Applying Analytics to Retain, Attract Telco Customers

The fact is telecommunications customers are constantly getting bombarded with offers to switch providers. Not only that but customers are also becoming more involved in service/price comparisons.

That’s why it’s more important than ever for business leaders of wireless providers to use analytics to identify the right offers and price points for services and features to attract and retain the most high-value customers.

The use of predictive analytics by telecommunications and other companies to identify optimal pricing is hardly new, as Accenture notes in a report.

“But its importance is rising rapidly in many sectors as cost cutting to lift margins runs out of steam and as new analytical tools and techniques become part of the pricing conversation,” according to the report.

European telecom carriers are among those that stand to benefit from applying analytics tools and techniques for developing new pricing models.

The average mobile phone bill has fallen 15% since 2007, and European users spend an average of 24 euros ($31 USD) per month on their mobile subscriptions while Americans spend roughly two thirds more, according to a Reuters report out of the Mobile World Congress conference in Barcelona.

“We understand better now how to price mobile services and data,” says France Telecom CFO Gervais Pellissier in the Reuters article. “But not everything has been sorted out yet.”

Telecommunication carriers in Europe and other geographies can help formulate price models aimed at attracting and retaining mobile customers by using analytics to help determine the prices that certain customer segments are willing to spend for voice as well as data usage plans.

For instance, statistical modeling among a wireless carrier’s customer segments may determine that certain high-value, data-intensive customers, who value the ability to access mobile websites for specific types of content, are willing to pay a certain price for monthly data usage.

Wireless carriers that are investing heavily to expand their respective network infrastructures can use analytics to help determine the business impact of adjusting price models against the investments being made in infrastructure as well as to determine how one might influence the other.

For instance, Verizon has the largest 4G LTE network in the US, extending to 476 markets compared to AT&T, which is in only 200 markets with its 4G LTE network, according to an article in Seeking Alpha. Analysts place Verizon’s five-year projected growth rate at 9% versus 6.3% for AT&T.

Failure to act on information about churn indicators and customer intent for price optimization hurts wireless providers when it comes to customer and revenue retention. But it can also have a negative effect on share price.

For instance, Moody’s has downgraded Leap Wireless International’s ratings by one notch, in part based on expectations that subscriber churn will remain high this year.