Thursday, February 1, 2018

AT&T Sees Record Low Churn, With Bundles

AT&T now is seeing such low churn rates in its postpaid mobile business and especially with customers on bundles that the “customer life cycle” lengthens. Where accounts in the past might have remained in service for three years or so, AT&T now expects that account relationships could last  eight years, a level previously unheard of for consumer services (mobile, video, internet access). Churn at these levels is implying 100-month and more lives.

Basically, AT&T finds churn cut in half when customers bundle services including either their mobile phone service and gigabit internet access, and often both of those core products.

The company also believes it will see similar benefits for customers bundling video service with other products.

Half a decade ago, for example, mobile subscriber churn  was far higher than it is today. About 2010, monthly churn of two percent to three percent a month among some of the largest four U.S. mobile service providers was not unusual.
2009Q4 Subscriber churn

2009Q4 Avg Sub months

That has clear implications for the profitability of accounts, since the rule of thumb is that accounts with longer tenure are higher value, both because such accounts tend to spend more, and also because such accounts represent very low customer service costs.

Research done by Frederick Reichheld of Bain & Company (the inventor of the net promoter score) shows that increasing customer retention rates by five percent increases profits by 25 percent to 95 percent.

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