Reducing Customer Churn by Adding eBilling System
eBilling and associated analysis is delivering significant benefits for Service Providers of all sizes, across both their consumer and business sectors. However, the two environments are very different. The consumer marketplace faces particular challenges, not least of which is the reluctance of some customers to adopt an online lifestyle. It has been the reluctance of the consumer sector that has clouded the industry’s perception of eBilling. The business sector represents the more straightforward case – where it is faster to convert and easier to articulate customer benefits. For most Service Providers, the corporate space represents a significant part of their revenue, or it is an area of potential growth in a highly competitive market.
As the Service Provider marketplace becomes increasingly competitive, customers are more willing to exercise their purchasing power. Around 75% of the 17 to 20 million subscribers signing up each year with wireless carriers have transferred from competitive carriers – customer churn. - source: Dunn and Bradstreet
In 2006, the Customer Respect group conducted a survey of UK telecom companies and reported ‘customer churn’ as one of the most pressing issues for the industry.
Unfortunately, there is little consistency in the measurement of churn and, because of the potential impact on share price, rates are sometimes ‘massaged’ to make them appear more positive. - source: Yankee Group
According to Dunn and Bradstreet, annual churn rates for telecommunication companies sit in a range of between 10% and 67%. The generally accepted industry average is around 35%.
There are two big hits associated with churn – lost future revenue and the cost of customer acquisition. Claude Borna, senior consultant in the communications industry, Deloitte Consulting, used to cite customer acquisition costs for carriers ranging between $300 and $600 in sales support, marketing and commissions – and that was almost a decade ago.
In 2001, Yankee Group estimated the cost of acquiring a new client at seven times more than the annual cost of retaining an existing subscriber. Bain & Co suggests a 9:1 ratio. Take your pick.
A recent benchmark survey (2008) of UK Service Providers, conducted by TM Forum, cites frustration with billing systems, especially for mobile services, as a major contributor to customer loss rates.
Benchmarking showed a large gap between the top and average billing inquiry rates among service providers. Average performers logged 16.21% of inquiries as billing related while leading companies reported billing inquiries at 1% of all inquiries. Significantly, good performers in this area show lower customer loss rates with less effective performers showing high loss rates.
The report noted: “Since the largest cause of customer service calls for mobile subscribers is for billing-related issues, investments in streamlined billing plans can generate a good rate of return.”
The McKinsey Quarterly went further, putting a figure to the value of self-care. They suggest that an average increase in customer retention for service providers of 1-2% can be derived directly from online self-care. – source ‘Automated Self-Service Comes to Service Providers’, McKinsey Quarterly, 2005
By using eBilling software and incorporating an eBilling system into their business practices, service providers are able to reduce customer churn and, in the long run, hold onto their existing customer base. The best way to increase revenue for any company is to hold onto existing business while increasing new business. Reducing customer churn is imperative in achieving this goal.
As the Service Provider marketplace becomes increasingly competitive, customers are more willing to exercise their purchasing power. Around 75% of the 17 to 20 million subscribers signing up each year with wireless carriers have transferred from competitive carriers – customer churn. - source: Dunn and Bradstreet
In 2006, the Customer Respect group conducted a survey of UK telecom companies and reported ‘customer churn’ as one of the most pressing issues for the industry.
Unfortunately, there is little consistency in the measurement of churn and, because of the potential impact on share price, rates are sometimes ‘massaged’ to make them appear more positive. - source: Yankee Group
According to Dunn and Bradstreet, annual churn rates for telecommunication companies sit in a range of between 10% and 67%. The generally accepted industry average is around 35%.
There are two big hits associated with churn – lost future revenue and the cost of customer acquisition. Claude Borna, senior consultant in the communications industry, Deloitte Consulting, used to cite customer acquisition costs for carriers ranging between $300 and $600 in sales support, marketing and commissions – and that was almost a decade ago.
In 2001, Yankee Group estimated the cost of acquiring a new client at seven times more than the annual cost of retaining an existing subscriber. Bain & Co suggests a 9:1 ratio. Take your pick.
A recent benchmark survey (2008) of UK Service Providers, conducted by TM Forum, cites frustration with billing systems, especially for mobile services, as a major contributor to customer loss rates.
Benchmarking showed a large gap between the top and average billing inquiry rates among service providers. Average performers logged 16.21% of inquiries as billing related while leading companies reported billing inquiries at 1% of all inquiries. Significantly, good performers in this area show lower customer loss rates with less effective performers showing high loss rates.
The report noted: “Since the largest cause of customer service calls for mobile subscribers is for billing-related issues, investments in streamlined billing plans can generate a good rate of return.”
The McKinsey Quarterly went further, putting a figure to the value of self-care. They suggest that an average increase in customer retention for service providers of 1-2% can be derived directly from online self-care. – source ‘Automated Self-Service Comes to Service Providers’, McKinsey Quarterly, 2005
By using eBilling software and incorporating an eBilling system into their business practices, service providers are able to reduce customer churn and, in the long run, hold onto their existing customer base. The best way to increase revenue for any company is to hold onto existing business while increasing new business. Reducing customer churn is imperative in achieving this goal.
posted by CTI Group at
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