The Dark Side of Customer Retention

Despite plenty of evidence to the contrary, it’s easy to get into the mindset that very large businesses and other organizations have such ample resources that everything they say and do is part of a well-orchestrated strategy. In fact, the reality is that one hand often doesn’t know what the other is doing. And the size of an organization and the amount of its resources — whether large, small or somewhere in the middle — are in no way a reflection of its level of dysfunction or lack thereof.

Still, I was very surprised when Paul King, president and COO of customer acquisition and retention outfit Aperio CI, recently told me that a couple of the big U.S. cablecos initially launched international VoIP packages without taking into consideration the high costs of international call termination — a mistake that cost these MSOs as much as 50 cents per call rather than making them money. I’m not sure if this story is funny, scary or a little of both.

Another example of large companies flying in the dark is around customer care. But this seems to be more by design than due to oversight. Despite all the talk in this industry about "customer-centric" efforts and advances in data mining and service assurance, service providers as a rule actually seem to know little about the preferences, usage and requirements of their customers. The reason, I believe, is that, frankly, they don’t much care.

I’m not a touchy-feely sort, so, hey, if that business model works, more power to them. The problem with this, however, is if a service provider doesn’t have a reasonably decent feel for the needs and wants of their customers, churn could become a significant challenge. Especially in a market with one or more service provider alternatives. And particularly in a down economy in which customers are making sure every penny counts.

But I don’t want to be a glass-half-empty kind of girl, so let’s look at the upside of churn. In some cases, churn actually is a blessing. I’m talking here about situations in which customers who suck up more resources than they contribute to a service provider decide to move to the competition. It’s helpful for service providers to know who these folks are as well. Why spend the resources on keeping or winning back the very people who are draining the life out of a service provider? A better strategy would be to say "thanks for doing business with us" and even making a helpful suggestion as to which of your competitor’s service plans would be the best match to their needs — an option that will mean the lowest possible margin for your competitor.

That’s exactly what KPN in the Netherlands is doing today, thanks to the customer acquisition and retention tools and services provided to it from Aperio CI, says King.

"All legal. All above board. Very competitive," says King, referring to the practice of directing churning customers to a competitor’s least desirable (from the competitor’s standpoint) service package.

At the same time, service providers can leverage this kind of solution to understand the usage patterns or other data about those customers they want to hold on to, so they either can proactively offer them special offers or service packages better targeted to their needs or have such options at the ready should these customers threaten to drop their service, says King.

(One simple solution for determining if a customer is one you want to keep or send packing is to make better use of simple billing data. Aperio’s CEO, William Mich, is dedicating an entire session on the topic at the upcoming Billing & OSS World Conference & Expo in Chicago next month. For more details on this and other sessions, visit www.billingworldexpo.com.)

"The economy is tough right now," says King of Aperio CI. "There’s a lot more push on [customer] retention than there is on acquisition."

Until next time,

Paula Bernier
Editor in Chief

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