Two pronged approach to Maximize CSPs’ Customer Lifetime Value

Two pronged approach to Maximize CSPs’ Customer Lifetime Value

      On one hand, operators are facing a huge ask to lower customer churn and on another, with the launch of high-speed data services, traditional voice and SMS services have taken a huge hit, resulting in lowering the overall ARPU for the operators. Although, all industries face “Churn” but it is more acute in DTH, Telco, ISP segments.

It is proven that acquiring a new customer is far more costly than retaining an existing customer. So it has become imperative for telcos to control Churn rates and increase ARPU to stay profitable. Companies wanting to retain its customers need a value system to take an informed decision, and Customer Lifetime Value (CLV) is one such matrix, which can help operators to retain profitable customers and also enable them to determine the amount of money they can spend to maintain a relationship.

Did You Know?

> It costs 5 times as much to attract a new customer than to keep an existing one satisfied
> 65% of a company’s business comes from existing customers
Source: Gartner

In marketing, customer lifetime value (CLV or CLTV), lifetime customer value (LCV), or lifetime value (LTV) is a prediction of the net profit attributed to the entire future relationship with a customer after deducting money spent in maintaining the relationship over a period of time. Below is an example to calculate CLV.

Best Customer Experience Average Customer Experience
Life Expectancy 3 years 2 years
Revenue Year 1 $280 $100
Revenue Year 2 $300 $100
Revenue Year 3 $300 $100
Lifetime Revenue $880 $200
Gross Profit Margin 10% 10%
Lifetime Gross Profit $88 $20
Acquisition Cost $8 $4
Maintenance Cost $12 $4
CLV (Lifetime Net Profit) $68 $12

From the above example, it is evident that customer with superior user experience have higher CLV, loyal and profitable for the operators too. The big question is, if the CLV is low, how to reduce customer churn? Telcos have no other option other than revisiting their original strategy to pamper the customer. Telcos will not be able to achieve this objective until they have a robust real-time billing and integrated policy and charging systems in place to roll out innovative plans.

To reduce customer churn telcos can offer plans such as Roll-over Plans, Loyalty Reward on completion of tenure, Rewards on Paying Bills on time, Bonus Data Packs, Refund on Unused data, Borrow Data fromhe Next Bill Cycle, Multi-play service bundles, etc. Apart from plans they can also focus on providing superior customer experience, offer free upgrades, reduce service rates to cultivate brand loyalty.

To increase ARPU the Telcos must focus on use cases which specifically cater to the needs of customer segments such as: Roaming plans, Bundle Plan with Devices, Social Media Plans, Share Data, Location Based Plans, Gift Data, Upsell offers, Crossell, Time Of Day, Application Based Plans, Device Based Plans etc. Telcos can also take a conscious call to retain only high-value customers so that the cost is incurred only on those 20 % of the customers who are contributing to over 80% of Telco’s business

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