SAS estimates that 35% of customers acquired by telco service providers will not cover the cost of their acquisition - they cost more to attract than the amount of revenue they generate.
Yet, like many other South African businesses, telcos tend to spend an enormous amount of time and effort on obtaining new customers - and not enough on keeping them.
But, with increasing competition in the sector, telecommunications companies (telcos) must look closely at identifying, retaining and servicing their profitable customers.
"Provided your customers are profitable, it makes strategic business sense to keep them," says Bruce Jones, sales manager, Commercial Sector, at SAS Institute. "Attracting new customers is relatively costly."
According to a Cap Gemini Ernst & Young Telecom Report published in November 2002, it costs up to three times as much to acquire a new customer as it does to keep an existing one.
"Without business intelligence, companies cannot hope to retain the right customers effectively," says Jones. "For a start, they need to be able to identify who their profitable customers actually are. Some customers may not be worth retaining because they cost more to service - through acquisition costs, customer support services and, potentially, debt and debt collection - than the revenue they generate."
Having identified profitable customers, telcos can then introduce interventions, such as targeted marketing campaigns, to ensure that they retain these customers as churn is one of the biggest issues faced by cellular companies.
"Not only do telcos need to identify profitable versus non-profitable customers, they must also identify characteristics of users who are likely to move on in the near future.
"If profitable customers show signs of moving on, interventions can be put in place to keep them."
MTN has used business intelligence to successfully reduce prepaid customer churn by some 45% in strategic segments. The cellular network operator also increased its period of customer retention by almost a year, thanks to its utilisation of leading business intelligence tool, SAS Enterprise Miner.
The data mining tool from SAS Institute enabled MTN to identify high value customers who could be on the verge of leaving the network. Indeed, its predictive churn model has proved to be 84% accurate.
Having identified potential lost customers - particularly the high value ones - MTN then devised ways of increasing their 'affinity to the network' by targeting them with specially tailored marketing campaigns.
SAS is the first solutions provider to offer an integrated customer retention solution that supports the whole process of managing churn - from gathering and warehousing data, to predictive churn modelling, to distributing the results via a range of media, including corporate intranets and portals.
"What makes our solution unique is that it has built-in intellectual capital, in the form of industry-specific data models," says Jones. "These fit 70% of the requirements of any telco - from an enterprise-wide point of view. The solution gives guidelines for structuring the data warehouse, and the raw data needed, providing a blueprint which can be tweaked to suit the business exactly.
"Significantly, the model is enterprise-wide, so whether the business starts implementing CRM on the supplier, customer or operational side of the business, and irrespective of what the integration strategy is, the model is consistent."
Because the customer retention solution has blueprints for typical reports, in enables customers to implement and start seeing results very quickly, without having to employ consultants to detail what the data model will look like, or to come to an exact definition of churn.
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