In Broadband Era, the Customer Rules

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In the rough-and-tumble broadband marketplace of tomorrow, the customer is king. Providers who expect to survive must create the systems, products and policies needed to identify, serve and retain their most profitable and valuable customers.

Those that don't will lose their best subscribers and, with them, the profitability and cash flow inherent in these low-churn, high margin customers.

Now, thanks to a new generation of data-management solutions, subscriber-based companies can gain the perspective they need to find, serve and keep their customers and integrate the information and processes into their business operations-from reports for the executive office to real-time support for the call center.

DOG EAT DOG

Competition is changing the face of subscriber-based industries. According to industry analysts:

  • Cable operators face basic churn rates of 28 percent-up to 70 percent for premium subscribers;
  • Net marketing costs exceed $1,000 for each new subscriber;
  • Average "customer life" continues to fall;
  • Churn is typically even higher in new-growth broadband offerings such as cable modems, digital cable, and digital-subscriber-line service.

At the same time, customer valuations have skyrocketed, as illustrated in the recent Time Warner Inc.-America Online Inc. merger in which existing subscribers were valued at $3,450 and $7,454, respectively. This dramatic difference is primarily a function of how much data those firms collected about their customers' buying habits.

Unfortunately, most broadband providers have built islands of mostly transactional data to perform billing, customer service, and operational and service functions. Today, providers must know not only who their customers are, but also how to manage each customer, including their most valuable subscribers.

They must also have the information needed to improve service, lower subscriber acquisition costs and-above all-reduce churn in their most valuable customer groups. Today's antiquated, dispersed data systems simply cannot meet those requirements.

The industry now recognizes the need for a value-driven approach to customer management.

In most provider organizations, customer-billing data is not connected to marketing, analytical information is disconnected from operational information, and internal customer data cannot be correlated to an external prospect database. Broadband providers-including firms that offer cable television, DSL and other data, telecom, direct-broadcast satellite, security and utility services-need a software solution that integrates billing, marketing campaigns and customer service into a single, value-driven enterprise perspective.

Today, consumers have a choice, and operators that don't manage customer value will see their most valuable customers walk away.

Now, a new class of solution has emerged that seamlessly combines data from a wide range of subscriber-oriented sources to provide a comprehensive, value-based view. By using advanced algorithms to aggregate multiple internal and external customer data sources, this new technology overcomes the traditional problems associated with centralizing multiple databases, including the challenges of data incompatibilities, storage fragmentation and data migration difficulties.

ONE VIEW OF EACH CUSTOMER

The single view of the customer enables a closed loop approach to managing customer value: segmenting customers by value, delivering rules-based marketing campaigns and measuring the results. It also preserves and enhances the important legacy customer systems.

By creating a single data warehouse, or "datastore," this strategy allows every "customer touch" employee-including customer service representatives, sales, dispatch and marketing staffs, and inside or field technicians-to see the same comprehensive, up-to-date view of the customer. And, it allows senior management Web-based access to virtually all areas of the company that used to be "protected" in silos.

In this environment, selling the same old way won't be any more successful at reducing churn than it has been in the past.

The best of this new class of customer-value management, or CVM, solutions allows broadband-service providers to integrate their billing and legacy systems. They can also integrate prospect data from demographic or psychographic sources.

Once a provider has created an enterprise-wide customer data store, management can then determine the ongoing value of each subscriber by mapping his or her profitability using a point system based on his or her business case. Such mapping might include a number of behaviors tied to the products and services purchased, longevity, upgrades and downgrades, payment history, non-revenue calls, number of service truck rolls, and collection calls placed.

Other CVM capabilities allow providers to formulate rules-based marketing campaigns using customer-provided and third-party demographics, geography, service history and other variables. This single-view, rules-based approach pays big dividends at the point of customer contact.

In a call center, for example, CSRs can automatically make the right offer to the right customer.

Today's sophisticated CVM suites also include Web-based reports that track all operational, marketing and service activities. These systems can also track the effectiveness of each marketing campaign-from the initial prospect contact to the longevity of the resulting subscription.

POWERFUL BENEFITS

By creating a single customer view across their entire enterprise, providers can pursue more productive, value-driven customer strategies. These advanced systems allow companies to:

  • Quantify customer value based on billings, service, CSR calls or other variables;
  • Map areas of customer success on to targeted prospective subscribers;
  • Target acquisition and retention campaigns to their highest-value customers;
  • Match specific offers to select subsets of their target audience;
  • See the status of every node in a rebuild;
  • And access Web-based reports for details on every aspect of their CVM efforts.

INITIAL RESULTS

In their initial deployments, these consolidated database solutions have contributed to significantly reduced churn, a reduction of 25 percent in subscriber acquisition costs, and a measurable improvement in overall operational efficiencies. Results will vary, but the potential is clear-to increase customer retention, profitability and lifetime value.

In today's competitive broad-band marketplace, it's not enough to know who your customers are, what you want to sell them and how you hope to manage that relationship. To survive and succeed, providers must manage subscribers based on the value those customers bring to the enterprise. Those that do not will lose the coming battle for market share and increasing revenue.

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