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| Escaping Churn |
Escaping the Churn Trap (Special report Telecom Finance)
By Erik Hornung, CEO and Founder of DanCell International
Churn is a major problem for many operators in competitive markets. In the worst cases churn threatens the sustainability of some telecom operators whereas plain dilution of the bottom line and disappointed shareholders are frequent occurrences in many other markets.
In this paper we will look at the individual causes for churn as well as the different preventive actions and the consequences and costs of ignoring the warning signs.
What are the reasons for churn?
Popular opinion suggests that the main reason in fiercely competitive markets is that operators with deep pockets try to buy the market. Accordingly you have follow suit or die - which you will do if your pockets are not quite deep enough.
The stated perception is very common and of cause holds some truth but is rarely the full story and very often other causes for churn can be found internally within the management and operations of the individual Telco.
However, acknowledging this is often times a more painful process involving peeling away the layers of long proven practices, revisiting the organizational structure and evaluating individual’s performance and potentially revising the company’s objectives.
What is the cost of Churn?
Let us look at the basics of churn and try to quantity what it does to your bottom line before we dig deeper.
The average costs of churning customer are in the range of $200 to $300. In practice some operators have experienced stable churn rates of 60% in several consecutive years. With a typical ARPUs of $40-60 we are talking serious money evaporating from the bottom line.
Key Reasons for Churn
Based on analyzing selected Telco’s performance in different markets DanCell has extracted some of the reasons for companies being stuck in the Churn Trap and puts forward some suggestions on how to escape.
• Subsidizing terminals and subscriptions
• Organizational structures and business objectives
• Sales and Marketing strategy and performance
• Technical strategy and performance
• Lack of coordination
• Lack of differentiation
• Customer loyalty programs
• Customer care
Whereas some of the reasons appear common knowledge and difficult to deal with others are less obvious but potentially more dangerous since they are more fundamental and ignoring them leaves the company exceedingly vulnerable and potentially caught in a death spiral as it has been experienced in the real world.
For more read download our special report in Telecom Finance... click here
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