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Approximately, 20% of newly acquired telecom customers have a forecasted negative lifetime value and drain around 40% of company profits every year. While the remaining c.80% of new customers turn a profit, their value still varies widely, with the top quartile of customers bringing in over 65% of profits.
This is creating a multi-million pound revenue leak so telecoms companies need to move away from outdated volume metrics towards more meaningful value-based models. To illustrate the benefits of a value based approach, a typical telecom customer base can be segmented into four different categories.
Value-Destroyers
These customers have a negative lifetime value, including elements such as high cost to serve, high cost of acquisition, and high churn rate. Often, these are the customers telecoms companies want to avoid and offering cheaper deals is rarely worth it.
Plodders
Barely above the value-destroyers, these customers don’t spend much, but have a lower churn rate and low cost to serve. However, there is often not much room for upselling – happy with what they have and will continue plodding on with the service.
Swingers
These customers sit in the middle, but with the right offers they could be persuaded into becoming money-makers. Equally, if not serviced in the right way they have a propensity to churn.
Money Makers
These customers bring in over 65% of profits alone. Long tenures, high monthly spend, open to upgrades and bundle offerings, and with a low cost to serve, these are the kind of customers every telecoms company wants to attract and retain.
Telecoms Value Report
With the commodification of services and price wars driving providers to decrease pricing, many providers are driven by customer volume. However, a fundmental lack of understanding around customer value management is holding telecoms back from being truly value-driven.
To understand value vs volume, we surveyed 200 professionals with responsibility for customer value base management to gain insights into how far along this journey from volume to value they are.
A Value Based Approach
Adopting a value-based approach gives telecoms companies a multidimensional view of customers. It combines key metrics such as total cost to serve, cost of acquisition, tenure, contract value and churn propensity, to give a much richer insight into customer lifetime value. By combining this data with Artificial Intelligence and Machine Learning, telecoms companies can create models that predict future lifetime value, making recommendations on next best actions. This approach helps companies to personalise and target offers that are most likely to drive profitability, helping to ensure they retain their most profitable customers while reducing the cost of retaining less profitable ones.
Delivering real benefits
Using our powerful Value Based Management platform, we have delivered customer value insights for several organisations, allowing them to optimise their profitability and enhance commercial decisioning.
£6m
additional savings
£12m
opex saving
£4m
opex saving
We join the dots...
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