customer value - managing acquisitions through retention in competitive market

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3rd Annual Telecoms in Africa:

Customer Loyalty & Retention Conference

Sathya Karthik R

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© Abiba Systems | www.abibasystems.com

Category 2005 2010 2014 (est.)

Subscriber Base

133.55 506 911

Penetration 14.30% 41.00% 62.4%

ARPU ($) 14.5 10.34 >6

Key Drivers Voice Voice, SMS3G VAS

Business Priority

NetworkNetwork,

Acquisition

Acquisition, Retention,

Profitability

Customer Focus

Market Share Wallet Share

Hottest: Mobile > 65% , Internet > 40%Hot in mobile: Mobile > 65% , Internet > 40%Hot in Internet: Mobile < 65% , Internet < 40%Coolest: Mobile < 65% , Internet < 40%

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• Intense competition – choice for customers

• Rapidly increasing penetration

• Very high churn

4

23 3

9

56

99%

94%

99%

97%

90%

98%99.30%

75%

80%

85%

90%

95%

100%

105%

0

2

4

6

8

10

12

14

16

18

20

Kenya Algeria Botswana Egypt Nigeria Sudan Tanzania

Number of Operators Prepaid Base % of Total

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133.55

280.7

506561.18

14.513.4

10.34

7.5

0

2

4

6

8

10

12

14

16

0

100

200

300

400

500

600

700

800

900

1000

2005 2007 2010 2012

AR

PU

($

)

Sub

scri

be

r b

ase

(M

n)

Subscriber base Vs ARPU

Subscriber Base ARPU

© Abiba Systems | www.abibasystems.com

Benin, Chad, Democratic Republic of

Congo, Uganda

Gabon, Ghana, Kenya, South

Africa, Nigeria, Sudan, Tanzania

Ethiopia, Eritrea, Guinea, Togo

Algeria, Botswana, Egypt, Tunisia

Africa

Mobile Penetration

<= 50% >50%

<=3

>3

No

. of

op

era

tors

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• ABIBA Systems is a Business Intelligence and Analytics company based out of Bangalore, India

• Our industry focused product and services portfolio is getting wide acceptance.

• We offer a consulting based approach to identify cost effective solutions to enhance the decision making capabilities of senior management.

Domain specific pre-built solutions

Rapid deployment for quick wins

Business User friendly solutions

Lower TCO to ensure higher ROI

Our solution approach

Our Clients

Top BI & Analytics Companies

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Acquisition

Cross-sell

Up sell (new product/service)

Retention

Re activation

Life stage

Val

ue

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Differentiated approach based on lifecycle of customer to enhance value

Attack ‘entry point’ by improving quality

of acquisition

Profile the customers and employ retention approach to maximize revenue from retained

customers

Enhance revenue from ‘terrorist’ customers

Revenue

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Acquisition AcquisitionCross – SellUp Sell

RetentionLife Time ValueUp-sell

Life Time Value

Competition

Low High

Low

Hig

h

Pe

net

rati

on

ABIBA Competition Penetration Matrix

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Average Life of Customer

Pro

fita

bili

ty

Steady eddies???

Do not focus on retentionIncrease wallet share

• Additional services• Increase wallet share

• Loyalty• Better services• Benefits

Terrorists Already taken care?

Operator Focus ---- Maximise(Life * ARPU) - Cannot retain – then enhance revenue; have to sacrifice ARPU to enhance life

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© Abiba Systems | www.abibasystems.com

Prepaid subscribers – little information

Cost of acquisition > initial ARPU

Competitive market – getting Multi SIM users

Distribution driven – differing objectives

Strategic focus – Sub.base and market share

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Metrics Scenario 1 Scenario 2No of customers Acquired 1000 750

ARPU (in USD) 6 8

Annual Churn Rate 60% 48%

Customers retained 400 390

Cost of Acquisition/Customer (in USD) 12 15

Total Acquisition Cost 12000 11250

Revenue 48600 53280

Profit 36600 42030

A targeted acquisition results in

•Lower churn

•Higher ARPU

•Increased revenue

•High Profits

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Customers acquired

ARPU (in USD)

Churn Rate/ annum

Customers retained

1000

6

60%

400

750

8

48%

390

Scenario 1 Scenario 2

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Cost of acquisition

Revenue

Profit

12000

48600

36600

11250

53280

42030

Scenario 1 Scenario 2

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© Abiba Systems | www.abibasystems.com

Churn cost global telcos $10 billion annually in the form of

customer defection -Telecommunications Online

The propensity of a pre-paid customer churning is three to five times that of a post-paid customer.

“ It is costing operators 8 to 10 times to acquire a new customer than to retain existing customers” – Gartner

Churn rate in emerging markets is averaging > 50% p.a and is expected to go up further with new operators and MNP.

A loss of just 10% of its high value subscriber base amounts to a loss of 85% in revenues for the company – Dataquest. e.g. In some markets – ARPU of older valuable subscribers is about $20 – while for new prepaid subscribers is <$2

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high costs, low life post connections

Reactive, higher cost,low life post reconnections

Mass, higher cost, customer fatigue, low effectiveness

Only acquisition

Reconnections

Proactive retention –dormancy

management

Value based retention

WAR+Analysis

Maturity

Effe

ctiv

en

ess

The matured approach

Beyond 48 months

Up to 24 months after launch

24 months to 48 months after launch

Now

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Limited customer information

Minimal customer engagement when compared to Postpaid Very low exit barrier

Low Loyalty levels and sticky factor

Very Low ARPU which does not justify ‘generic’ retention

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© Abiba Systems | www.abibasystems.com

Set

Cle

ar C

LM O

bje

ctiv

es Value based approach

Control at entry – channel management, brand fit, Cost of acquisition

No retention at any cost – ROI driven

If you can’t retain - ARPU enhancement

No customer fatigue OR dissatisfaction

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Who will respond to the campaign?

Who is churning?

What is happening?

BI & Segmentation

Churn Prediction

Survival Analysis

CLV

Profiler

Recommendation

Response Modeling

Actionable Decisions

Whom should I retain / acquire?

How long can the customer be retained ?

Why is the customer churning ?

Which are the better campaigns ?

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Campaign

Analysis

Reports

Location Analysis

Data Mart

Hot Spot Analysis

Target

Campaign Planning

Post Campaign

Analytics

Sampling

What -if

Pre Campaign

Analytics

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Manage internal reviews with little ‘sweat’ – Makes you an internal Champion

Improved ARPUs by upselling

Extend life of desired

subscribers

Quick response to market

Understand customer behaviour

and drivers for churn

Retain the high value subscribers

Effective resource utilisation – better

campaign ROIs

Assist good quality and foil poor quality

acquisitions

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