just recently, both British Telecom and Vodafone UK highlighted in their year-end shareholder meetings that the SME segment is one of their top priorities, in particular for tapping into for driving up revenues.
We believe one of the areas in which operators need to step up their SME-related practices is around churn management. As a first step towards this, operators need to understand the enablers that allow for and the drivers that ultimately cause SME churn. We have identified the 15 most common factors behind SME churn (factors which need to be assessed at an operator level then tackled with solutions)…
The Enablers (Creating a Churn-Friendly Environment)
1. Mobile Number Portability (MNP)
MNP has made it especially easy for SMEs to jump ship and switch to competitors. At the drop of a dime, with no warning whatsoever, SMEs are able to port out all of their mobile lines, simply by making a phone call to get the process underway. It used to be that an SME that wanted to switch to a competitor would need to close their lines at one telecom (and lose those phone numbers) and open a new set of lines at another (and get brand new phone numbers). Thanks to MNP, this is no longer the case. This enabler (that has now been introduced to most markets) is one that necessitates operators never drop the ball in managing their SMEs – the smallest of failures can drive them to port out.
2. Increased Market Knowledge
In an increasingly competitive environment, operators have become much more aggressive in their sales and marketing tactics. What this has led to is a more knowledgeable SME subscriber base. The bombardment of advertisements, SMS, direct visits, etc., has created an environment in which SMEs are much more aware than they used to be of the products, services, prices, etc., of their operator’s competitors. With such knowledge in hand, they are now more than ever susceptible to switching their services to another operator, particularly if a competitor has a better value offering.
3. Handset-Driven Environment
With the rapid enhancements in handset technologies and thus an ever-decreasing handset lifecycle (whereby individuals are changing their handsets at a much faster pace than in the past), SMEs are willing to switch operators in exchange for a newer set of handsets. As handsets are often given as freebies by operators in exchange for a contractual commitment from the SME, those coming out of contracts are very susceptible to being lured away by competitors and their handset offerings. It used to be that price was one method to lure away SMEs from their operator; now, brand-spanking new handsets are a common tool for doing so.
Drivers (Factors Directly Causing SMEs to Churn)
4. Network Quality
One of the key drivers (for pretty much all customer segments) of addressable churn, network quality is of the utmost importance for SMEs, particularly for those that rely on their mobile phones for conducting business. The inability of an SME employee to check his or her emails when on the road, or to make a call to an existing client regarding an urgent matter are the kinds of things which will drive SMEs to churn.
Unfortunately, the quality (service levels) of mobile networks is on a downward trend, particularly in advanced markets. The increasing demand for mobile broadband is one of the factors driving this deterioration, as is an increase in uptake rates (with up to 200% penetration rates in some markets). A recent Nokia Siemens Network study conducted across 17 countries revealed that the impact of network quality on subscriber retention stands at 34%, the highest observed rate in several years.
5. Pricing & Product / Service Portfolio
As mentioned earlier, SMEs are now more so than ever equipped with information regarding competitor offerings. The highly charged competitive telecommunications environment in most markets is driving operators to constantly change their offerings (their tariffs, their services, their handset offers, etc.). As such, operators need to constantly be on their toes to ensure their offerings are in line with their competitors (including around prices, not just the product / service pool of offerings). This requires vigilant monitoring of what competitors are up to, and rapid revising of offerings in line with findings. This also requires an operator have the various products and services competitors are offering available as well (beyond tariffs – things like data center services, international roaming bundles, specific handsets, etc.). Failure to be competitive around the core product and service offerings is a definite churn driver, as SMEs that are particularly campaign / price sensitive will be lured away by the competition.
6. Differentiated Treatment
SMEs have come to expect that their operator will treat them better than their peers if they are spending more with the operator. This can be in the form of a loyalty program, free / discounted handsets, or differentiated service levels, all designed to reward SMEs based on their spend levels. This type of differentiated treatment has come to be a de facto standard in many telecom markets, such that all operators conduct such practices. As such, SMEs that are not rewarded or recognized for their spend levels may feel slighted, and, accordingly, churn to a competitor that does offer such added benefits. Operators must be aware of what their competitors are offering at all times, and ensure that their own differentiated offerings are up to par.
7. Channel-Related Experience
Poor service provided via the variety of channels SMEs can interact with their operator through is another important driver of churn. Be it dealer shops with long lines and no customized treatment for SMEs, web sites that don’t reflect real-time up-to-date bill information, call center agents that know next to nothing about the SMEs needs, or account representatives that cannot be reached, poor service is a relationship killer. What is particularly bothersome around this is that a majority of the churn-triggering service-related issues are quickly addressable, not requiring major overhauls or new technologies – worse is that these issues are readily apparent to both the SMEs as well as operator employees but still no action is taken.
8. Billing and Payment Experience
Somewhat related to the above factor is the billing and payment experience SMEs have with their operators. Small businesses place a great deal of importance on efficiency and accuracy, especially around financial matters. Thus, they seek timely secure invoicing that is itemized on a line by line item, and alternative user-friendly payment options to ensure efficient and timely payments can be made. Most importantly, they seek a hassle and error-free process around billing and payments – this includes ensuring efficient resolution of disputes, should they occur. These two areas are ones in which many operators fail to deliver, often pointing the finger at infrastructural / system-related issues. From the SME’s perspective, it’s a failure to deliver nonetheless, and can be pointed to as one of the reasons which may cause them to churn.
