What is Churn? | Fighting Churn and Building Loyalty [Part 1]
In this series of posts, we will talk about a very important economic and technological field of our global economy. A field that has entered every house and its services has been irreplaceable in our daily lives, just like water and food: it is the telecommunication sector.
Part 1: Context of Churn in Telco Companies.[This part]
Part 2: Reasons Of Churn.
Part 3: How to Fight and Reduce Churn.
Part 4: How to Build Customer Loyalty.
This field has been the driver of innovation, technological advancements and it has set the trend of how people go about their daily lives for the past 10 to 15 years.
It is known that telecommunication industry is one of the fastest and most profitable industries in the world. Most of the 7 billion humans on our planet (as much as 90% of the world population according to some studies) have access to the basic telecom services, and enjoy the benefits of communication and internet at a speed that is getting faster and faster every day.
With the daily advances in technology, More and more telco companies are envading new markets.
the telecommunication sector is one of the fastest growing industries with 90% of the world's population using telecoms services . The rapid growth of telecom users worldwide is also accompanied with increase in number of telecom providers, leading to fierce competition in this market.
Moreover the introduction of Mobile Number Portability (MNP) and dongle use in various countries has also facilitated an easier mode for a customer to switch to another provider.
Churn has been a subject of discussion for a while now, and it has become the main reason for telco companies to create new products and to attract new customers. But it has become the reason to start doing "base management" in order to keep existing customers happy and satisfied.
The world rates vary as different companies within different countries have different churn rates.
Companies lose at least 20 to 25% of their customers from one year to another. If no new customers are acquired then the average lifetime of an existing customer is equal to 1/c, where c is the annual rate of churn.
For the company with 25% churn, this means an average lifetime of 4 years for the customer, whereas a churn rate of 50% has 2 years lifetime value .These numbers are very important for the telecom company to understand and monitor.
Recent reports on worldwide mobile churn state that the loyalty of a mobile customer has fallen to an all time low, with an average customer now switching provider every 27 months. This particular number tells a lot about the dynamism of the telco sector worldwide.
This average is more than twice as frequently as a decade ago.
I should mention that Churn happens in both directions, to and from the telecom operator. For example, the introduction of mobile internet (That is served via modems) makes it easier for a customer to switch from one provider to another provider, and this led to a very high rate of rotational churn.
This switching is referred to as customer churn. Some of the causes of customer churn are switching costs, bad network quality and customer financial status.
Because of competition in the communications sector, Mobile internet operators are finding it very tough to keep their existing customers and they are losing their customers to competition. Churn is a global phenomena . Every telecommunication company is experiencing the problem of customer churn.
The introduction of new telecom providers has stiffened the competition. The focus of telco companies has shifted from building a large customer base into keeping customers in house.
Churn is often treated like a seasonal flu: telco companies's management assume the root cause of the problem can be eliminated and that the best it can hope for is to minimize its symptoms. I will try in this series of posts to prove that churn causes are not some seasonal effects, and if the problems do not get resolved, it will cause a long-term effect of the company's performance and existence in the market.
So the first question we should ask is:
Why Customers Leave You?
To know the main reasons that can drive customers away, check the second part of "Fighting Churn and Building Loyalty [Part 2] .
Your comments and feedback are always welcomed! I also love to hear any suggestions about future topic I can cover here.