Service Providers Improve Churn Performance

March 20, 2014
By: Gary Kim

“Loyalty” in the consumer communications and entertainment service arenas arguably has become stronger in the mobile and fixed businesses over the last decade, as measured by churn rates.

That lower churn has come even as numerous studies continue to suggest a relatively significant amount of consumer unhappiness with value, price, handsets, billing simplicity, service continuity and a subjective sense of not being “valued and recognized” as customers.

In 2009, for example, a Forrester Research (News - Alert) survey found 40 percent of customers would consider leaving their present provider for a lower price. Since 2009, U.S. mobile service provider churn rates have declined, though. Compared to early in the 2000s, churn rates have dropped substantially, even though competition has grown.

Most observers would credit product bundles in the fixed-line business, and contracts and family plans in the mobile business, for slowing churn rates, despite growing competition.

Though many would say “loyalty” includes a great many elements other than churn, churn is a measurable way of describing customer tenure, if not directly the subjective sense of satisfaction that consumers may have with their service providers.

And, on that score, packaging mechanisms that increase value (product bundles, contracts, group plans), though important, remain vulnerable to “lower price” attacks.

Australia-based Wotif did a study of passenger “loyalty,” as measured by a willingness to stick with their favored provider.

Price, in fact, remains the top preference when consumers book a flight, domestic or international. Availability of a flight on the needed travel dates and availability of direct flights all rank higher than brand of carrier.

"Unsurprisingly, price was the most important factor for travelers booking both domestic and international flights, with preferred airline being ranked least important for domestic travel but more important for international travel," said Helen Demetriou, Wotif Group executive general manager for flights and packages.

In that sense, then, communication and entertainment service providers have other methods for adding value, compared to airlines.

These days, communication and entertainment services represent a bundle of value, including several products embedded in retail plans that offer consumers clear value-price relationships for buying bundles. Mobile service providers also have the additional element of device-offers.

So all of that data seems to indicate that whether or not service providers are highly successful on other elements of “loyalty” programs, keeping accounts for a longer period has become easier over the last decade.


Edited by Rory J. Thompson