thoughts,

Greenwich Consulting reflections and analysis for the telecom, media and utilities industry. October 2012

Customer Base Management: Moving to industrialization

In most markets, telecom operators are facing a slowdown in customer acquisitions and a decline in ARPU. The rise of multi-equipment, acquisition of lower revenue customers, and fierce competition combine to drive ARPU down and force operators to create more sophisticated marketing and pricing strategies, especially in emerging markets where prepaid consumers frequently represent over 95% of the base. Customer Base Management (CBM) has been developed in this context to enhance an operators main asset: its customer base. It consists of stimulating the base with targeted below-the-line offers and promotions in order to drive usage increase ARPU and reduce churn.

Many operators have started to implement such below-the-line actions. Some of them have been able to achieve promising results, increasing the ARPU of their targeted customers by 5-10% and decreasing their churn rate by 10-15%. However, fulfilling CBM potential is a challenge and launching targeted offers requires significant work that takes time and requires developing specific marketing and IT tools, creating a dedicated organization, and implementing advanced organization processes. The purpose of this white paper is to provide operators with a clear vision of the challenges that Greenwich Consulting faced when working with some of its customers through those operations. The analysis and feedback gathered through these projects, together with interviews with industry leaders, has allowed us to build a positioning scorecard and to specify the main actions required to achieve the advanced CBM level which we discuss herein.

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reflections and analysis for the telecom, media and utilities industry from Greenwich Consulting.

Customer Base Management has proven to be a key lever in boosting the business performance of Telcos
Customer Base Management has been developed to meet MNOs new challenges on their respective markets.
In emerging markets, gross adds are slowing down and churn is increasing. ARPU is also decreasing due to the rise of multi-equipment and value dilution in the customer base. Moreover, heavy emphasis on Above the Line (ATL) promotions has led to price war and value destruction in many telecom markets. Faced with those challenges, telcos were looking for new strategies: Maintain pricing and promotion attractiveness whilst avoiding price wars Stimulate the usage of each individual subscriber with a more segmented approach Increase customer base value, by having targeted retention actions, usage stimulation offers, and acquiring a larger share of the wallet in the offer portfolio Ensure the Return On Investment (ROI) of every promotion addressed to the customer base Strengthen proximity and personalize customer Results achieved using CBM: In a North African country, CBM allowed an operator to stimulate the customer base, contributing directly to an increase of 3-5% of the operators global revenues. In another emerging market, CBM increased ARPU from 5% to 8% on targeted subscribers and reduce prepaid churn by 15%. In the UK market, CBM allowed an MNO to reduce churn by 5% to 8%, while increasing revenues from 2% to 5%.

In this context, a lot of operators have begun to deploy CBM tools and started to stimulate their customer base with tailored offers and promotions. These actions tend to prove that there is room to increase profits by having a structured CBM approach. Hence, there is a need for a multi-layer implementation of a CBM strategy. CBM requires a marketing strategy definition, followed by a specific organization, processes, and implementation.

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reflections and analysis for the telecom, media and utilities industry from Greenwich Consulting.

Customer Base Management is about contacting the right client at the right time with the right proposition
Customer Base Management consists of addressing the customer base with specific below the line offers (BTL).
Compared with above the line offers (ATL), this provides the operator the ability to address specific objectives on targeted customers, in order to increase global customer base value. On the operators side, the benefits of implementing CBM as a complement to ATL offers can be summarized in four points: Recurring contact with customers (from 2 to 6 direct points of contact per month) Offer personalization (one to one offer, adapted to customers profile) Increase in the promotions take up rate due to customized offers Steering of the generated value with close follow up and reactivity in launch and withdrawal of offers

While a MNO ATL portfolio relies on three to six price plans and up to 10 to 12 promotions a year, CBM creates 20 to 50 offers annually and provides the ability to define micro-segmented promotions. Micro-segmented offers present limited risk of cannibalization to value offers since they target only certain profiles (e.g. not targets for ATL promotions).

