Forrester: Stop churn before it happens

About 50 million telecom consumers will change service providers this year, and telecom operators who don’t want to lose customers need to be more proactive in improving their customer service and offering more consumer education according to Forrester Research. In addition, service providers need to get product managers more involved in the customer care process.

Sally M. Cohen, Forrester Research analyst and author of “The Science of Churn,” said consumers grow more critical of their service providers during an economic downturn and are more likely to examine bills more carefully. “I haven’t heard anyone talking about cutting back on customer care, and I hope that’s not what’s happening in the downturn,” Cohen said. “To skimp on customer care now is to shoot yourself in the foot.”

While some of the churn in 2009 will be involuntary – mostly due to moving – much of it is voluntary, the research showed. And surprisingly, 16% of those buying bundles will churn, despite the hassle of changing out multiple services. Eighteen percent of those buying TV service, 12% of those buying Internet service and 9% of home phone users will churn, Forrester’s research showed.

“There are two major reasons they consider churning – first, what’s the value of the service or the benefit of what they are paying for, and second, are they getting the level of customer care they think they should be getting,” Cohen said.

Forrester surveyed 5,154 US and Canadian consumers in the third quarter of 2008 and found that home phone consumers are most likely to churn either in the first seven to 12 months of service or very late in the service tenure.

“The early tenure switch is typical across services,” Cohen said. “Consumers signed up and are not happy with what they are getting – either the service isn’t working the way they expected, there is improper billing, or they not getting what they thought. So early on is the time that it is really important to get things right because it will leave an impression.”

Consumers who churn much later are probably leaving for less expensive options such as wireless replacement or VoIP, Cohen said.

Where both groups are concerned, service providers need to be more proactive to prevent churn rather than trying to deal with it when consumers call up to cancel service, Cohen said. “Today the typical approach is to have a loyalty or win-back team that is a reactive solution to churn,” she said. “They’ll say, ‘We can lower your price,’ or, ‘We can offer you a higher tier service for same price,’ or whatever it takes to win that consumer back. I argue that it should really be a more preventative approach. Now we’ve uncovered all these reasons why people churn – value and customer care – service providers likely already knew that. Instead of being reactive, they should be proactive.”

Where value is concerned, it’s “marketing and education 101,” Cohen said. Consumers need to get more information at every step along the sales cycle, from when they order the service to when it’s installed and every time they contact the service provider.