Evolution in churn warfare?

Churn is every carrier's nightmare. Maintaining a good data warehouse to combat churn is every carrier's dream. Two database software companies hope to help carriers retain customers by using lifestyle and geographical data.

Experian has combined its InSource-Experian database of 100 million households with HomeScores, a product enhancement database, to create InSource HomeScores, said Betsy Conlin, Experian's director of marketing for telecommunications, energy and cable groups.

HomeScores sifts through customers' publicly available long-distance, lifestyle, demographic and churning information. The data is then broken down by utility usage. The HomeScores data comes from a survey Experian conducted with market research firm PNR and Associates that identified statistics common to customers that change service providers.

"We asked specific questions about people's intent to switch Internet service providers, how much they spend on wireless and long-distance," Conlin said. "Then we applied it to a database for prospecting." Households that met certain statistical criteria were identified as likely to churn.

Although the product is still in its testing stages, telcos appear to be interested. One long-distance carrier has bought the product and another telco is currently test marketing it. In test marketing, that long-distance carrier used HomeScores to drive its direct mail response rates up to 10%, an Experian spokeswoman said. Experian declined to name the carriers.

In a similar development, MapInfo Corp. hopes its new alliance with Oracle will help telcos with customer loyalty programs. In April, the two companies announced that they will make all Internet business applications software compatible in the future, beginning with Oracle8i, Oracle Spatial and Oracle Application Server.

"This brings the best of both worlds," said Dwight Cheu, product information manager at MapInfo. "We're taking our MapInfo programs' mapping data and bringing it into the primary Oracle databases." This enables carriers to not only map their switches and fiber optic cable, but also link the maps to data on customers' average telephone bills and demographic profile. Oracle has a 70% market share in the telco office market, Cheu said.

He suggested that carriers use this data warehouse to cater to high-spending customers and ensure loyalty. "Say a wireless company sees a microwave trunk go down that affects 17 cell towers," Cheu said. "Then they see the area has lots of high-profile $500-a-month customers, so they give them a $25 credit."

Oracle and MapInfo also hope their union will enable their carrier clients target certain geographical concentrations of customers where the industry is highly competitive, Cheu said.

"The biggest response we've gotten is on the telco side," Cheu said. "It shows that location is important to the industry, especially with geography-based technology like [asymmetrical digital subscriber line] and DSL whose range is 3000 meters."

The industry is moving from price-based strategies to consumer-loyalty strategies, said Erich Almasy, vice president of the Toronto office of Mercer Management Consulting. "We're following the airline industry where the difference between a profitable [and] unprofitable customer is more dramatic. Airlines have gotten serious about churn and loyalty programs. The telephone companies are starting to learn the same thing."

Ever-increasing churn rates are at the root of this strategic shift, said Almasy, who estimates that a carrier's immediate cost for losing a typical customer is $3000. The annual rate of churn for U.S. carriers can range from 10% to 30%, he said.

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