A Sticky Situation

The right sticky services can bind customers to you for life.

As the U.S. wireless penetration rate creeps higher each year, so does churn. Carriers everywhere are developing sticky services to keep customers from churning. Some services are sticky because customers love a particular feature so much that they would never give it up by switching carriers. Other times, carriers create stickiness by entangling customers, either through bundled services or group plans, making it difficult for them to leave.

"Each carrier is trying to figure out what it is that holds the customer and creates stickiness," said Carr Krueger, a partner at Arthur Andersen's technology media and communications practice. "They want to be more than a pipe and are all looking at things that will differentiate them. Through doing that, they have established stickiness."

The Ties That Bind According to Alan Brune, Telephia vice president of marketing, sticky services fall into three categories: unique services, structural services and services that provide linkage amongst groups. For example, Nextel's Direct Connect feature is a product that allows customers to push a button to speak with co-workers, clients and associates. When Telephia asked wireless users which product, feature or service was most important in their decision to churn, 30% cited the push-to-talk feature.

"People who are currently with Nextel won't be leaving for other carriers if they value that particular product component because it is not offered elsewhere," Brune said. "Normally if other carriers see an attraction to a product for the first few months, they try to match it so you don't see uniqueness in a product for too long, but there are technology (SMR) issues in terms of why Nextel has Direct Connect capability."

Rick O'Connor, Rural Cellular Corporation (RCC) senior vice president, northeast region, said RCC's group-ring feature is unique to its market, and the company was able to turn the feature into a sticky service. Group ring allowed RCC to link phones with individual MINs so that they ring simultaneously, giving customers the perception that they had multiple phones hooked to one number.

"In our rural market, it was a good system because at the time, most of our customers had 3W bag phones; but when Motorola came out with flip phones, customers wanted portability," O'Connor said. "Group ring allows customers to keep a phone in their vehicle and link a portable phone to it so they have two numbers and two access plans, but the two ring simultaneously. When they travel, they use the 3W product. When they are out of the vehicle, they use the portable products."

Today, more than 30% of RCC's customers use the group-ring feature. Since competing carriers in the area don't support the feature, it has provided RCC some stickiness.

Brune said the second category of sticky services - structural services - requires customers to go through a process that they are not apt to repeat in order to obtain a feature. For instance, voice-activated dialing requires customers to spend time training the recognition component and setting up names. In addition, customers that automatically pay with credit cards are less likely to churn because they would have to cancel the payment with their credit-card company, which might take a couple of months to deactivate.

"Once you get these services, you might not be interested in moving to another carrier if you have to set up all these structural services again," Brune said.

Carla Schneiderman, Corsair vice president of marketing, business development and sales, agreed that automatic payments provide stickiness.

"Any type of activity that requires debiting an account for money means customers go through a process of setting up profiles, and there are a lot of security layers and authentication involved to help avoid identity fraud," she said. "After customers set up accounts, they are not likely to switch carriers because they have gone to a lot of trouble."

O'Connor pointed out that SMS has become a structural sticky service for RCC. One local cable company has embraced SMS as a dispatch service via the Web and is not putting as much money into its own dispatch systems.

"To switch from that would be difficult at best, and they would have to set up all new groups and numbers," he said. "We see that type of feature starting to provide some stickiness."

However, Brune warned that carriers must offer structural services that provide value, or else the service becomes onerous for customers. For instance, credit-card billing takes awhile to set up, but it provides a convenient payment option, which customers value.

Arthur Andersen's Krueger added that structural services don't always provide stickiness. Although it takes a great deal of time to enter phone numbers and addresses in a handset, such a feature is no longer sticky because new tools allow an easy transfer of that information. Vendors are developing software that allows customers to download the data to a PC. Customers could easily switch carriers, then upload the data into new handsets.

Brune said the third category - services that link groups - includes features such as group calling plans or bundled services. Telephia's most recent survey shows that a number of new pricing plans give free mobile-to-mobile calling between family members.

"Customers may get four phones together on one consolidated bill, and it makes it difficult for one person to turn around and go elsewhere," he said. "It is a sticky service in that customers are linked with other individuals and have to get the others to agree before they can switch to another provider."

Glued to the Wireless Internet Many carriers are hoping new wireless Internet applications will be the glue that sticks customers to them. However, Telephia's survey showed that only 9% of customers switch providers in order to get Internet access, and a mere 1% churned in order to get on-screen information with news. But Brune said as carriers figure out which data products have the most value, the wireless Internet could play a part in reducing churn.

Corsair's Schneiderman said the personalized information that wireless-Internet applications will bring could help carriers keep customers.

