Reach Out & Touch Prepaid Customers
Your prepaid activation rate is increasing, but if you are like most wireless carriers, your churn is, too. Some carriers blame customers for prepaid churn, calling them disloyal or credit-challenged. But you may need to look inward for a solution. Reducing prepaid churn requires a new approach to customer care, said Richard Russell, Aethos Communications Systems (now owned by Logica Aldiscon) president & co-founder. Replenishing a prepaid account must be automatic and simple for customers, or they may let their accounts become inactive out of laziness. Most importantly, you must combat the credit-challenged stigma by treating prepaid customers as well as you treat your postpaid subscribers from the point of sale on.
EASY RENEWAL One common problem is that often prepaid customers don't reactivate their accounts. It is easy to blame customers in this situation, but Russell said it is really your fault if replenishing an account takes too much effort.
"The prepaid market has a high inertia," Russell said. "If you set some kind of obstacle in front of your customer, there is always going to be a certain percentage of them that won't bother, and you risk increasing your churn."
To stop customers from switching to your competitors once they decide to use prepaid again, you need to give them simple ways to recharge their cards. For instance, Powertel has made it easy for customers to buy $30, $45 and $90 vouchers by placing them in more than 550 mass-merchant, agent and Powertel retail locations. The company continues to aggressively expand its points of distribution so that prepaid cards become even more convenient. Carriers can sell prepaid cards almost anywhere, including newsstands, gas stations, kiosks or drug stores.
"The customer should not be more than 15 minutes away from a Powertel location to replenish a card," said Mike Bashaw, Powertel vice president of marketing & product development. "If you ask a customer to drive more than 15 minutes, he might not do it."
But Russell said if you expect customers to drive somewhere just to add credit to an account, you are missing the mark. Replenishing an account needs to be even more simple because customers may not get around to running such an errand for a few weeks. Russell suggested a prepaid solution that will pro-actively notify customers when they are low on credit with a recording and allow them to recharge their accounts automatically over the phone via a credit card or a bank-account debit. You also should give them a way to find out how much credit they have, along with an easy way to reach customer care. It could be as simple as pressing a series of buttons on a phone.
"You have to make it a no-brainer for them to do," Russell said.
Tom Villa, PrimeCo market director of prepaid products and services, said PrimeCo offers five ways for customers to replenish their accounts.
"We have learned from our prepaid customers that when they run out of money at night, most of the options to replenish are closed," Villa said. "We have been very successful with ways to replenish at the corner market at 2 a.m."
The company also is experimenting with replenishment through automated teller machines (ATMs). Through an extra menu option, customers will use the ATM's features and functions to add credit to their accounts.
Bob Young, PrimeCo vice president of customer care, said that because prepaid customers rely on a more real-time world than postpaid customers do, you must have constant contact with them regarding their accounts. Postpaid customers get a bill at the end of the month, but a prepaid customer always is managing a credit balance on an account. That requires more information, he said. PrimeCo has automated facilities in place that allow prepaid customers to hear their credit balances or the number of minutes left in their accounts at any time. They also can find out the cost to use additional features. Customers may call the customer-care department or talk to someone face-to-face to find out the same information.
Villa added that PrimeCo's customers want account information sent directly to their handsets through text messaging so they don't have to call customer care or an interactive voice response (IVR).
EQUAL OPPORTUNITIES Aethos' Russell said another reason you may be failing the prepaid-customer-care test is because you treat all customers as credit-challenged, even though some are not. Often, carriers suggest prepaid as an alternative to postpaid service only after the customer has failed a credit check. Customers feel as if they are on probation and that you do not value their business.
"Right away, the subscriber starts with a poor impression of customer care," Russell said.
This feeling grows stronger if your prepaid service is more expensive than your regular postpaid service. Later, when they reach their credit limit, customers become increasingly frustrated if you cut off their conversations mid-call. Russell said this lack of interaction between carriers and customers is the main reason prepaid has not taken off in the United States. In Germany, for example, most prepaid users are professionals who have good credit but do not want to deal with a bill. Or, they just want to control costs, he said. A friendly recording notifies a customer that his account is low before he places a call. If his credit runs out in the middle of a conversation, the carrier will let the call continue if he is a trustworthy customer.
