They Love Me, They Love Me Not

Reducing churn depends on your ability to stay attractive to customers.

Joe owns a small construction business, and he and his employees rack up hundreds of dollars in wireless airtime charges each month.

For three years he remained faithful to one wireless provider, accruing monthly charges of up to $1,500 for service to 12 phones. He was so satisfied with the service that he recommended it to several business acquaintances.

Then he and his workers began experiencing reception problems, which he assumed were caused by too many subscribers on the network. He said that he contacted his sales representative and the customer-service department several times about the problems. They simply informed him that the company was erecting several new sites in his area within six to eight months and told him that maybe the problems would be resolved at that time.

According to Joe, even after he threatened to take his business elsewhere, the company's representatives seemed apathetic. Finally, he did take his business to another wireless provider, and now he's just a churn statistic for the first company.

A recent Bear, Stearns survey tallied the results of 11 wireless companies' churn reports and came up with a median monthly churn rate of 2.2% for 4Q99. Others say the industry average is closer to 3%.

As a statistic, the churn rate appears minor. But suppose a company has one million subscribers and a monthly churn rate of only 2%. That would translate to 20,000 subscribers hitting the door every month.

What can wireless providers do to prevent such a mass exodus?

Executives from Alltel, Bell Mobility, U.S. Cellular and Verizon offered several general suggestions, and comments gleaned from wireless subscribers provided additional insights. The following tips are based on their answers and comments.

Mind the Network If your subscribers' calls are getting dropped on a regular basis or not being transmitted properly, or if the reception consistently lacks clarity, you have a problem. Many of your customers interact with your network on a daily basis, which is much more often than they contact your sales and customer-service departments, and they judge the quality of your company in large part by their experiences with the network.

As Joe's story illustrates, coverage and capacity problems can result in the loss of valuable customers and in bad public relations. Joe's first provider increased its customer base, a sign of prosperity, but decreased the quality of its service in the process. Joe suffered, churned and disparaged the company on a popular Web site, primarily as a result of the company's taking on more customers than its network could handle.

The issue of growth management will continue to be important as wireless services become more commonplace. In this regard, today's wireless industry is reminiscent of the early days of the Internet. Consider, for example, the experience of AOL back then.

Early users of AOL's services enthusiastically jumped online to communicate with friends and strangers for a minimal fee. Then, too many users inundated the network to the extent that, during peak periods, it was sometimes difficult, if not impossible, to log onto the Internet service. At that point, many users began seeking alternatives to AOL.

Continued investments in and monitoring of the network help to reduce such problems. For some companies, minding the network goes beyond mere problem-solving to improvements such as upgrades from analog to digital or from voice-only to voice-and-data networks or from circuit-based to packet-based data networks.

Listen to the Customers Some companies use predictive mining of account databases to determine the desires of existing customers. After discovering what the customers want, the companies can offer discounts and services that will appeal to existing customers and keep them loyal.

U.S. Cellular, for instance, developed a price plan specifically for farmers. The plan lowered service rates during the off-season to better accommodate the farmers' needs.

Data mining enables service providers to create plans that attract customers according to age group, income level and profession. It also can be used to gather information about customers after they have churned to determine why they left. And on some occasions, the information can be used to spot a customer on the verge of churning. Such customers can be approached with special offers in an effort to salvage the account.

There are generally two reasons why customers churn. The customer sometimes loses a job, moves out of the service area or, for some other reason, no longer needs or can afford your service. At other times, a customer churns because he or she has become dissatisfied with your rate plan or network coverage, or finds a more desirable wireless plan elsewhere.

Providers can learn a great deal by keeping track of customer complaints, which come in many forms such as calls, faxes or e-mails. Because a large percentage of calls to customer service involve billing questions, CSRs can be a good source of information about how to improve the format of your bill.

After reviewing and considering customer feedback, one company decided to make its bill available online and simplify its paper bill. In the past, the company's bills contained pages of in-depth call details with a total at the end. Now, the company's bills include three sections: a simple summary, a detailed summary and in-depth details.

By listening to customers, some providers also have discovered that confusing rate plans and hidden charges can result in a decrease in minutes of use. This discovery has led to a review of pricing in some companies and an attempt make rates more competitive.

Focus on Customer Service Customer service has many sides. Although the contact center is only one, it still represents a critical component of customer service for most providers. For this reason, training CSRs should be a priority.

CSRs can be given a lot of information and flexibility in their jobs, or they can be powerless reactionaries who simply man the phones. One of the companies contacted for this story makes its reps privy to its churn rates and reveals the impact of churn on the company's revenue.

That company also has created a partnership between its marketing and customer-service departments. Marketing reps frequently talk with CSRs about feedback from customers and about new-product ideas.

The CSRs also receive training on retention methods. The company runs contests and rewards CSRs with incentives such as gift certificates to recognize team achievements.

Another company strives to better train its retail agents and to improve its recruitment and hiring practices. The company also strives to ensure adequate coverage in the stores and to make sure that agents can provide the necessary product information and customer follow-up.

