How Wireless Providers Can Rethink Churn

Before the COVID-19 crisis, wireless providers expected flat to little growth in 2020 while still preparing for costly infrastructure upgrades to support 5G. As consumers seek to curtail spending due to COVID-19, providers can expect higher churn rates than the 2008-2009 recession, particularly from premium plans, or “postpaid” options, to cheaper plans and providers, or prepaid or pay-as-you-go.

Providers are responding by offering short term forgiveness, flexibility and incentives to retain customers. Verizon, which gave an extra 15GB of data to its customers, is one example. “But will incentives like freebies and entertainment be enough to keep people from switching?” said David Poole, digital business transformation strategist at Publicis Sapient. “They’re making you this data offer, but does that help you if you’re still paying the same high monthly bill?”

This approach is short-sighted and providers need to embrace a self-disruption mentality. They must look at churn differently to shed customers that’ll become increasingly unprofitable while retaining those that will represent value through the recession and beyond. While first-quarter financials showed providers weathering the crisis, future quarters will reveal the impact of churn, and this approach will be critical to remain profitable.

Providers should ask themselves three key questions when responding to current and future economic crises:

• Can providers be proactive and offer downgrade options? Many customers will increasingly struggle to pay their bills the longer the crisis lasts and the longer they are unemployed. Consider partnering with lenders to help customers through hardships.
• How do carriers reconcile their subsidiary pre-paid brands, such as AT&T’s Cricket, as they allow customers to downgrade to plans that look very much like their pre-paid brands? Making movement fluid between sub-brands is key and avoids sacrificing the premium brand quality.
• Will these pay-as-you-go plans make a resurgence even after the COVID-19 crisis passes? Will more customers demand this option? The crisis helped customers identify services that they can live without during tough times. Rather than bundling, providers should consider offering more a la carte plans that let customers pick and choose the services they want to pay for.

Rethinking churn

Loyalty marketing needs greater precision that’s data-driven and looks beyond traditional data sources to predict future churn and risks, and better define these segments:

• For customers anticipating economic hardship, a seamless offer to downgrade to pay-as-you-go while staying with the carrier, potentially to a sub-brand.
• For high-value customers, a series of rewards that are actually valued and relevant based on signals from that customer.
• For unprofitable customers, a low-cost, self-service way to switch providers.

Many loyalty marketers may claim to already use data for this kind of segmentation and loyalty strategy. Yet, the models built on an eleven-year bull market likely aren’t effective for the sudden shifts ahead of us during this deep recession. These models should use first-party data and enrich that with a wide range of third-party data to get visibility into future hardship.

Many providers have these building blocks in place, but they need to be expanded, integrated and oriented to reinventing loyalty marketing:

• Customer data platform (CDP): to get a 360-degree view of each customer and what motivates their relationship with a provider. You could use data virtualization to make a wide range of data accessible and consumable, without formalizing it through processing and development.
• Artificial intelligence/machine learning: to identify patterns in defaults and model prospect risk, spend and long-term value. You could message high-value customers that searched “close account” or similar search terms to identify signals and boost retention.
• Customer engagement platform: to implement a segmentation strategy. You could engage customers representing the highest value with rewards that matter to them.
• E-Commerce engine: to automate the process of downgrading plans. You could remove manual steps and paperwork inswitching from postpaid to pay-as-you-go and vice versa.

Churn in uncharted territory

One of the keys to loyalty marketing in the COVID-19 era will be showing customers how to make the most out of the services they already have available on their current phones and plans, as fewer will have the budgets for new phones.

Because fewer people will be traveling, at least for the time being and likely for the rest of this year, mobility of mobile wireless, like international phone plans, won’t be as necessary but services like Wi-Fi calling and data protection are going to be increasingly valued. Providers can proactively cancel subscription services that are un-used, similar to what Netflix recently did.

Businesses will also be churning even more than people, with the average small business having only a few months of cash flow on hand. “There’s more complacency among consumers while businesses are more proactive in switching providers,”said Poole. But acknowledging that there’s a problem, such as millions of people out of work and desperate to trim expenses, and presenting affordable solutions is best done proactively when customers are still exploring alternatives and beforethey’ve made up their minds.