Table Of Contents

WHAT IS CHURN AND WHY IS IT IMPORTANT? 2

JOURNEY-BASED APPROACH TO CHURN 4

8-STEPS TO PREDICT & REDUCE CHURN 5

POINTILLIST AI - INSIGHTS TO REDUCE CHURN 19

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What Is Customer Churn?
TELECOM COMPANIES TYPICALLY Telecom industry retention surveys
SPEND MOST OF THEIR EFFORT show that while price and product/
AND RESOURCES ON CUSTOMER service are important, most
ACQUISITION, EVEN THOUGH THE customers leave a service provider
COST OF RETAINING AN EXISTING because of dissatisfaction with the
CUSTOMER IS FIVE TIMES LOWER way they are treated.
THAN ACQUIRING A NEW ONE.
It costs hundreds of dollars to acquire
Customer retention is a measure a new telecom customer. When
of how many of your customers a customer churns, you not only
continue to buy from you over time lose the future revenue from this
and are therefore loyal to your customer, but also the resources you
brand. Churn, sometimes known as spent on acquiring the customer in
customer attrition, is at the opposite the first place.
end of the spectrum, i.e. the number
of customers that stop buying from
your company.
“Only 1 out of 26 unhappy
customers complains. The
rest churn.”

- Esteban Kolsky

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Bain estimates that for a telecom provider with 5 million
Here are a few reasons why you should care
customers and an average churn of 2 to 2.5%, a reduction about churn:
in churn by even 50 basis points would be worth $410
million in customer lifetime value over 30 months. • Customer churn reduces profitability through revenue loss

• Churn results in greater marketing and re-acquisition costs

• The probability of selling to an existing customer is a lot

When customers leave after poor experiences, they not higher than to a new prospect
only will not return, but they often amplify their message
of dissatisfaction to others using social media. • Knowing the customer churn rate is helpful for calculating
customer lifetime value

• It is a measure of a company’s health and long-term

prospects

• Customer churn determines whether customer retention is

improving

• It helps identify which customers and segments are the best

fit for your product

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Why a Journey-based Approach to Churn is Needed

Businesses previously did not have visibility into real, end-to-end If you don’t look at the customer’s complete journey, you will likely
customer journeys, so they focused only on the last one or two reach the wrong conclusions.
customer interactions, incorrectly assuming that they caused the
customer to churn. The breakthrough of customer journey analytics now provides
you with the power to look across millions of complete journeys
But poor experiences accumulate over time. Much like personal connecting multiple touchpoints
relationships, trust or resentment can build over years in customer
relationships. Customers can also feel neglect or indifference, and Using customer journey analytics platforms, you can now visualize

frequently the point at which they churn has roots far earlier in and discover the root causes of churn in real-time, based on the

the relationship. complete history of interactions with millions of customers.

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8 Steps To Predict And
Reduce Churn
Step 1: Calculate Your Churn Rate
You can’t reduce what you aren’t Customer churn is the proportion
measuring, so the first step is to of subscribers who leave a service
calculate your customer churn provider during a given time
rate. period.

There are several different ways Revenue churn, on the other hand,
to calculate your churn rate and is the proportion of recurring
there is no single, industry-wide revenue lost in a given time
measure of calculating it. period.

So, let’s start by defining two ways

to measure churn: customer churn
and revenue churn.

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Customer Churn Rate
Basic churn rate is calculated by detrmining the customers lost during a timeframe and dividing it by the
total number of customers at the start of the timeframe.

HOW TO CALCULATE BASIC CUSTOMER CHURN RATE

To start, choose a timeframe for your calculation. Companies typically calculate monthly customer churn
rates but you could also do quarterly or annually. In this timeframe, determine the customers lost and
divide it by the total number of customers at the beginning of the month.

* Avoid including new subscriptions gained during the month.

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Revenue Churn Rate
Revenue churn rate can be calculated in two flavors: gross and net

To calculate your gross revenue churn rate, start by choosing a timeframe. In your chosen
timeframe, determine the revenue lost from existing customers and divide it by the revenue at the
start of the timeframe.

