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 Copyright © 2005, SAS Institute Inc. All rights reserved. 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.