Showing posts with label churn. Show all posts
Showing posts with label churn. Show all posts

Friday, November 18, 2011

AT&T: churn unaffected after rivals got the iPhone - MarketWatch

AT&T customers, apparently including many of those who use iPhones and might have complained at some point about inconsistent service, seem not to have defected to either Verizon or Sprint, AT&T says.


There is no question that iPhone exclusivity seemed to help AT&T reduce its churn rate. But many expected churn to increase once Verizon got rights to sell the iPhone. 


"Churn has not moved at all," said Glen Lurie, president of emerging devices for AT&T. Of course, aggregate or "net" churn might not entirely tell the story.


It is theoretically possible that more customers left, but even more customers signed up, producing no adverse effect on overall churn. AT&T churn unaffected after rivals got the iPhone

Technically, it appears AT&T churn has been inching upwards, but by an amount small enough that the overall trend is "flat."



Saturday, October 15, 2011

How "Sticky" are Bundles When Consumers See Value Mismatch?

It now is conventional wisdom, and also rational thinking, that bundles create barriers to customer churn.


The obvious value is that consumers save money when buying a triple-play bundle, rather than each of the products separately. 


The same thinking applies to "family plans" for mobile services.


In fact, bundled products traditionally are seen as effective in many industries. Product bundling


But bundles arguably only work when consumers want the products in the bundle, or when the value-price relationship is seen to be acceptable That increasingly might not be the case for video entertainment services. 


Roughly 25 percent of customers from major U.S. triple-play providers are not satisfied with their service, primarily because they don’t think it offers enough value for the money, says Yankee Group analyst Sheryl Kingstone.



And that's the key issue: video subscriptions keep getting more expensive, and consumers arguably are starting to rebel. 


In western Europe, prices for mobile services arguably are high enough that if another global recession occurs, service providers could see resistance even for a "must have" product. That isn't to say people will drop mobile service. It is to note that they will likely reduce usage in ways that cuts their spending.


Mobile ARPU in Western Europe in fact declined by 9.1 percent cumulatively during 2009 and 2010, says Yankee Group analyst Declan Lonergan. During the same two-year period, ARPU declined in Greece by almost 30 percent and by over 16 percent in both Ireland and Spain.


If Europe slips into recession again in 2012, customers will change their mobile usage and spending habits, he argues. Voice and messaging revenue will suffer most, while spending on the mobile Web and apps will hold up relatively well.


The point is that bundling reduces churn when buyers seen a good fit between value and price. It doesn't take much insight to note that buyers increasingly see a mismatch in the video subscription category. 

Tuesday, October 19, 2010

The Value of an Existing Customer

In most cases, the value of an existing customer is much higher than the value of a newly-acquired customer, for a number of reasons.

(click on the image for a larger view, once to open, and then click on the image again and it gets large enough to read easily)

It is, for example. six to seven times more costly to gain one new customer than to retain one existing customer, Flowtown argues. Also, boosting customer retention rates by five percent can boost profits from five percent to 95 percent.

Monday, February 15, 2010

Video Cord Cutting Threat is Overestimated, Parks Associates Says

Despite the growing amount of video available online, less than eight percent of U.S. broadband households, or about 5.5 million households, are considering canceling their multi-channel subscription services in favor of online video, according to Parks Associates. You may interpret that as good or bad news.

The 2008 study found 11 percent of U.S. broadband households were considering canceling pay-TV services, and in an earlier 2009 survey, the number was 10 percent. The upside is that people might be finding it is harder than they thought to replace their current multi-channel video experience with alternative sources.

Where there clearly seems to be more danger is in the area of churn. As many as 2.75 million of those households report they are considering a switch to a new service provider. That's the bigger danger, as consumers do not have to change behavior or lose any of the value when switching providers, but might save some money, or even increase perceived value for equivalent levels of spending.

Online viewing is correlated with switching propensity, though. Parks found that households saying they are likely to switch or cancel their services watch 10 hours of online video each week, much higher than typical video consumers.