"In other countries, right off the bat prepaid is advertised as a great service because customers don't have to sign a contract," he said. "It is very attractively promoted."
Some U.S. carriers are catching on. Although Powertel's prepaid service is premium compared to its postpaid (35 cents per minute vs. 10 cents to 20 cents per minute), it is marketing the product as a desirable service to all segments. Powertel advertises on billboards, posters, radio and in newspapers -- the same media it uses for postpaid products.
"We did buy space on some billboards in demographic areas where we knew there would be a high percentage of credit-challenged customers," Bashaw said. "At the same time, we also advertise convenience, flexibility, control."
SIMILAR FEATURES Treating prepaid customers the same as postpaid customers does not end at pricing, marketing and customer care, Bashaw continued. You need to provide prepaid customers with the same features you give your postpaid customers. Today, Powertel cannot do that because it doesn't render a bill. For example, prepaid customers cannot subscribe to Powertel's enhanced short message service because it requires a monthly charge. In addition, prepaid roaming still is limited until IN standards come out in late 1999 or early 2000, he said. Modifications to the company's prepaid platform next year will allow customers to buy more enhanced services, and he predicts those customers will be less likely to churn.
"We want to be able to give all customers ubiquitous service as soon as possible," he said.
Russell also said if your prepaid solution does not allow you to view customers' calling history, you can't help your customers resolve their billing questions.
"If a customer phones up and says he bought a prepaid card, and it ran out fast, generally speaking, you won't be able to tell him what went wrong," he said. "You won't know when his last call was, what it cost him or any of that information."
A prepaid solution should provide CSRs with customer-care windows on their computer screens that show the last call a customer made, his payment history or if credit ran out in the middle of a call. Then, your CSRs can have an informed conversation with the customer and do something to help him.
"That kind of differentiation will determine whether you succeed in prepaid," Russell said. "A lot of prepaid solutions run out, and customers are on their own because no one in customer care wants to talk to them."
PrimeCo CSRs can view prepaid and postpaid call-detail records (CDRs) by account number or subscriber. The company's on-line IVR information comes directly out of its billing system so a customer, at any given moment, can hear his balance. Some carriers have problems viewing prepaid account information because they have provisioned an adjunct billing solution, which means adding an extra layer onto the network. PrimeCo installed a prepaid solution from its single switching vendor, Lucent, so it has no switching handoff issues. Likewise, Convergys is its single billing provider.
"We are able to get more innovation out of leveraging those two than if we had a multilayered legacy type of switching and billing system," he added.
Bashaw said it is possible for Powertel to run prepaid calls through its billing system. If a customer challenges a call, a CSR can pull up the CDRs. The carrier does not actively promote that ability because viewing prepaid call detail is more difficult than postpaid. The company has two systems. One is the administration system on its prepaid platform, which does real-time rating on its IN network and keeps track of the customer's account balance. The other is a separate billing system that runs the CDRs through its postpaid billing system.
"To get call details, we have to go to our postpaid billing system, so it is just an extra step," he said.
REACHING OUT Equal treatment also means reaching out to prepaid customers with new promotions or calling them just to see how things are going. Powertel and PrimeCo send direct mail advertising new promotions to prepaid customers. Bashaw said he does not want prepaid customers to feel excluded, so he includes them in all of the company's promotions and direct mailings. Carriers cannot hang their hats on pricing advantages forever, he said, and Powertel makes sure customers feel appreciated. The carrier is contemplating an incentive-based prepaid customer-loyalty program similar to a frequent-flyer program where customers could get free airtime, accessories or credit every time they replenish their accounts.