9. Problem Resolution
Almost any given customer, consumer or business, accepts that companies they work with will make mistakes from time to time. What they won’t accept is inefficient and poor resolution of these mistakes; in response to poor problem resolution efforts, many will sever the relationship with the company. This holds true in the telecom sector as well, wherein churn rates skyrocket when problems aren’t handled effectively. SMEs that face an issue expect their operator to resolve the problem within a reasonable time of it being reported, handled by a single point of contact, with strong communications throughout the resolution cycle. Failure to invest heavily in problem resolution efforts, to optimize resolution processes, to put the best resources around it, is a sure-fire way to have an environment in place that will drive churn up when problems occur.
10. Account Management
Unlike individual subscribers, SMEs need to be formally managed by operators – with an ever-changing workforce, changing behaviors and changing needs, SMEs require and deserve an added level of attention. As such, operators need to provide passive (or in some cases, active) management, such that the SME has an individual employee they can contact when they have a need. This is not to suggest a system whereby one individual manages just one relationship be in place; rather, a given account manager should be managing a given set of SMEs, with proactive contact on a somewhat frequent occasion to determine if any needs exist. More importantly, the SME should know they have one individual who they can go to should a problem occur, a new line be needed, etc. SMEs shouldn’t have to communicate with different people every time they need something; rather, they should know and be comforted by the fact they have a specific person they can go to when they need something.
11. Acquisition Focused Premium Systems
Poorly designed incentive systems that motivate account managers or sales representatives to do the wrong thing is another factor that can drive up churn. In particular, a system that places too high a value on sales and not as much on client management will motivate account managers and sales representatives to be overly sales-focused; what this in turn will lead to is the selling of products and services to SMEs that they don’t need, as well as too little focus on managing the relationship and the overall satisfaction of the SME. What it further leads to is sales by dealers that can be fraudulent in nature – fake line activations that are then deactivated after a period of time. SMEs that are bombarded by their account managers for sales purposes, that don’t have effective account management around service-related issues, and that are sold products or services that they don’t need are prone to churn.
12. Sales Force Competence
In line with the above factor, this relates more to having sales representatives that are not equipped to sell properly; effective sales to SMEs requires being able to understand the client, their specific situation, and ultimately, their needs. Poorly trained sales representatives are more likely than not to place SMEs into product and service packages that will not meet their needs. Further, the communication of incorrect information (regarding the products and services, regarding billing, regarding the agreement, etc.) to the SME is also likely. Creating an environment in which the SME is mismatched to their bundle of products and services, and in which information they have or have not been given may lead to a problem is one which is also likely to trigger churn.
13. Communications Practices
When new products or services are launched, when policies are introduced, when an account manager is changed, operators often fail in properly executing communication efforts with their SME subscribers. This failure to communicate leads to many issues down the road – the SME being unaware and thus not benefiting from a given new product or service, the SME finding out their account manager has changed once they try to reach their old account manager, the SME receiving a bill that is higher than normal due to a regulation change but not knowing why, etc. Operators need to have in place ATL and BTL communications practices that are in line with the needs of SMEs, which ensure they get the right messages via the right channels at the right time. Failure to do so is another factor that often contributes to SMEs churning.
One driver of churn that is essentially un-addressable (at the point of churn) is fraud – the case whereby services are utilized by an SME but then never paid for, with the original intent never to pay for the services. This situation arises when operators have weak prediction, detection, and prevention practices in place. This type of churn has increased since handsets have come in to the service offering, whereby SMEs take the handsets and run. Not “churn” in the traditional sense of the word and thus not like the above mentioned drivers, this is an area nonetheless that operators need to ensure they have best-in-class practices around – be it in the account opening / approval processes, account review processes, policies, etc.
15. Business Shutdown / Failure
Another area operators have little control around but nonetheless need to manage is around churn that is driven by the voluntary or involuntary closure of SMEs. Particularly during financial downturns, many SMEs have to shut down operations. In such cases, churn is sure to increase, with little the operator can do about it. That said, flexible payment solutions / deferred payment offerings should be designed and explored for utilizing in such times, as such services may be a method to drive down churn ever be it slightly.
The 15 key factors we have listed above will vary from market to market in regards to their importance / impact on churn – for example, in some markets, subsidized handset offerings are not a common practice, and as such, will not be a factor that will drive churn. To determine the impact of each of these enablers and drivers on churn we recommend operators conduct detailed surveys / exit interviews with their clients and non-clients, around understanding their own market drivers.
Following this assessment effort, operators must then design strategies for tackling those churn factors deemed critical. Based on the factor, this will require the development of above the line and below the line offers, proactive and reactive offers, new products and services, improved network coverage in certain areas (or femtocell solutions), changes in incentive systems, changes in hiring practices, changes in processes, etc. A roadmap should be developed around all the activities that need to be conducted to reach an ideal state around churn management, with items prioritized based on their importance in driving down churn / time to market / ease to implement.