How to Lower Churn in a Rapidly Changing Industry

The telecom sector of our economy has had perhaps more turmoil than most. There are new products and wholly new technologies being launched every day that have the potential to draw customers from one provider to another.

Some association prophets say that the future of the association world may also soon experience disruption. So I thought the recent book, Customer Churn Reduction and Retention for Telecoms, might have some application for membership marketing. Are there best practices that we can put in place to reduce churn and retain more members?

Interestingly, it appears that the solutions for preventing churn and keeping customers in telecom focus on many of the same measures discussed in association circles. And intense competition has forced these telecom companies to implement many of these strategies.

Some of the strategies highlighted in the book include Lifetime Value, Product Mix, Predictive Modeling, and Customer Segmentation. Let’s look at these in an association context.

Lifetime Value: One of the reasons I like to follow the game of baseball is that it lends itself to statistical comparisons. Likewise, membership lends itself to statistical analysis. The fundamental analysis is Lifetime Value (LTV). In economic terms, all members are not created equal. Understanding the overall value of a member and then the value of a membership segment or individual is foundational for developing a retention strategy.

Product Mix: In the telecom world they now have the Triple Play (phone, internet, and TV) and some are looking at a Quadruple Play by adding wireless to the product package. We also have this option available in membership. It is called tiered membership. The fact is the higher you can move a member up the membership product line the more likely he or she is to stay with you. Offering the equivalent of a black Ford is not the optimum membership package to enhance retention.

Predictive Modeling: Admittedly this is a marketing tool that increases in usefulness with the size of a membership or customer base. Nevertheless, past behavior is best predictor of future behavior. So modeling should come more into play in getting and keeping members. In a recent acquisition model that we ran, we found that using the best model we could get 80% of the members by mailing 20% of the prospects. In the chart below, the x-axis is the percentile of the prospect database and the y-axis represents the percent of the members gained. The red line would be the results without a model.

Market Segmentation: Because all members do not represent the same economic value and they display different buying behaviors, it makes a lot of sense to segment members and communicate differently to each group. The exciting news for membership marketers seeking to build segmented communication to members is that technology as never before is allowing this. For example, we are looking to move the renewal and retention work that we do now from traditional printers and variable laser black copy to an iGen – a high speed digital color printing press -- which allows for real time variable printing. This means no inventory and the option for a different messages, graphics, and data for each person who receives the retention communication.

Human nature does not vary that much. So it is a great idea to take best practices from other industries and apply them to ours. It is also a good idea to find out what the best and most successful practices are from other membership marketers and apply them in your situation.


Chris Davis said...

Thanks for this post. I found it very interesting seeing as how my association is one who's members are rural, independant telephone companies. I will have to check out the book you mentioned.


Tony Rossell said...

Chris -- Let me hear if any of your member companies have success stories to report on related to retaining customers. Tony