Figure 1: Typical ATL/BTL articulation principles and main benefits

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reflections and analysis for the telecom, media and utilities industry from Greenwich Consulting.

Different and complementary business objectives can be addressed with CBM through five major types of campaigns:

1.

2. 3. 4. 5.

Stimulation of top ups: customers tend to save their remaining phone credit in case of an emergency. Through CBM, it is possible to incentivize them to top up and restart their natural consumption. Stimulation of usage: CBM provides customers with opportunities to spend their remaining credit on bundles or special promotions. Revival of inactive accounts / win-back: Revive inactive accounts by giving special offers to targeted customers, according to their level of reachability and the calculated risk of leaving. Loyalty actions: Trying to secure high value customers can prove difficult on prepaid and no contract offers. Proposing targeted loyalty offers tend to reward loyal customers and enhance customer satisfaction. Migration to better suited offers stimulation: Ensure customer satisfaction and increase customer lifetime.

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reflections and analysis for the telecom, media and utilities industry from Greenwich Consulting.

Operators have started to implement CBM actions but there is much to do to reach advanced industrialization
In many mature and emerging markets, MNOs have started conducting CBM experiments, and some are even deep into the process of industrialization.
Operators can be classified into three categories regarding their maturity level in the CBM industrialization process: CBM Initialisation, Intermediary CBM, and Advanced CBM. This scoring is based on the accuracy and exhaustiveness of their CBM initiatives regarding the relevance of their methodologies, processes and tools Many operators have begun to implement CBM and are currently at the CBM initialisation step. They have started testing some isolated CBM campaigns but have neither the vision nor strategy defined. Operators have created BTL offers to address at risk customers and sustain ATL communication strategy. The industrialization of CBM actions must be supported by a dedicated organization that will be in charge of the launch and the management of BTL offers. Once industrialization processes and organization are implemented, operators may succeed in raising the number of CBM campaigns.

Figure 2: The three steps path to Advanced CBM

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reflections and analysis for the telecom, media and utilities industry from Greenwich Consulting.

CBM implementation relies on five key success factors

The CBM implementation within a MNO organization needs to be carefully planned. Several tasks that need to be conducted:
Analyze the customer base to understand the different consumer segments Define CBM objectives for each customer segment and come with the best campaigns to reach such objectives Get the right IT tool to execute each objective Industrialize CBM processes relying on IT tool capabilities Implement CBM culture within the organization

1. Segmentation of the customer base

CBM requires segmenting the customer base in order to set objectives per segment. A good segmentation strategy will help to reach the following points: Know the business indicators and the usage profile for each segment Prioritize objectives for each segment, allowing the selection of the most relevant campaigns in order to improve business indicators and stimulate usage per segment Optimize the budget allocation per customer.

Figure 3: Detailed objectives, examples of associated campaigns and essential analyses to be conducted

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reflections and analysis for the telecom, media and utilities industry from Greenwich Consulting.

2.

Design of CBM campaigns

4.

Process industrialization

CBM campaigns have to be shaped in accordance with operators local market positioning and customers interest. In particular, BTL offers must fit/ complement ATL guidelines. A ready to use campaign portfolio, with reliable business case for each BTL offer planned, will increase responsiveness. An iterative methodology with a ROI analysis step (discussed below) will allow selecting the campaigns with the most positive impact on the customer base

New CRM tools allow conducting selected tasks such as control group selection, exclusion rules, or evening post mortem ROI analysis. Full CBM process, as detailed below, will include four steps: Plan, Design, Execute, and Analyze. a) Plan The CBM Manager has to: Define the rules of CBM use

Coordinate ATL and BTL roadmaps Define business objectives to reach and actions to implement. Segment the customer base to get the appropriate reporting in the analysis step

3.

