Winning Strategies in War Against Churn

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Cable operators, interconnects and the leading spot-cable rep firm National Cable Communications are evidently winning the battle against client churn.

NCC has sharply reduced churn so far this year, due in large part to the rep firm's advance planning in 2000 to improve its back-office and its buying processes in general, according to NCC senior vice president and director of sales Andrew Ward.

"Investment in our business infrastructure — interconnects and electronic data interchange [EDI] billing — is paying off in business retention," he said.

That change of fortune actually began a couple of years ago, when NCC surveyed ad agencies to learn what they deemed as impediments to making spot-cable buys. The survey's results indicated that the hurdles fell into three categories — price, process and performance. That information was at the heart of NCC's subsequent business plan, he noted.

Price issues stemmed from the cost of doing business for client in making spot-cable buys, according to Ward. The problem emanated from a lack of market interconnection and local-ratings research, he added, while performance obstacles were the result of poor schedule fulfillment.

According to Ward, NCC has tackled those concerns and consequently has been able to slash client churn. "Historically churn has been in the 60 [percent] to 70 percent range, varying of course market-by-market and quarter-by-quarter," he said.

Looking at the first quarter of 2002, "Churn was down to 35 percent compared to a year ago," Ward said.

SPOT, CHURN AND AUTOMOBILES

The automotive category has long been at the forefront of local sales managers' minds and the top of their budgets — often to the detriment of other categories.

Indeed, just over four years ago, in February of 1998, NCC and various MSOs contended that they were winning the war against churn. But their preoccupation with client retention, they said at that time, kept them from devoting more resources to stoking their ad-sales growth rate elsewhere.

Many cable executives back then felt that to a large degree the churn rate reflected their efforts to shift away from the traditional reliance on automotive business.

But as NCC's then-CEO John Sawhill observed, automotive was also the leading category for broadcast TV and radio stations, and they too were struggling with the rate of client turnover.

Ron Pancratz, Cable One Inc. vice president of ad sales said in 1998, "We're trying to wean away from that dependence" on automotive so that it would account for a smaller overall percentage.

EXPANDING CLIENT BASE

More recently, Pancratz noted that "churn has gotten better. The [local cable] business has reaffirmed itself with a core group of advertisers."

Although what he dubbed "peripheral companies" exit in down times, he felt that environment is "not as severe now as at other times."

"Selling more network-specific programming, rather than selling packages, builds client relationships," he added.

For its part, NCC has traditionally relied on three key spot-cable categories — automotive, media and entertainment and telecommunications, Ward said.

Those sectors tend to focus heavily on the top 10 DMAs, which means that their spending — or a reduction in allocations — tends to have dramatic impact, according to Ward.

"Automotive has stayed strong, but the other two have dropped significantly," he said.

Not only has the rep firm offset those cuts, it has exceeded budget by concentrating its attention on such categories as restaurants, retail, travel and tourism, beverages, financial services and packaged goods, he added.

NCC's vice president of sales development and marketing Marc Bodner said that in his new-business development arena, "churn really hasn't been a huge factor." Those accounts that are persuaded to make spot-cable buys by NCC are inclined to become sold on its merits and continue, he said.

"We're probably getting back 95 percent of the people [clients] we had last year," he estimated.

"Churn has pretty much been normal," said AT&T Media Services senior vice president Judi Heady. "I don't see us losing clients — we pitch long-term."

"You can't consider last year" when measuring churn levels. Given all the disruptions that occurred, due to the bleak economy and the terrorist attacks of Sept. 11, she said, "Churn was rampant" in 2001.

OTHER MEDIA CHURN CONCERNS

Cabletelevision Advertising Bureau vice president of local sales and marketing Kevin Barry said, "Churn is always a problem that we need to reduce."

But he also maintained that churn is not limited to the cable industry alone, that it also affects the broadcasters.

At Time Warner Cable, president of ad sales Larry Fischer concurred, "I don't see [churn] as a problem. I don't see it as any worse than in broadcast."

Newspapers, on the other hand, probably are hurt least of all by client turnover because that medium is such an entrenched tradition among retailers, Barry said.

Insight Communications Co. vice president of ad sales Kevin Dowell said, "My sense is that we're doing a better job in [reducing] churn at the local level. But we still have concerns in national and regional," which he attributed to a number of one-time-only buys.

"The churn factor is very low," said the New York Interconnect's senior vice president and general manager Eglon Simons.

"The keys are that the interconnect is technologically strong and so are our client service and research support."

Of course, if an account is not active in the market or won't use TV or cable for its own strategic reasons, he said there may be little the interconnect can do about it. But "once people are with us, they stay," he said.

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