Surviving the Recession: The Residential Market

“Assume your average churn rate is 2%,” Altman said. “Your goal is to identify the subset of customers where the churn rate is 30%, because at one third, I can start investing money proactively and preemptively.”

3. Don’t stop focusing on growth. “This is not just about retention and staving off losses – they need to be thinking about how to grow subscriber numbers,” Cohen said. “Maybe the ARPU [average revenue per user] doesn’t continue to grow, but if we can grow subscriber numbers now, then when the recession is over, we can think about how to sell these new great services we thought up. Once you have them in your grasp, especially if you can win them over in an economic downturn, you can upsell more later to a happier consumer.”

While no one likes a price war, the current situation is very different from previous price wars, like the long-distance voice battles of the ‘90s that drove the big three – AT&T, MCI and Sprint – into the ground, said Ron Westfall, broadband analyst with Current Analysis.

“Past price wars were reliant on the initial offer,” Westfall said. “This is very different. What we are seeing that is different now is that an aggressive pricing scheme [between telcos and cablecos] brings in the customers, and for a short-term hit, you create a scenario that is more encouraging, in terms of future sales, than previous pricing wars.”

Consumers will still buy advanced services if they are convinced of the value, so telcos shouldn’t stop selling things like Embarq’s eGo and AT&T’s Home Manager, Scherf said.

In general, it’s important to keep marketing to remind consumers of the value telcos can deliver. “My colleague, James Quivey, wrote a piece about the video market that applies here and basically said, ‘They say you can’t market your way out of a recession, but it doesn’t hurt to try,’” Cohen said. “It’s about communicating the value of the service to consumers who might misperceive the cost or the value.”