Following up with customers is often an overlooked aspect of customer service. If a customer has a concern about the service, billing or anything that requires corrective measures, the change should be made, and a company representative should communicate to the customer that the problem has been resolved.

Serving customers also includes managing expectations. New customers should be informed of network and equipment limitations and told how the product should work.

Consider wireless Web services as an example. If the customer expects the service to operate anywhere near the speed of his or her desktop service or in every location, you'll have an unhappy customer on your hands. But if the customer understands the product's limitations up-front, he will be less likely to complain or become disillusioned later.

Then there's the welcome packet, which some wireless providers use to orient new customers. The welcome can take the form of written correspondence or a telephone call. For example, one company's representatives call new customers near the arrival of their first bill. The reps chat with the new customers about their perceptions of the service and determine whether the customers have used all of the services they signed up for. One wireless executive said that his company discovered less churn with customers that received a welcome packet.

The anniversary package, a variation of the welcome packet, arrives after the customer has received one year of service. It usually contains an invitation to renew as a subscriber, but it also can be used to gather feedback.

Providers often overlook mundane operational processes while assessing their customer-service programs. Marketing and data mining are important. But more routine operations should not be ignored. With the routing of phone calls, for example, it's important to make sure that customers don't have to languish too long on hold or that corporate representatives don't play pass-the-buck with customers, passing them from department to department until they grow tired and hang up.

It all adds up to understanding what customers want and need and helping them to better understand what your company and network technology can and can't deliver. Without such an understanding, customers such as Sue, who subscribes to a $150 monthly plan, can conclude that they are not receiving the service they were promised.

In Sue's case, the national service that the provider's advertisement promised turned out to be unavailable in some areas of the country. Now, Sue is wondering if the holes in coverage reflect limitations typical in today's wireless networks or whether there was false advertising. Regardless of the answer, Sue expressed a definite plan to churn, as soon as a better offer comes along.

In an effort to offer the influx of next-generation services, wireless providers are migrating gradually from circuit-switched to packet-based networks. Creating this next-generation network is no small feat. Yet, perhaps a larger challenge for the wireless provider is enabling the next-generation of voice and data services that capture the most demanding market.

Although voice over IP (VoIP) technology may be good for small branch offices needing cheap voice, it still is not today's killer application. A few significant barriers to VoIP implementation prevent the technology from being delivered in real time, much less with the quality of the calls provided on the traditional telephone network. These problems revolve around three factors: quality-of-service (QoS) issues, inter-domain network-management challenges and limited services deployment.

The Internet is still too unreliable to support voice calls. With the convergence of IP routing and optical switching comes the challenge of meshing QoS standards. For instance, multiprotocol label switching (MPLS), designed to help service providers deliver better IP services, has yet to engineer traffic in optical networks the same way the technology steers traffic in routed networks. Providers need a packet-switched network with QoS protocols for voice with IP telephony applications to reliably match a PSTN. The Internet without QoS is unpredictable, resulting in poor or unacceptable voice quality.

The major benefit of VoIP technology is the reduced cost associated with having a single point of management. However, data and telecom are diverse networks, with different priorities and strategies. Network-management tools with common interfaces and alarms are at least two to three years away; therefore, it is difficult to realize any reduced management costs.

Many of the hot applications that are to be the key drivers of VoIP are still at least six months away due to the challenges cited above. However, voice over instant messaging, including instant wireless messaging, may make the most sense as aVoIP application as it does not require the same level of QoS as real-time voice applications.

IDC predicts the U.S. wireless-instant-messaging market will reach 43 million users by 2004. Millions are turning to the mobile Internet as their window to the world.

To succeed, mobile-service providers and ISPs must know where their subscribers are, how they are accessing the network and what information they need - instantly. Wireless providers need to become the second-generation mobile portal. Adding the voice-recognition concept, voice portals give mobile users access to real-time information with minimal hassle.

This is the area where providers should focus with respect to rolling out VoIP-related services. But how best to enable such services?

Providers may be quick to implement pure softswitch technology, as it promises to give telecommunications the same growth the Internet experienced in the 1990s. However, the softswitch is used only in the tandem layer on the network in the long haul, which does nothing for the provider at the service layer. The overall functionality of the softswitch has yet to be defined, including whether or not it should have a database or just work with one. It is clear that the softswitch performs call control. However, the IP industry is having problems deciding where services should reside, concluding that perhaps service deployment should be distributed throughout the network.

Within three years, billions of real-time voice and data messages will exchanged across the network daily. The existing intelligent-software infrastructure, including softswitch technology, is not designed to handle this load.

A new breed of platform architecture will enable the provider to handle this explosion. (See Figure 1.) It should have a distributed architecture and be able to scale to meet the demands of today's wireless subscribers. It should be built to process billions of messages a day, host millions of customers and provide continuous computing in a single node. A software-based platform that runs on off-the shelf hardware and spans multiple networks will result in reduced costs for development and maintenance.

This infrastructure gives service providers a fundamental element of wireless instant messaging and is a key component of the mobile portal, enabling revenue-generating, real-time personalized services.