Why Customer Churn is So Detrimental for Telecommunications Companies

Customer churn is detrimental in any industry, but especially in telecommunications where people have a strong incentive to jump between providers. Estimates of churn within the industry are only 10 percent per year on the low end; but they are 65 percent on the high end. In under two years a telecom company could have to recruit 100 percent of its customer base!

This piece will examine the problem of churn in depth and suggest how telecom companies (and others invested in customer retention) can solve the problem:

What Is Customer Churn?

Any time a customer chooses to cancel a subscription it’s an example of customer churn. They may abandon a telecom provider entirely or else reduce the number or size of services they subscribe to. This is a huge issue for all companies, because acquiring new customers costs 6 to 7 times more than keeping the current ones. That means even if lost customers are quickly replaced the loss has a deep impact on the bottom line.

Churn also has indirect consequences that can compromise a telecom provider for years to come. A survey of consumers reveals that 95 percent tell friends and family about a negative experience with a company. Consequently, the circumstances that lead to churn also compromise the ability to attract new customers.

Why Does Customer Churn Happen?

Every telecom company is a little different, and customers choose to leave for lots of reasons, not all of them valid. However, the causes of customer churn tend to fall into one of these four categories.

  • Poor Customer Experience – When customers have a negative experience with staff, with a store, or with any sort of sales/service platform they are more likely to consider alternatives and actively seek out other telecom providers.
  • Falling Short of Expectations – The customer sets the standard for service. If someone chooses to sign up with a telecom company and then receives a level of service that seems less than promised, the experience immediately sours.
  • Neglecting to Promote Loyalty – Unlike some other industries, consumers rarely develop loyalties to telecom companies and often have active derision. When companies fail to give people a reason to staythrough incentives, competitive pricing, innovative services, or stellar support they are likely to lose customers to competitors.
  • Failing to Provide Value – The telecom industry is full of startups and innovators aiming to disrupt the industry. Established providers that are not able to match the upstarts in terms of quality or value, begin to quickly fall out of favor with subscribers.

How Do Your Stop Customer Churn?

It is impossible to stop all customer churn. It’s also important to realize that when customers leave one telecom provider they go seeking out another, which promotes competition within the industry. All companies want to keep churn as low as possible.

Every company will need to make unique refinements and recalculations to fix the issues that individually cause customers to leave. And in order to do that they must take a data-driven approach. Eliminating churn is all about appealing to consumers, and that is only possible when telecom companies understand very specifically what those consumers want and need.

The first step is for telecom companies to integrate the data they already have so that subscribers are illustrated as completely as possible. Growing this data set using data from an increasing number of digital portals and customer touch-points is essential moving forward.

The second step is to implement tools that make business intelligence for telecommunications easy, intuitive, and instantaneous. Data will only reduce churn when it reveals actionable insights, and for that to happen analytics must be as accessible as possible.

Even with analytics improvements do not happen overnight. But they do happen. And when they do customers have painless and friction-free interactions that boost satisfaction and loyalty through the roof.