Opinion

2022 was a tough year for telcos, which must now focus on churn to survive

CEO at Pendula, Alex Colvin, says telco brands must think differently about the value of retention if they are to survive the new status quo.

The telco landscape in Australia has shifted significantly in recent years.

The pandemic, privacy breaches and the current economic downturn have caused an unprecedented shift in the way people use telco services.

As a result, telco brands must think differently about the value of retention.

This shift has been multifold and has resulted in a polycrisis for the sector. Firstly, a work-from-home revolution triggered by lockdowns, with the ABS reporting that more than 40% of employed people still regularly worked from home after lockdowns ended. 91% of people now have a home broadband connection, of which 93% are connected to the NBN. This came from an increase in the number of customers choosing to increase their internet speeds and move to unlimited data plans.

Then, for consumers that hadn’t been fussed about shopping around, skyrocketing inflation and the growing cost of living began to make sticking with a provider long-term even less viable. Couple that with the multiple data breaches from virtually every major telco player in 2022, adding questions about data safety into the mix, and the result was one of the biggest changes in customer mentality in perhaps the sector’s entire history.

All of this has made customer retention more important than it ever has been. Prior to events of recent years, most telcos had legitimate marketing strategies which focussed on acquiring new customers faster than others left. The current state of play means that is no longer viable, with consumers willing to rapidly and ruthlessly switch providers if offers and quality of service aren’t adapting to their needs.

It is for this reason that retention and not acquisition will prove the key to success in this sector for 2023 and beyond. Acquiring a new customer can cost as much as five to 25 times more than retaining an existing one. Even the most forward-thinking companies, who have highly desirable products or services, will experience a chunk of their client base moving on, but those that prioritise customer retention will be those who thrive in the long term.

The telco sector is one of the fastest adopters of data-driven marketing strategies – but there is still a lot of room to innovate for marketers who are willing to push the envelope. The benefits of a high retention rate are clear, so what can you do about it?

The first step is to synthesise the data at your fingertips so as to better understand not just how much churn you are experiencing, but why it is occurring. This will help to determine causes behind churn, and must also be followed up with tangible and relevant interventions.

In the end, customers want to feel valued, so it’s crucial to be continually investing in your customer service, care, and experience. This may require a complete overhaul of how you do things. As an example, one of the critical benefits of personalised two-way conversations and automated workflows is higher engagement rates.

From there, innovation becomes a natural and essential third step, whether you innovate on price or product. Bundles, network optimisation, and other value-add services not only help to attract new clients, but they can also facilitate lower telco customer churn.

Challenger brands like Amaysim have been implementing new products and customer service strategies for years, and as a result, are often ahead of the curve compared to bigger telcos who’ve traditionally been able to heavily rely on brand equity. Brand equity is now, thanks in no small part to the breaches mentioned above, as well as customers’ better understanding their own needs, a far less powerful factor than it once was.

As an example, Amaysim has implemented such offers as complimentary bonus data, encouraging customers to “stay safe and stay connected”. This latched onto the insight that phones were going to be used more than normal in lieu of physical socialising, and that purse strings were going to be tightened.

Churn is costing money, particularly if net revenue churn is in the red. It has never been more important to focus on retention, and understanding that customer churn and implementing strategies to reduce churn will become a key marketing focus for many sectors (not just telco) in today’s economic environment.

To address this start by asking yourself some simple questions. Can you proactively reach out to your customers to offer them added value? Are your products and services still solving a customer’s immediate needs given current economic conditions? Do your customers feel valued? Importantly, these questions must be answered in consultation with customers.

Answering these questions regularly, and using them to experiment and strategise around execution, then locking in a long-term strategy for retention that is constantly being re-evaluated, is the most effective way to reduce churn now as well as into the future. By doing so, you’ll be naturally future-proofing the bottom line of your business.

Alex Colvin is the CEO of Pendula.

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