Hook Your Customers

Often carriers' quarterly reports sound like fish stories.

"Acme Cellular adds another 20,000 customers."

"ABC Wireless doubles its customer base."

But these numbers don't reflect the whole truth. They don't report the ones that got away.

In some markets, churn averages 30% to 45% a year, according to research from Technology Trends, Technology Focus. These statistics prove that most carriers aren't keeping customers happy. Service providers must do a better job of building customer loyalty from the outset. Catching customers is just as much about keeping them as getting them.

How to Keep Them

According to Hunt Lambert, Lambert & Company principal, today's competitive environment is to blame for the industry's high churn rate. Carriers are trying to increase revenue at any cost, which leads to price wars.

"All of the major carriers try to win customers with price," Lambert said. "As a result, they now have 65 million customers who have been trained that they can always swap services for a better price."

According to Lambert, carriers must focus retention programs even more carefully, targeting specific market niches and winning their loyalty with customized offers. There are four secrets to building lasting loyalty.

Decide who you're after. Carriers have to start building loyalty from the beginning. Each customer requires a different mindset. Market segments should be easy to identify, not shrouded in tricky names. It should be simple for everyone in your organization to share your vision. Target "teenagers," not "white picket-fencers." Target "Hispanics," not "blue bloods." Everyone can picture a teenager. But who is a "white picket-fencer?" The more recognizable your target market segments, the more likely your organization will understand your vision.

Get to know the customer. You should know the patterns and habits of your market segments in detail. Every time a customer calls, learn something new about him. Research should develop revealing questions to ask at the end of customer-care calls. If you put those questions to use every time you contact a customer, you'll understand him more and increase your ability to build a relationship.

"The key to developing any churn-reduction program is making sure you understand why customers are churning," said Ted Carrier, Cox Communications PCS vice president of operations and integration. "There's no sense throwing programs at customers until you understand why they are leaving."

"You have to know enough about them to reward them in a way that's meaningful to them," Lambert agreed.

But, Carrier warned, your marketing messages have to set the right expectations from the beginning. Don't make promises you can't keep.

"If call quality is important to a customer, we can deliver that," he added. "But if they expect bullet-proof coverage everywhere they go, and we can't provide it, they could feel duped."

Equip your entire organization. Good customer retention requires a team effort. Train your organization from the top down, turning every person -- from receptionist to the CEO -- into a churn-fighting machine. Internally, you may have to do handstands, but the customer should never know. The company philosophy should be the age-old concept, "the customer comes first." This includes program development that incorporates cross-functional teams to implement segment-specific programs.

Once you catch them, keep them. Retention programs are a must in this competitive market. Research shows that it costs five times as much to get a new customer as to keep an existing one. The trick to keeping your customers is simple: Keep them so happy they'll never want to leave. You can do that by surprising and delighting them at every turn.

"Many of these customers want to stay with us. When they are impressed with the company they're working with, they have reasons not to churn," Carrier said.

Some carriers have done good jobs of impressing customers. They have implemented creative retention and loyalty programs. The key to these programs is to know how your customers live and then thank them in ways that are tailored for their lives.

One service provider in Boston reduced its churn rate by nearly 12% through one simple program. The provider asked customers what dry cleaners they used, tracked down the most popular dry cleaners in a few ZIP+4 areas and gave customers discount cards for the nearest dry cleaner.

The concept didn't even take much time or money. The discount cards weren't expensive because the only cost incurred was for printing. Other than that, the provider simply had to contact several dry cleaners to arrange discounts. But the perceived value to the customers was high. As a result, the provider reaped bountiful customer loyalty. Every time a customer used the card, he saw the service provider's logo -- a subtle reminder the carrier appreciated his or her business.

Another option is to use recreation to build loyalty. By asking a few simple questions during customer acquisition, you can learn what recreational activities mean the most to your customers. Asking customers if they like golf, tennis or surfing, for example, will give you the ammunition to build stronger relationships.

Once you know how customers spend their free time, you can send them a lifestyle-driven "thank-you." A sleeve of golf balls, a tube of tennis balls or a bundle of high-grade surf wax with your logo imprint will cost little, but will tell a customer a lot.

You won't want to commission a sleeve of golf balls every week, but you can use these ideas as incentives. Send a gift when a customer reaches a certain spending point ($500, for example) or when he's been with you for six months.

Some carriers find higher churn rates in specific market segments. If that's the case, you can tailor a loyalty program to strengthen those specific relationships. One Arizona provider strengthened its relationship with customers under 35 years old by asking them a few questions during customer-care calls and at the point of sale. The provider found out that reading and drinking gourmet coffee were important to many customers under 35. So, it contacted prominent area book retailers and coffee shops to arrange customer discounts. Then, it offered discounts to the most popular book retailers and coffee shops. The campaign worked, reducing churn by approximately 5% among customers in the targeted age range.

A happy birthday program is another way to increase loyalty. All service providers have customers' birth dates, yet few make use of the information. By being a little creative, even this small piece of information can be a useful churn-reduction tool.

One creative way to say happy birthday to your customers: Offer free local calling to your highest-revenue customers on their birthdays. It only will cost you a fraction of network bandwidth, and you'll earn an invaluable loyal customer base.

Be Creative

The key to implementing loyalty programs successfully is not just to transplant these ideas into your market. No two markets, customers or carriers are the same. Each program should be tailored to build relationships with customers in your specific markets. With unique, creative programs in place, your next quarterly reports could boast customers retained as well as those gained.

In addition to loyalty programs, many carriers are finding that a critical element in retaining customers is making sure they are on the right rate plans. GTE Wireless is one carrier that has found this is a sure way to show customer appreciation.

GTE Wireless faced rising customer turnover in its San Diego market a few years ago. According to Bruce Nead, GTE Wireless group manager of strategic services, customers were jumping ship for more attractive price plans.

Jumping ship wasn't necessary -- GTE often had its own comparable plans. So Nead developed a campaign targeted to cutting down the churn rate. The result was a tool that ensures customers are on the most appropriate rate plan for their needs. The tool rates customers in different billing scenarios automatically. Then, the company uses the customer's past history and rates it against other plans. Based on that information, GTE sends the customer a letter suggesting a more appropriate plan.

"It was really targeted at high-end users who were not on the right rate plans," Nead said. "If there was a plan that would cost them less, we'd show them what they could save if they switched to that plan."

The campaign worked.

"We had a significant return rate of 12% on the letters," he said. "The sum of our efforts reduced our churn in San Diego by more than a fifth."

In addition to market-specific programs, GTE Wireless introduced a nationwide Customer Bill of Rights program last year.

"It is based on the foundation that GTE will help you navigate through all of the choices you have to make, then we will go to great lengths to assure that you've made the right choice as a customer," said Bill Tallman, GTE Wireless general manager of strategic marketing. "Based on that concept, we created a rate-plan migration program. We focused on eliminating the main dissatisfier among all of our customers."

GTE segmented customers and sent direct mail to promote the bill of rights. It also used billing messages and retail advertising to promote the bill. So far, the plan has been a success.

"Preliminary results of our rate-plan program are very positive. The churn rates of those that we have migrated are about half of the control group," Tallman said. "Those are only preliminary, and we continue to monitor that. But we are very confident that there is a strong link between customer satisfaction with their rate plans and churn reduction. We will continue that in 1999 with a much broader base."