To calculate your net revenue churn rate, start by choosing a timeframe for your calculation.
Companies typically calculate monthly customer churn rates. Net revenue churn also takes into
account increases in revenue due to up-sells to higher cost subscriptions and is a critical indicator
of the health of a telecom business.

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Revenue Churn Rate (con’t)
Here’s an example using the Net Revenue Churn Rate formula
on the previous page: if company X has $10M of monthly
recurring revenue (MRR) at the beginning of the month and $1M
of MRR from existing customers is lost from cancellations and
subscription downgrades during the month, but $2M of MRR is
gained from upsells, then the net revenue churn rate is:

(1-2)/10 = -10%

Net revenue churn can be confusing, because positive numbers

are bad and negative numbers are good. A strongly negative net
revenue churn means that a company’s revenue would increase
even if there were no new sales.

If net revenue churn is near zero, then churn erases the growth
from upsells, so all growth must come from new customers.
If it’s positive, the company’s sales team must work harder to
overcome revenue leakage from existing customers.

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Step 2: Calculate Churn For Different
Time Periods
Churn can be categorized as short term, mid term or long term, depending on how long customers have been active before
they decided to discontinue and cancel the service.

Short-term churn is when customers churn after the initial few months. Short-term churn rates are typically high, as
customers test out different services and decide whether or not it adds value or they like it. When your short-term churn
rate is extraordinarily high, examine your sales and marketing funnel to see if you’re targeting the right customer segment.

Mid-term churn occurs when customers have used your service for a few months and have had a chance to evaluate,
understand and experience it. Improving mid-term churn rates is about keeping customers engaged and interacting with
your business and giving them reasons to keep coming back. This can be done by adding desired features, providing
consistently good customer service and maintaining regular communication.

Long-term churn happens when an established customer with a long history decides to cancel your service. To keep
customers engaged over the long-term, you need to reinforce the core value of your service consistently. Look for up-sell
and cross-sell opportunities to keep them invested and interested in your company.

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Step 3: Identify At-Risk Customers to
Reduce Churn
Prevention is better than a cure, right? customers and thereby reduce customer churn. By gaining
a data-driven understanding of customer preferences and
Some customer groups and, more importantly, some the best ways to reduce friction in particular situations,
customer behaviors are more predictive of churn than companies can more easily identify and prioritize
others. But it is hard to spot these behaviors proactively opportunities for improvement.
and in real-time, so you can take steps to make these at-
risk customers stay. Customer journey analytics can help identify which
customers are most likely to churn, thus providing you
Leading telecom companies are using customer journey with valuable data to turn the situation around.
analytics to improve their ability to identify at-risk

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You can use customer journey analytics to find those
particular touch points that prove to be an obstacle in the
customer journey, putting customers at risk of churning.

A call into your call center to sign-up for a new service,

for example, may be a point at which most customers are
abandoning their journey. However, a deeper investigation
could reveal that the average wait time for a particular set
of customers is higher than average. Now you can take
remedial steps and monitor the journey to see if there have
been improvements in the signup rate for these customers.

Moreover, by employing customer journey analytics your

efforts to woo back your former customer are significantly
more likely to succeed, as you reach out to them with the
right message, through their preferred channel, and within
the right timeframe. Even if you fail at winning back that
customer, the information you gather will help you take
proactive steps before customer churn becomes a more
significant problem.

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 USE CASE

A Leading Telco Uses Customer Journey

Analytics to Reduce Churn
Customer churn is particularly wireless provider used customer customer satisfaction index (CSAT)
troubling for the telecom industry due journey analytics to determine the and customer effort (CES) scores,
to slim margins and saturated markets. probability of a customer calling in customer retention rates and top-
for a certain support issue across all line revenue. According to Deloitte,
Telecom companies are now using online support channels. Agents now a one-half of one percent increase in
customer journey analytics to pinpoint proactively know what issues need customer churn or retention is worth
problem areas such as customer care to be resolved, how the subscriber an estimated $1.3 billion in revenue
calls and analyze how to improve tried to address the issues, and how to this telecommunications company.
them or provide alternatives via self- best to deliver an improved customer In addition, the company reduced call
help methods. This has resulted in experience. center volumes by 30 percent which
improved NPS (Net Promoter Scores) saved 15 dollars per call without
and lower cost to serve. After operationalizing customer negatively impacting service levels.
journey analytics, the time customers
As described in Deloitte’s 2017 Retail, spent in the interactive voice
Wholesale, And Distribution Industry response unit (IVR) decreased by 67
Outlook Report, a leading US-based percent. This had a positive impact on