"The ability for subscribers to control the push information they receive is going to be pretty critical," she said. "If a carrier allows them to create profiles that will filter out information or marketing promotions they don't want, they are more likely to stay with that carrier rather than switch to someone else."

Siobhan Ryley, ADC applications consultant, said that when carriers offer personalized information, they need a flexible BCC system to store customer data. For instance, Virgin Mobile Australia, which targets 18- to 35-year-olds, collects a large amount of customer data so it can sell value-added services. If customers want their daily horoscopes via SMS, the carrier has to collect their dates of birth. Virgin Mobile Australia uses ADC's Singl.eView customer-relationship-management (CRM) system to access customer information and then market personalized services to them.

"These are interests in great detail, so carriers need a flexible CRM system that can collect all sorts of weird information, in addition to the nuts and bolts of customer-account information they need for billing," Ryley said. "It is important to get all that information in one place."

Athene Software has been working with e-commerce portals to predict which customers are the stickiest and what information is most relevant to them by using the same machine-learning algorithms and neural networks that it uses to predict which customers are most likely to churn.

"You want to deliver relevant information to WAP-enabled phones and PDAs, not just let customers surf the entire 'Net and see what is out there," said David Howlett, Athene vice president of marketing. "We are trying to understand what people's preferences are without them necessarily having to reveal their preferences."

Right now, Web portals are using the predictors more than wireless carriers do, Howlett said, but as carriers behave more like ISPs, they will want to figure out the most relevant content to offer. For example, Athene has discovered that customers who set up personalized accounts through a portal, such as My Yahoo or My AOL, have a high propensity to go back to that portal for their Web access. Parallels can be drawn to wireless carriers here. For instance, Sprint PCS offers My Sprint PCS Wireless Web, which allows customers to build a personalized menu of wireless Internet sites.

When it comes to sticky services, what works for one carrier won't work for all. Whether you develop wireless-data applications, unique services or structural services, it is important to spend a lot of time listening to your customers in order to find out what they want. Otherwise, your offering could move past sticky into tacky.

With a churn rate well below the national average, Rural Cellular Corporation (RCC) has found that it does not need sticky services to retain customers. The company instead attributes low churn to a variety of customer-service programs.

Rick O'Connor, RCC senior vice president, northeast region, said the company developed its retention concept at the end of 1996 and implemented it in 1997. From 1997 to 1998 the company's churn rate dropped from 1.75% to 1.5%. Since then, it has remained steady at 1.3% to 1.35%.

After establishing a culture that empowers employees to make quick decisions in order to retain customers, RCC segmented its customers into four groups: consumers; top 30 accounts; super accounts; and mid-level businesses. CSRs were designated to handle the consumer group and assigned to contact them several times over the first three years, including welcome calls after a couple weeks; a first-bill call; and a call in month seven. In month 11, CSRs send an anniversary letter with a certificate for 30 minutes of airtime.

The company assigned the top 30 accounts to direct sales account executives (AEs), who were responsible for a certain number of personal visits and telephone calls to customers each quarter. The AEs also performed quarterly rate analyses. Senior AEs handled the super accounts, or customers with 300 or more phones, on a daily basis.

RCC was experiencing the most churn from mid-level businesses - small businesses with five to eight phones that do $500 to $1,000 worth of business each month.

"Many of them had not been on our radar screen, so we said the best way to serve these customers is to be in front of them," O'Connor said.

RCC targeted a county in which it was experiencing high churn. It formed a 4-person retention team - two from retail and two from customer service - and trained them for a month on how to rebuild accounts, make recommendations and talk to customers. The team was assigned 20 to 25 visits a week and pledged to continuously contact these customers over the first year. O'Connor said RCC took great pains to separate customer service from sales, which could be why customers accepted calls and visits from the retention team.

The program was highly effective. As the retention team talked to customers, it found most were not on the correct rate plans or were unaware of new features that could improve service.

"This program was received unbelievably in the marketplace," O'Connor said. "Today people stop me on the street and say they can't believe a company had someone walk into their offices and tell them it could save them money."

Although RCC experienced a drop in revenues in the beginning because customers moved to plans that saved them up to 50%, its penetration rate increased, and morale skyrocketed.

RCC may analyze churn predictors in the future, but O'Connor said if the company approaches retention the right way, it won't need to forecast churn.

"Customers stick with Verizon Wireless because of our unparalleled network quality. We put our customers first; with 1,300 company-owned retail stores and helpful and knowledgeable customer service personnel, we make wireless simple, affordable and national."

"Wireless local loop plans provide a `sticky service' for our customers who choose to replace landline service with wireless-based service. Basically, we find the right person, get them on an unlimited plan, and no one else can match it."