Getting the right IT solution

When implementing CBM strategy, MNOs should rely on either non-specialized CRM system or dedicated CBM tools. A dedicated CBM tool will help optimize the integration with the MNO environment and put a strong emphasis on real time campaigns while a CBM module from a CRM tool will have more date mining functionalities and can accommodate multiple objectives.

b) Design CBM organization defines targets and propositions, validates the technical feasibility, designs the campaign workflow and validates the customer level of solicitation, assesses the business case of each proposition and redacts the customer brief for execution.

Figure 4: Pros and Cons of dedicated CBM tool and modules of CRM tool

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reflections and analysis for the telecom, media and utilities industry from Greenwich Consulting.

c) Implement The CBM Manager has to ensure a high level of information circulation between the CBM marketing team and the communication and IT officers. We recommend using a tree-level validation process: IT department validation, CBM Manager validation, and getting the marketing managers final validation before execution.

d) Analyze In order enhance the CBM process, operators have to conduct systematic analysis on the results from BTL offers. Best practice when implementing CBM is to dispose of follow up tools in order to steer created value during the campaign, of an analysis canvas allowing fast post mortem analysis and of a repository in order to find every single results of previous campaigns.

Figure 5: The four steps of a CBM implementation

Case Study: Operators who have launched CBM initiatives are extending the reach of such programs and fine tuning the approach based on the results of the first campaigns conducted (test and learn process). They are then implementing an organized CBM approach: Sub-segmenting the customer base to increase the take up rate and maximize relevance to consumers Fine-tune the targeting to give the appropriate level of incentive that meets the customers interest in order to maximize ROI Specify the KPIs assigned to the CBM perimeter Refine the sequencing of CBM actions and coordinating CBM actions ran on the same customer Develop new customer solicitation tactics, to improve the efficiency of the CBM campaigns catalogue and to reduce the risk of clients optimization

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reflections and analysis for the telecom, media and utilities industry from Greenwich Consulting.

5.

A cross-function CBM organization has to be set up

CBM implementation requires defining new roles in the Telcos organization. Marketing managers will have to be incentivized on CBM initiatives and a CBM manager has to be in charge of the overall CBM process. Setting up CBM processes needs to be accompanied by an organization framing in order to achieve business objectives settled to CBM. The CBM process and organization have to be under the direct control of the marketing director. This will ensure the necessary coordination between the ATL and BTL roadmaps and actions.

A CBM Manager will be responsible for motivating all the people involved in the process. In his day-to-day business, he will have to be in constant contact with many departments in the operator organization: Business lines, market intelligence department and pricing department during the planning phase Pricing, market intelligence, IT and communication during the definition of the campaigns phase IT implementation and customer care information during the execution phase Market intelligence during campaigns results analysis

Figure 6: CBM organization is steered by the marketing department, involving many players in the organization

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Case Study : a North African operator has implemented an advanced range of CBM campaigns both to reactivate inactive customers and to stimulate to-up and usage of active customers Inactive customers have been targeted with specific retention offers, allowing reducing churn by 10% to 20%

A consistent CBM roadmap has been built on a monthly basis to push alternatively top-up and usage stimulations campaigns, based on an advanced value based segmentation.

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reflections and analysis for the telecom, media and utilities industry from Greenwich Consulting.

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Moving to the next CBM level can be achieved in 10 key actions

When implementing CBM, the CBM Manager needs to answer the following questions: what can I achieve with CBM? Which customers do I have to stimulate to reach specified objectives? What offers can I use to motivate them while still creating value? How do I compose my team and what are the tools that I need to implement? Here are the 10 first actions to be completed, in order to start with CBM.

