New research from Informa Telecoms & Media shows operators employing on-net deals and Mobile 2.0 as they battle to increase customer lifetime value. Where community tariffs and family plans were once about being able to tempt virgin subscribers onto a network because their family or friends also used it, on-net or community tariffs are now being heralded as loyalty measures.
The logic is simple: the more calls that are made on-net, the less operators pay in termination rates; the more subscribers get cheaper tariffs for contacting family, friends and colleagues, the less they are likely to churn.
Mobile operators, says Informa, are uniquely positioned to offer the communicative and interactive aspects of communities, whilst taking advantage of the emotional attachment and influence social networks can elicit.
Social networking exploded into public consciousness in the middle of this decade with websites such as MySpace and Facebook garnering millions of users within months of launch. The business model for social networking on mobile in and of itself may not yet be entrenched, but Informa says that operators are banking on the potential for positive retention effect to protect existing revenues, decrease acquisition costs, and thus indirectly promote margin uplift.
So how much impact can churn have? Why is it so important in a slowing market? Informa notes that many markets are reaching saturation and first time subscribers are few and far between. Slow subscription growth will not hide low margins in the same way that rapid increases in revenue due to high net additions can, says Angela Stainthorpe, Senior Research Analyst and author of Informa Telecoms & Medias new Mobile Churn and Loyalty study. Thus, the extension of subscriber profitability is critical, and operators must find ways to encourage greater incremental spend and a longer life on the network.
The global economic outlook has also brought the retention of existing subscribers to the fore. Lower investment capital, lower revenue forecasts and less money in the consumers pocket all make the future uncertain. Encouraging loyalty in the subscriber base in order to cut acquisition costs and maintain revenue levels in what is bound to become a yet more competitive market will be vital to survival, Informa believes.
It points out that if an operator begins a year with 1 million subscribers and experiences blended churn rates of 3% per month, with no concurrent new subscriber growth, it will lose almost 285,000 customers during the year. Assuming ARPU of $20 (14) a month, this equates to $35.8 million in lost revenue per year. Add to this the cost of acquiring new subscribers to replace those that churned, costs which reach beyond US$300 in some markets, and the case for holding on to existing subscribers becomes clear.
The report examines the following issues:
- What effect does churn have on profitability?
- How does an incumbent approach to customer retention differ from the approach of a challenger?
- What works in prepaid retention?
- How have operators dealt with Mobile Number Portability?
- What is the retention effect of bundling?
- How has the emergence of 'plan-only' monthly contracts affected churn levels?
Theres more information on the report here. And a table of contents here. 