They express strong interest in having online access to pay-TV channels as well. Such video-intensive customers also use offline video, such as DVD rentals, at higher rates than typical consumers do.

Their median number of DVD rentals from the last six months is 18, compared to two rentals among other households.

“Just 0.5 percent of broadband households appear to have cancelled their video subscriptions, according to  John Barrett, director, research, Parks Associates.

In fact, the profile of a "switcher" is someone who does not watch much TV. That makes sense. Though conventional wisdom is that "heavy" users are more likely to "cut the cord," in reality it is light users who are most prone to cancel their service, simply because the value-for-price equation is not so high.

Thursday, December 3, 2009

Big Churn Potential in Wireless Business?

Despite the fact that AT&T and Verizon have low churn rates, while Sprint and T-Mobile have churn higher than they would like, the potential for huge share shifts remains latent, if consumer satisfaction bears any meaningful relationship to actual churn behavior.

Nearly half of readers surveyed by Consumer Reports are unhappy with their cell phone service. Nearly two thirds had at least one major complaint about their cell phone carrier, with about 20 percent naming price as the chief irritant.

But here's the caveat. Most surveys taken over the last couple of decades suggested there was high dissatisfaction with cable TV service, for example. And, to be sure, consumers began to churn away as first satellite and now telco video alternatives are available. Until satellite became a viable option, though, high dissatisfaction was not accompanied by high churn.

The U.S. mobile industry, though, is among the most competitive in the world, so consumers do have lots of choices. So one wonders why more do not act as theory suggests they will, which is that unhappiness will lead them to try another provider. Maybe they are churning, and maybe their continued unhappiness means the new carriers aren't demonstrably and clear better than the carriers they left.

Apparently, neither better coverage nor new smartphones have been enough to change consumer satisfaction all that much, the report suggests, with the salient exception of the Apple iPhone. So will the latent unhappiness translate into higher churn? It's harder to decipher than one might initially think.

If consumers believe all the carriers have some gaps in coverage, have roughly similar or somewhat distinct retail offers, have adequate bandwidth and availability, and all of them will experience congestion during rush hour, consumers might not be extremely motivated to change providers, even if they are unhappy to some degree. The bad news for service providers might be that network quality and reputation have some effect, but not overwhelming effect on churn behavior.

But handsets are a huge motivator of change, it appears. About 38 percent of consumers who switched phones in the past two years did so to get the phone they wanted.

More than 27 percent went shopping with a specific phone in mind, in fact. About 98 percent of iPhone users said they would purchase the phone again. To point out the obvious, some people might be really happy about their handsets, and simply put up with their service providers.

But there is another way to look at matters. If half of consumers are unahppy to some degree, and that leads them to churn, what would one expect to see? At churn rates about 1.5 percent a month,. one would expect roughly 18 percent annual churn. That would roughly equate to 100 percent churn about every five years or so.

If one assumes only half of consumers are motivated to churn, existing churn rates easily could amount to churn of half the entire customer base about every two and a half years.

So maybe those unhappy consumers are in fact deserting their current providers. The reason they remain unhappy? One explanation could be that none of the providers they are trying are demonstrably better than the carriers they left. One often encounters consumers who say "we've tried them all, and all of them have some problems."

Thursday, March 26, 2009

Less Churn is Sorta Good, Sorta Bad

At home entertainment is up, while almost anything outside the home is down, a survey sponsored by the Cable & Telecommunications Association for Marketing suggests.

Industry executives--both telco and cable--have been saying that with housing starts down and housing activity down, so are home moves.

Ironically, that has made it harder to attract new customers, as moving automatically creates a "change event" that opens the door for new providers.

The CTAM survey also suggests there is less appetite for trying new providers. So all those customers who aren't moving, also are less likely to churn. Lower churn is good. But some amount of churn also represents a sales opportunity.

Service providers in the small and medium business space note a roughly similar trend: people are less inclined to take on some amount of additional risk by switching current providers.