1. Conduct advanced customer base analysis, based on KPIs per product line and per segment 2. Refine customer base segmentation with a double value/usage segmentation criteria 3. Define CBM campaign objectives and identify the most relevant campaigns to achieve business 4. Launch test campaigns and analyze ROI from the test plan, keeping the most impactful campaigns and taking 5. Collect corrective actions on the least impactful campaigns 6. Dedicate one marketing resource to CBM 7. Educate marketing teams (marketing managers) to CBM 8. Enable a first level of manual process (validation of the campaigns, targeting, ) 9. Evaluate the feasibility of using existing IT tools (CRM) for CBM 10. Launch a RFQ for a dedicated to CBM IT tool if necessary
Conducting a test plan is a best practice in order to validate first hypothesis and fine-tune the value proposition to customers. Such a test plan will help to achieve several objectives: Validate customer attitude hypothesis Benchmark reachable value creation Define objectives to assign dedicated CBM and resources Implement targeted organization organization standards and set

10 key actions to be completed to start with CBM:

Frame the customer base management process needs and dedicated tools to deploy Make an inventory of feasible offers

Having all this information in his hands, the CBM Manager will then move on to the Intermediary CBM step.

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1. 2. 3. 4. 5. 6. 7. 8. 9. 10.

10 actions to be completed to move to Intermediary and Advanced CBM: Analyze results of CBM actions conducted to date and define new KPIs to segment the customer base Test new offers / new campaigns and assign new objectives to CBM (test and learn) Refine customer base segmentation based on behavioral/interests criteria Develop an analysis repository for conducted campaigns allowing a fast market launch for the 10-20 most effective campaigns Build a detailed CBM roadmap on a weekly basis and coordinate CBM campaigns with the ATL marketing plan Create a catalog of offers and promotions dedicated to CBM Conduct CBM actions in all lines of business and set CBM objectives to marketing managers Select and implement an IT tool to industrialize the targeting, the execution and the RoI analysis of CBM campaigns Develop and implement advanced CBM capabilities: churn scoring, automated exclusions, interest scoring, etc. Automate main campaigns that have to be run every day (retention campaigns for inactive)

Greenwich Consulting helps MNOs harness the full potential of CBM, faster
Greenwich Consulting has a wealth of experience in Customer Base Management, having worked with several MNOs on this topic in emerging and developed markets. Based on this experience, Greenwich Consulting proposes several options to support mobile operators to implement or enhance their CBM methodologies and organization.

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reflections and analysis for the telecom, media and utilities industry from Greenwich Consulting.

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About Greenwich Consulting

Greenwich Consulting is a leading strategy and management consulting firm focused on the Telecom, Media & Utilities industries, providing its clients unique sector based expertise, with the support of 150 consultants present in more than 35 countries. Greenwich Consulting has developed strong expertise on key telecom issues in Emerging and Mature Markets through market analysis, strategic planning, and by delivering numerous C-level business consulting assignments for leading regional players. Greenwich Consulting has worked with over 15 global operators in implementing and industrializing Customer Base Management practices, both in emerging and mature markets. For more information, please visit www.greenwich-consulting.com All rights reserved. Copyright 2012 Greenwich Consulting Group

About Greenwich Statistics

Greenwich Consulting Group has reinforced its skills and expertise by creating Greenwich Statistics, an entity specialized in data modeling and quantitative analysis to help our customers supporting their business decision-making Dedicated team of 10 seasoned researchers and PhDs in mathematics and statistics to handle data analysis and develop innovative and complex models for Customer Value Management (churn, loyalty, etc.) and Quantitative Risk Analysis (credit risk, scoring, etc.) Collaboration with the business consultants of the Group to provide to our customers pragmatic and workable solutions

We strongly believe that Greenwich Statistics has the ability to best support telcos in conducting quantitative analysis and operational segmentation of their customer base. Greenwich Statistics extensive experience in similar projects and the methodology it has developed is a guaranty of quality and time efficiency (more than 15 successful contributions on Greenwich projects in the last 18 months).

Benjamin Ferrand, Senior Consultant at Greenwich Consulting France

Vincent Douin, Director at Greenwich Consulting France

Fabien Bouskila, Partner at Greenwich Consulting France

For more information please contact:

vincent.douin@greenwich-consulting.com fabien.bouskila@greenwich-consulting.com

thoughts,

reflections and analysis for the telecom, media and utilities industry from Greenwich Consulting.