Identifying profitable customers – it’s not always who you think

20 OCTOBER 2014

In the current mature telecoms market, the main source of growth available to communications service providers (CSPs) comes from poaching subscribers from competitors. And since the cost of gaining new customers is much higher than the cost of maintaining existing ones, keeping current customers happy has become a top priority for CSPs.

In the quest to maintain high customer satisfaction levels, CSPs are taking a page out the retail playbook, using Customer Experience Management (CEM) tools to identify premium ‘VIP’ customers and provide this elite group with superior customer service, including customized promotions and perks. But understanding exactly who service providers should consider VIPs isn’t always clear, as the following example illustrates.

TEOCO recently worked with a service provider to help understand their roaming costs. We found a single customer who was generating over ten thousand dollars in revenue a month as a roamer. From a marketing perspective, this subscriber is high-value – a VIP. But when we looked beyond retail revenue – including the roaming business partnerships and the wholesale agreements – we found this subscriber was actually generating almost three dollars in costs for every dollar of revenue brought in. This one subscriber created a loss for both their own account – almost twenty thousand dollars a month – and for the larger group within the CSP’s organization. One outlier can wipe out profitability for a whole sub-segment.

What is the moral of this example? It’s not just about a great customer experience; it is about ensuring a great, profitable customer experience.

More revenue does not always mean more profit
Ensuring profitability and making sound business decisions, not just subscriber acquisitions and retention, need to be top priority. After all, a CSP may have the happiest subscribers in the industry – but if they aren’t profitable, then what’s the point?

Many of the traditional initiatives undertaken by CSPs have a direct impact on the bottom line. For instance, Margin Assurance has traditionally been a finance-driven set of processes, practices and technology solutions to improve business performance. This means maximizing revenues from customers, minimizing operational costs, and optimizing profitability. Service Assurance has traditionally been a network-driven set of processes, practices and technology solutions to improve business operations. This means minimizing network faults and downtimes, maximizing successful transactions, and optimizing network utilization. And as mentioned earlier, CSPs worldwide have embraced the collective push for CEM.

It is clear that both Margin Assurance and Service Assurance remain key initiatives for every operator. What is apparent is that new CEM solutions cannot be created in a vacuum, but must interface with key solutions across the organization to provide a consistent and unified view of the subscriber experience, along with network and business performance. By analyzing data acquired from all of these sources, CSPs begin to really understand how making a change at one level will impact other parts of the business. The traditional ‘stovepipe’ management style – where the network team has its own data, the marketing team has its separate data, finance has its data, and customer care and billing have their data – hinders the ability to make the best business decisions. Being able to analyze data sets from across the organization is what will really drive a better, more profitable, customer experience.

For instance, combining quality of service data from the radio network with profitability data from finance can help CSPs determine and prioritize their small cell strategy to reduce congestion and enhance call quality. Which customers are most profitable -and should they be prioritized? Combining roaming data with geolocation information can help CSPs detect exactly where these high-margin services are being used, and where they are not performing correctly.

With limited company resources, both in terms of dollars and human capital, which problem areas get prioritized? To answer this question, CSPs need to have an understanding of profitability down to the individual subscriber level. As the above example illustrates, even though a customer may be generating significant revenues, they can actually be an even larger source of loss. Is this a subscriber you want to devote valuable resources to and label as a ‘VIP’? Possibly, but this only comes if you can first identify the problem and understand it from both a business – and a bottom line – perspective.