Creating a loyalty program often requires demographic information. The trend in postpaid service is for carriers to use their customer information for marketing purposes. You can do the same thing with prepaid customers, Bashaw said. Powertel gets reports that track how many vouchers its customers have purchased, the amount they paid for the vouchers and the number of minutes they buy. The company does not ask for demographic information because customers are reluctant to answer personal questions, Bashaw said. Instead, Powertel takes the names and Social Security numbers that it has and compares them with a national database to get detailed demographic information.
"If it is a business, we know what its SIC code is," he said. "If it is a consumer, we know his age. We use demographics to find out what partsof town customers (live) in, their age group, and their gender."
Russell said other carriers need to be more aggressive in reaching out to customers. Because some customers are completely anonymous, getting in touch with them can be difficult.
"You don't have a lot of contact with your prepaid customers," Russell said. "You are not sending them bills. You might not even know their name or address. Sometimes you have a credit-card number, but you might not even have that."
Carriers are learning about their prepaid customers in different ways. PrimeCo's Young said if someone buys a product at a PrimeCo store, the company requests his name and address at the point of purchase. It also asks for credit reference information, which is optional if a customer pays in cash. However, prepaid products are a popular gift item, and the company sells much of its prepaid service through indirect retailers. In these cases, PrimeCo does not ask for personal information at the point of sale because the buyer may not be the end user.
"There is no way to activate the phone at that point in time, so it is later that we would find out who that customer is and establish that relationship," he said.
Young said the bulk of PrimeCo's prepaid customers do not want to be anonymous, either. However, if a customer goes that route, the company still communicates with him through text messaging or just calling him on his handset.
Powertel also asks customers for names and addresses once they activate service, said Bashaw. Although at least 90% of Powertel's prepaid customers give out their personal information, a lot of them want to remain anonymous, he said.
"We are not going to be able to communicate with those customers, and we made a decision that if customers want to remain anonymous, that is their right," he said.
Whether you are thinking of offering a prepaid service or you have one in place today, high churn is a reality. Prepaid churn might be a small price to pay for the high number of activations you sell each day, but you can fight it if you use the right technology and the right attitude.
Many carriers and vendors enhanced their prepaid offerings over the summer. Cellular Mobile Systems expanded its Smart Talker prepaid branding campaign to address niche markets not currently served by existing plans. Both Alltel and 3 Rivers Wireless announced they will launch prepaid wireless services using the NTC SmartPay Wireless prepaid platform.
Boston Communications Group implemented an upgrade software platform, the Arlington release, to enhance its wireless prepaid services offering. This release provides new functionality, such as real prepaid roaming at rates prenegotiated between home and serving carriers. TeleCommunication Systems added zone-based rating capabilities to its prepaid wireless application, enabling carriers to define prepaid rating zones for subscribers to better serve key target market niches.
Prepaid offers many benefits, but a host of challenges awaits you:
* Customer Service: In wireless prepaid billing solutions, customers must pre-establish an account with a wireless carrier. Therefore, you must establish good customer-care components.
* Standards: By year-end, TIA and ITU will release open-network-architecture standards. Your prepaid system should work with these emerging WIN and/or CAMEL guidelines.
* Network Implications: With prepaid service, there may be increased loading of voice trunks, the SS7 network, or both; the interface with the existing MSC and HLR must be seamless.
* Rating Plan Flexibility: Rating plans vary from market to market, depending on creative marketing plans, legislation, competitive considerations, market toll-region setup, taxes, granularity requirements and customer demands.
* Scaleability: A prepaid service needs to scale up economically as the service demand increases.
* Interaction with Enhanced Services: The prepaid system should interact smoothly with such enhanced services such as short-message service, voice mail, calling party pays and voice dialing.
* Administration: Establishing an administration system with phone-card management, number management and comprehensive customer-care capabilities is key to effective prepaid-program management.
* Refill Methods: The systems must support various prepaid refill/recharge options. These methods include transfer via ATM network, credit-card purchase, scratch cards, payment at partner point-of-sale outlets, smart-card slots and Internet.
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