It is a shot in the arm for store staff looking to make more money, it is likely to cut churn and it’s amazing that no-one has already done it. In a matter of weeks, salespeople in some operator stores will have access to the same customer information as call centres and have the same negotiating powers to try and stop customers leaving.
The news comes as ‘fighting churn’ has quickly moved up to the top of networks’ to-do lists. T-Mobile launched its React 3.1 system last week, which allows its salespeople to access the same information as the call centre retention teams. Store employees have also been given the power to give the same offers and discounts as staff in call centres.
A T-Mobile saleswoman says: ‘It makes your job a lot easier. Price guarantee and the new React system are tools that we use to help us keep people from churning.’
T-Mobile is currently the only network that allows store staff to use discounts for retention, although O2 and Orange are looking to follow suit.
Ann Parker, head of customer loyalty, at O2 says: ‘The reason we don’t do that yet is because of a system limitation, and that’s why we are investing heavily in the systems. It’s a legacy system issue, not a commercial decision that we have taken.'
Orange’s CEO, Tom Alexander, has previously said that he has plans to give stores as much power for retention and customer service as possible.
All eyes on churn
Like Parker, Orange is currently looking at the mammoth task of overhauling its internal systems to make it possible.
It is little surprise that churn is the biggest objective for many of the networks. Market penetration is well over 100%, and there are very few new customers for operators to fight over. Only 3% of monthly postpay and 8% of prepay sales are new entrants to the market, according to latest figures from research company, GfK.
Instead of focusing their efforts on the small number of new entrants to the market or the costly practice of trying to persuade other operators’ customers to join them, operators are channelling their efforts to ensure that their existing customers don’t leave.
As well as trying to ‘get more value’ out of its stores in the form of retention, T-Mobile introduced its ‘you can’t find more minutes for £30’ price promise. The guarantee has not come without controversy. 3 has accused T-Mobile’s adverts of being misleading and claims that 3’s deals are superior.
One T-Mobile saleswoman confirmed that the guarantee makes it a lot easier for her to get customers to stay on the network when they are worried about better deals possibly being offered elsewhere.
Deals for porters
O2 has found that those customers adamant to leave the network are often tempted by gifts offered by rival operators.
Parker says: ‘We don’t save everybody [from churning]; sometimes the customer wants the free PlayStation or the Wii and we don’t do that.
‘Our churn rate is coming down, so we are saving more. We have invested heavily in advisers and in technical tools that look at customers’ historical usage and tell the adviser what would be the best package for the customer wanting to leave. The advisers can tailor the deal to suit the customers’ needs.’
Very few customers trying to move networks get away without a chat with the operator’s retention team trained to talk the customer to staying on. If customers attempt to leave the network via a letter or email, they get a call from customer services. ‘They are trained to understand the offers in market, and how to target the customers’ need. By looking at their usage pattern we can show why the deal they are going for may not be right for them,’ Parker says.
Despite T-Mobile claiming to give the most minutes, apparently customers view O2 as the network with the most competitive tariff offers.
One Orange shop manager says: ‘People don’t ask about the T-Mobile price promise. They come in comparing Orange with O2’s deals.’
The Orange shop manager says that the best retention tools he has are the Racoon 35 tariff and the operator’s payback offer, which gives a discount in return for customers’ old phones. Also to help convince customers to stay, the Samsung Tocco and Soul, Sony Ericsson’s C902 and LG’s Secret all have 8GB of free memory.
Despite 45% of all sales being new customers rather than upgrades in the market as a whole, according to GfK, operators’ churn figures have been falling over the past six months. O2 is in the lead with 17% churn on postpay,
and Vodafone is at 18% and Orange at 19.7%.
Parker says: ‘We are now having our best churn performance ever. It’s not something that we started working on over night. The thing that we have changed our focus on is recognising that it’s not about the moment where you say I want to leave or I want an upgrade – it starts much before that. It’s about the whole lifecycle.’
Although Orange is a little behind its competitors in terms of churn, the operator has brought it down and is investing more money in customer retention.
A spokesperson for Orange says: ‘We are always looking to improve how we can add value to existing customers, and we are making a significant investment in our retention policy. We are investing in overall resources that look at the customer experience, customer data and doing as much as possible to meet customers’ individual needs.’
Churn is down and part of this is due to the ongoing improvements we are making to the customers’ experience.’
The general wisdom is that retention is less expensive than new customer acquisitions, although it depends on how much operators are willing to pay to keep customers from churning. The network already knows what the customer spends monthly and knows whether they pay their bills on time.
Operator retention methods often depend on the time of the quarter. One operator source says: ‘Retention is cyclical. Operators have one retention budget for the quarter and are not allowed to go over that. They might spend it all in the first two months and not have any budget left for the final month in the quarter.’
Margins take a battering
It can be expensive to hold onto a customer. Many operators are offering big discounts to their existing customers if they threaten to leave the network. It often means monthly spend being slashed by as much as half, and that the network has lost half the revenue from that customer for the following 18 months.
Consumers’ canniness to push their network providers to cut line rental or offer more minutes and texts is sharper than ever given the squeeze on household budgets, and the fact that most contract customers are experienced with having a mobile phone contract.
It has meant that networks have to give more away to keep customers and, while that has stabilised churn, it has, in many cases, put huge pressure on margins.
One senior operator source says: ‘People are effectively being given unlimited texts and minutes and a free phone for £30 per month in many cases, and that was something they were spending over £70 per month in many cases. It does incredible damage to operator margins.’
Orange defends itself in PAC war
A number of independent dealers have accused Orange of dubious tactics in holding on to customers, including delays in giving out PAC codes. However, the operator completely refutes this.
A spokesperson for Orange says: ‘We follow Ofcom’s guidelines for porting numbers and issue PAC codes within 48 hours. For those customers who have requested their PAC code, it is normal practice in the industry to dis