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What is churn



A brief discussion of subscriber churn in the telecommunications industry

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What is churn

  1. 1. March 25, 2011 A Brief Discussion of Churn Prepared by Joya L. Martin
  2. 2. What is Churn? Churn is the number of subscribers disconnecting their service over a given time period expressed as a percent of the provider’s total subscriber base.
  3. 3. When you think of churn think of customer attrition. Churn takes into consideration both voluntary disconnections (at the customer’s request) and involuntary disconnections (through non- payment). Churn is a key metric in the telecommunications industry and is usually measured on a monthly, quarterly or annual basis.
  4. 4. There are slight variations in the way companies in the telecommunications industry compute churn. This can have a negative impact on the comparability of reported churn rates between different companies. Annual churn rates in the telecoms industry, although closely guarded, are estimated to average between 10% and 67%.
  5. 5. 2 Simple Churn Formulas Very simply, churn can be computed by calculating the net movement in the existing subscriber base in a given period divided by the subscriber base at the beginning of the period: S1 = subscriber base at beginning of period S2 = subscriber base at end of period CON = new installations NPD = non-pay disconnections VOL = voluntary disconnections REC = total reconnections Churn = S2 – S1 – CON Churn = REC – NPD – VOL S1 S1
  6. 6. Non-Controllable Churn Factors - customer has moved to a non-service area - customer has passed away - customer has gone out of business
  7. 7. Controllable Churn Factors - poor service - price - economic factors - loss to competition - customer dissatisfaction - theft of service
  8. 8. Why Track Churn ? Monitoring churn is important because churn rates may be possible indicators of: - customer dissatisfaction, - cheaper and/or better offers from the competition, - more successful sales and/or marketing by the competition
  9. 9. Minimizing Churn Rate One of the traditional ways to keep churn rates down is to create barriers which discourage customers from switching service providers (e.g. time-bound contracts and restrictive clauses and penalties). As the marketplace becomes more competitive and subscribers become more savvy, the need to find more creative ways of increasing customer retention is imperative.
  10. 10. Seven Great Ways to Reduce Subscriber Churn
  11. 11. 1. Include Customer Retention in Marketing Budgets and Operational Incentives Budget a percentage of sales & marketing spending on subscriber retention initiatives. Make provisions for customer retention as a part of operational performance metrics and incentive programs.
  12. 12. 2. Develop Good Customer Relationships Find ways to interact with subscribers frequently, providing them with the latest information on services, rate specials and customer service tips. Encourage subscribers to interact: outspoken subscribers are easier to keep than the quiet ones. Taking advantage of social networking sites is a less expensive and more interactive way to do this than bulk mail or telemarketing.
  13. 13. 3. Find Out What Subscribers Want Surveys may be helpful in identifying customers’ likes and dislikes. Keep track of responses and make changes to take advantage of customer desires. Exceed customer expectations.
  14. 14. 4. Up Sell Up sell premium services. Customers with multiple service subscriptions are less likely to switch providers.
  15. 15. 5. Invest in Customer Service Training Train staff to better handle customer service issues. How you handle customer problems establishes the path for customer loyalty.
  16. 16. 6. Create Greater Value In tough economic times, many will decrease service subscriptions or look for cheaper alternatives in order to compensate for reduced income. To offset this, continually look for ways to increase the perceived value of your service in as many ways as you can. Focus on creating value in everything you do.
  17. 17. 7. Reduce Theft Customers who value your service may be willing to try to obtain it for free. Reduce theft by conducting audits particularly in high/low populated areas. Pay close attention to service down-graders and train technical personnel to be on the constant lookout for theft of service.
  18. 18. Fact: It may cost five to ten times as much to acquire a new customer as to retain an existing one. Focusing on reining-in churn and achieving even small decreases in churn rates can create savings that have a huge positive impact on profitability and operating cash flow.
  19. 19. Conclusion A customer saved is money earned! End