A Holistic Approach to
Customer Lifecycle Management
Name: Ken King
Title: Industry Strategist - Telecommunications
CANTO – June 2005
Copyright © 2005, SAS Institute Inc. All rights reserved.
The long-Term Challenge for Wireless
Operators
According to McKinsey:
To justify [today’s stock] prices, the typical carrier
will need, by 2008, to simultaneously:




Limit ARPU erosion to 1% annually
Reduce Churn by 9%
Reduce Acquisition costs by 20%
Reduce Service costs by 20%
Source: Deutsche Bank; Morgan Stanley; McKinsey analysis
The McKinsey Quarterly 2003 number 4
Copyright © 2005, SAS Institute Inc. All rights reserved.
Agenda






Key Metrics in the Wireless Market
What theses Metrics reveal about Performance
Case Study
Managing Churn
Measuring Customer Profitability
Fully Integrated Customer Lifecycle Management
across the enterprise
Copyright © 2005, SAS Institute Inc. All rights reserved.
Keeping a customer vs. getting a new one
Payback Period on Customer Acquisition
Payback Period
$600.00
$400.00
$200.00
$0.00
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
-$200.00
-$400.00
-$600.00
-$800.00
M ont hs
Next el
Cingular
Sprint
T-Mobile
Source: Lehman Brothers Q1 2005 Earnings Reports
Copyright © 2005, SAS Institute Inc. All rights reserved.
Verizon Wireless
Allt el
US Cellular
This chart looks at:
ARPU, CCPU, CPGA, Churn, WACC
Customer Lifetime Value
Custom er Lifetim e Value
$2,500.00
$2,000.00
$1,500.00
$1,000.00
$500.00
$0.00
1 3 5
7
9 11 13 15 17 19 21 2
2
2
2 31 3 3
3
3 41 4
4
4 4 51 5
5
5
5 61 6 6
6
6 71 7
7
7 7 81
-$500.00
-$1,000.00
M ont hs
Next el
Cingular
Sprint
T-Mobile
Source: Lehman Brothers Q1 2005 Earnings Reports
Copyright © 2005, SAS Institute Inc. All rights reserved.
Verizon Wireless
Allt el
US Cellular
This chart looks at:
ARPU, CCPU, CPGA, Churn, WACC
Nextel Case Study – Phase 1
 Proactive Churn management
 Business Challenge
• Segment customers by profitability and reduce churn among the
most profitable segments
• Mandatory Implementation of number portability in November 2003
 Solution
• Nextel Customer LifeCycle division executed a multi-year strategy
incorporating advanced customer analytics
 Business Benefit
• Nextel’s use of advanced analytics led to a churn rate reduction from
2.6% down to 1.5%
• Cost per save reduced by 50%
• Customer claims more than $1B additional earnings
Copyright © 2005, SAS Institute Inc. All rights reserved.
Nextel Case Study – Phase 2
 Proactive Campaign Management
 Business Challenge
• “Getting the Right Message to the Right Customer at the Right Time”
• Increasing speed to market of all campaigns
• Reviewing and approving development of campaigns online
• Providing optimization of all campaigns
• Tracking of customer communication history
• Coordinating multi-channel, multi-touch campaigns
• Automating campaign management capabilities as current programs were
manually supported with internal, agency and IT resources
 Solution
• Marketing Automation and Marketing Optimization solutions afforded
Nextel the ability to segment customers, build models with all data points,
and keep track of customer actions. The solutions will automate every
existing marketing process and optimize customer segments by ARPU,
LTV, likelihood to respond, etc.
Copyright © 2005, SAS Institute Inc. All rights reserved.
Churn Types & Reasons
Technology
Handsets
Features
New Technology
Per Minute
Types
Economics
Activation
Subscription
Deliberate
Quality
Coverage
Social
Call Quality
Voluntary
Experimenting
Friends/Family
Incidental
Fraud
(operator initiated)
Copyright © 2005, SAS Institute Inc. All rights reserved.
Customer Service
Convenience
(customers’ choice)
Involuntary
Image
Finance
Internet
Location
Retail Channels
Billing
Reasons
Major Life Changes
Non-payment
Under-utilization
Source: Telecom Churn Management, The Golden Opportunity
Rob Mattison
Customer Lifecycle can be leveraged
+$
Better crossand up-selling
more effective
customer
retention
cash
flow
More efficient
acquisition
(Before)
$0
Intensify
-$
Copyright © 2005, SAS Institute Inc. All rights reserved.
Acquisition
Cost
Retention
Stages
Termination
& Recovery
Profitability may not correlate to Revenue
Ranking Customers
Cumulative Profit
300
250
200
150
100
50
0
10%
20%
30%
40%
50%
Most Profitable Customers
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60%
70%
80%
90% 100%
Least profitable Customers
Analyst Validation
Carriers.. Will develop matchless competitive
advantage if they choose to build the
organizational, channel, and IT capabilities
needed to identify and capture opportunities to
raise their customers’ lifetime value.
McKinsey, 2003
Copyright © 2005, SAS Institute Inc. All rights reserved.
Vision – Decision Centric BI for ICM
Integrated Analytics
Segmentation
Customer
Profitability
/ CLTV
Retention/
Churn
Revenue
Assur.
Rate
Plan
Opt.
Contact
Center
Optim.
Service
Provision
Optim.
Channel
Performance
Collections
Optim.
Cross/
Up Sell
Business Intelligence Platform
Technology: Reporting, OLAP, Data Mining, Dashboards, Alerts…
Data: Revenue, Cost, Customer, Product, Usage, Partner…
Extract, Transform, Load
Transactional Platform
Processes: Billing, CRM, Ordering, Collections, Network, PRM…
Copyright © 2005, SAS Institute Inc. All rights reserved.
Copyright © 2005, SAS Institute Inc. All rights reserved.