Technology Case
Essay by nikky • March 17, 2012 • Research Paper • 333 Words (2 Pages) • 1,607 Views
Nowadays, Telecommunication companies have to compete with each other
and survive in changing environment, deregulation, and a general economic
regression (Geppert, 2002). Management must shift its focus from rapid revenue and
market share growth to maintaining and enhancing margins. Margin enhancement
consists of effective revenue enhancement and cost management, leading ultimately
to increased profitability and margins (Geppert, 2002).
A persistent challenge on both the cost and revenue sides is customer churn,
the movement of customers from provider to provider in search of better and cheaper
products and services (Geppert, 2002). As markets become saturated and competition
intensifies, customers have more choices and are concerning with their purchasing
power (Geppert, 2002).Competitors in the telecommunication market is constantly
tempting customers with incentives to switch providers. That makes churn
management, the process of acquiring and retaining customers, a major challenge for
the carriers. To turn capricious subscribers into customers (Whiting, 2001). Churn
management is not just about retaining a customer. It is also about retaining and
growing their share-of-wallet (Killion, 2001). It is easier to up-sell than it is to acquire
new customers.
To illustrate how the cost of churn affects an individual wireless carrier,
suppose the carrier has three million subscribers at the start of a year and an annual
churn rate of 27 percent, amounting to a loss of about 810,000 subscribers in that
year. Assuming an equal distribution of customer churn throughout the calendar year
average revenue-per user of $45.27 a month (according to the Cellular
Telecommunications Industry Association as of the end of 2000), the total revenue
loss per year is approximately $220 million. Further, assuming the cost of acquisition
to be $350 per customer, the total cost to replace that revenue is $284 million.
Companies need to proactively identify high-value customers and also should
be able to identify customers
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