1

PhoneSafe
Situation
Complication
Key Question
PhoneSafe provides handset insurance to the
major Canadian wireless phone companies
In turn, the wireless companies offer the
insurance as an option to their subscribers
(mobile phone users) by charging an extra fee
on their monthly statements
PhoneSafe has been losing many end users
The CEO is considering launching a campaign
to win back these lost subscribers
Should PhoneSafe launch such a campaign?
2
Monthly customer loss rates
0
1
2
3
4
5%
User segment
Proportion who drop PhoneSafe
Family plan
3.33
Corporate
2.00
Teen
5.00
Young
professional
4.00
3
Monthly revenues by segment
0
1
2
3
4
5
$6
User segment
Revenue per user
Family plan
4.25
Corporate
3.25
Teen
4.75
Young
professional
3.75
Gross margin
Cost
4
DMF benchmarks
Billing insert $0.005 to $0.02 0.005%
Text message $0.01 to $0.03 0.05%
Postcard $0.20 to $0.40 0.5%
Phone call $3 to $5 5%
Method Cost per contact Response rate
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Answer Guide: Case Overview
Model Solution
1. The plan could make money

2. PhoneSafe must focus on high margin customers who have
longer lifetimes; calculating the Customer Lifetime Value
enables apples-to-apples comparison
3. Corporate customers and text messages represent the most
desirable segment + medium

4. PhoneSafe should consider alternative actions to improve the
customer retention in advance
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Calculation ANSWERS Corporate and
text message represent best approach
% drop 3.33% 2.00% 5.00% 4.00%
Average
months of life
30 50 20 25
Gross margin $0.50 $1.50 $2.00 $1.00
Margin over
lifetime
$15 $75 $40 $25
Billing insert 0.005% 20,000 $0.01 $200
Text
message
0.050% 2,000 $0.02 $40
Post card 0.500% 200 $0.30 $60
Phone call 5.000% 20 $4.00 $80
Calculation Family plan Corporate Teen
Young
professional
Medium
Response
rate
Contacts
per save
Cost per
contact
Average cost
per save
Plan
Medium
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Answers (1 of 2)
Show Handout 1:
Situation, Complication,
Key Question
How should they think about
evaluating such a program?
Should they do it?
The key concern is whether the
operation will make them money
Establish the key items needed to
know in order to make an
assessment (customer duration,
profitability, and cost of program)
Show Handout 2:
Monthly Customer
Loss Rate
Walk the candidate through
the slides
Does this seem significant? Yes! That could be huge!
What are the implications for
the program?
The amounts of time a customer
will remain varies widely. Winning
back a customer who sticks
around longer is more valuable
Show Handout 3:
Monthly revenues
Does margin or revenue
matter more for this analysis?


What are the implications for
this program?
How does this relate to the
prior slides?
Margin. That represents the value
to us of a won customer. Revenue
that is not pocketed is less
relevant
Higher $ margin customers are a
more appealing segment
Knowing the average customer
duration and GM lets you calculate
margin over a customers lifetime
[calculates] Corporate is best (see
answer slide)
Set-up Key questions Model answer
8
Answers (2 of 2)
Show Handout 4: DMF
Benchmarks
Do these figures seem
reasonable?
What are the implications to
the question?
Calculate the cost per save based
upon response rates and cost per
contact
Put these costs in perspective of
Customer Lifetime Value
Text messages to corporate
accounts provide the best return--
$35 in incremental margin per
saved customer
Other combinations are
mostly negative
Having gone through the
math, what are some other
factors PhoneSafe should
consider?
How will the phone users
respond?
Should they barrel ahead with
this plan?
What else could the company
do to enhance retention?
Does this change by
segment?
How do you better align
interests with the wireless
guys to have them help you
retain customers?
Do you think it would be
better to invest in retention
rather than winning back?
They might be annoyed by getting
those texts. Make it value-add.
It might make more sense to do a
pilot first, just to ensure those
response rates are in-line
Bundling, data backup, other
features
Perhaps share more revenue with
them, but get them to remove
PhoneSafe as a separate line item,
rather bundled into plan
You can perform similar
calculations based on cost of
initiative and how much extra life
you get out of each customer
Set-up Key questions Model answer