Wednesday, February 13, 2008

Vonage Churn: Not an Issue if it Survives

Should Vonage survive, it might be able to get its churn rates under three percent a month. But it would be a surprise if, even under the best of circumstances, it got churn below two percent a month.

That's a big "if," but history suggests lower churn is possible, if not easy. The reason is that, over time, customers learn the value of a new type of service or application, and gradually come to have a better understanding of why it is they actually need and use a service. There always is lots of churn at first.

The U.S. cable industry struggled precisely with churn at the same levels Vonage grapples with, in the late 1980s and 1990s. Today's churn levels are far below that, but not much below two percent a month. And there's a reason even for that level of churn.

People move. That's called "uncontrollable" churn because there isn't a heck of a lot most providers (except those with a huge footprint) can do about people moving. Wireless providers used to have three percent a month churn as well. These days, most save Sprint Nextel are down just a hair under two percent a month.

They don't necessarily have the "customer is moving" problem so much with the advent of continental U.S. calling buckets that mean local calls cost the same as long distance. A new dwelling in a new area doesn't necessarily mean any change in calling rates and charges, so there is less "uncontrollable" churn.

Still, even the largest of the wireless carriers have just a bit under two percent a month churn. So far, in the consumer markets, that's about as good as it gets.

In the commercial markets, guess what the monthly churn rate is for many smaller independent service providers? Three percent.

That's not great, but the point is that it is hardly unusual, especially for new services, smaller providers and any service tethered to a location. The good news for Vonage is that, like a mobile provider, its service is not tied to a physical location. Over time, and should it survive, it can expect, with diligence and the passage of time, to get its churn down to about two percent a month.

The issue is simply to stay in business long enough for the learning effects to kick in.

Friday, January 18, 2008

Sprint Loses Customers


It's not wonder Sprint is axing 4,000 employees, closing stores and halting distribution agreements with some partners. In the fourth quarter Sprint Nextel reported yet another quarter in which it lost more customers than it gained.

True, Sprint reported a "net gain" of 500,000 subscribers through wholesale channels, growth of 256,000 Boost Unlimited users and net additions of 20,000 subscribers within affiliate channels.

Bu those gains were offset by "net losses" of 683,000 post-paid subscribers and 202,000 traditional pre-paid users. In other words, Sprint lost 885,000 customers in the quarter and gained 776,000.

In other words, Sprint had a net loss of 109,000 customers.

In the churn area, where Sprint has arguably its single greatest challenge, post-paid churn (customers billed monthly) was 2.3 percent, slightly better performance than the previous quarter, and within striking distance of the slightly less than two percent range Verizon and at&t now have.

Unfortunately, Sprint Nextel's rate of involuntary churn, where it has to cut off service to a customer, rose over the prior quarter.

At the end of 2007, Sprint Nextel served a total subscriber base of 53.8 million subscribers including 40.8 million post-paid, 4.1 million traditional pre-paid, 500,000 Boost Unlimited, 7.7 million wholesale and 850,000 subscribers through affiliates.

As this chart from Bear Stearns shows, churn creates a couple problems. First, it directly reduces the number of revenue-generating units a company has. Secondly, it almost always raises the cost of acquiring new customers as well. The former hits revenue, the latter costs.

Monday, November 5, 2007

Google and Sprint


We might know by the end of the day what the relationships are, but Sprint Nextel's fate hangs on just a couple things right now. It has to fix its customer service problems and has hired 4,500 people to get that done. Assuming that stops being a problem, it has to decide what to do about protecting its base business while dealing with its WiMAX network. Right now Sprint runs two separate physical networks and WiMAX makes three. Then there are the logical networks for voice and data. Plus back office systems that are in the process of unification, but not all there yet.

More immediately, if it can get a deal with Google, and push the device really hard, it has a chance to stop the excessive customer churn that prevents it from dealing with the WiMAX issue effectively. Google devices might help Sprint with churn, giving Sprint time to repair its customer service reputation and plot a reasonable future for WiMAX.

Most of the churn seems to come from the Nextel side of the house in any case. Is it so crazy to consider divesting Nextel and proceeding with WiMAX?

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