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Step 4 - Discover Your Most
Profitable Customers and
Focus on Keeping Them
Let’s face it—all customers aren’t equal, and while you may want to retain
all, your resources aren’t unlimited and you need to focus on the most
profitable ones first.

Customer journey analytics plays a big role in this endeavor by providing

a detailed, quantitative picture of the entire customer journey, how they
interacted with the product, the problems they faced and the resolutions
at each step along the journey.

Using customer journey analytics, you can group your customers into
segments defined by profitability, readiness to leave and the likely
response to offers to stay. In this way, you can reduce customer churn by
better predicting it.

“If I offer an incentive to customers most likely to churn, they may not leave
the company, but will it be profitable for me? The traditional method is
focused on reducing churn, but we contend the goal should be maximizing
profits, rather than only reducing churn.”

- Sunil Gupta, Professor, Harvard Business School

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®
Step 5 - Target the Right
Customers to Begin With
If you’re going to work hard to retain your most profitable customers,
then another way to reduce customer churn is to be laser focused on
acquiring customers that are less likely to churn.

No matter how deep and sophisticated your retention strategy, it will be

a huge waste of resources if you are attracting the wrong audience. It is
imperative to make sure you are targeting those customers who are the
best long-term fit for your product and can see the value in it.

Customer journey analytics tools can help you better target and
segment customers based on behavioral, demographic and product
attributes. Journey analytics tools discover the most predictable paths
and the key attributes of prospects who eventually turn into long-term,
profitable customers.

Armed with this information, you can more precisely target the right
audience, set the appropriate customer expectations and significantly
reduce the possibility of eventual churn.

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Step 6 - Engage with Customers at Optimal
Times Through Their Preferred Channels
You’ll be surprised by how many telecom companies only communicate
with customers when they either want to upsell or when the customer is
breathing fire.

Besides emails and phone calls, there are other techniques such as those
suggested below to proactively and consistently talk to your customers:

Satisfaction Surveys – Conduct short, open-ended customer surveys

which let customers voice their opinions in an easy, convenient manner.

Social Media – Be present and answer questions through all your social
media channels. After all, your customers spend most of their time on
social channels, so why wouldn’t you be there too?

Feedback Bar – Incorporate a feedback bar on your website and mobile

app, so customers can ask questions, comment on features or give
feedback as they are using the product.

Customer journey analytics can help you optimize omni-channel journeys by automatically engaging with each customer at
the best time, and in a relevant, personalized way. By embedding triggers at any point along the journey, you can engage with
your customers in the moment.

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Step 7 - Identify CX Problem Areas
Customer journey analytics is the best approach to By using these data-based insights, you can now decide
help you quickly identify problem areas throughout the on the appropriate steps to take to mitigate these
customer journey. These problem areas could be caused customer experience issues and create experiences that
by flawed and inefficient processes, inconsistencies in reduce customer churn and suit the best interests of
your user experience, lack of personalized service, bugs, the customer.
or a whole host of other things.

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Step 8 - Create A
Customer-Centric Culture
A lot of telecom companies pay lip-service to the concept of creating a
customer-centric culture in the organization. But real change comes when
you put resources behind it, measure it and share the results across the
organization.

One effective idea is to connect compensation to important customer

experience metrics such as churn rate. This creates an organization-wide
focus on the issue.

Use customer journey analytics to monitor these KPIs in real-time and

over the long term through dashboards. Share these metrics regularly
across the organization.

In addition, when hiring new employees (even those in non-customer-

facing roles) look for customer centric attributes and skills. Invest
resources and time in training and supporting employees to be customer-
focused. Give your employees the power to do what it takes to meet and
exceed the customer experience standards you have set and reward those
who consistently shine in this aspect.

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®
Pointillist AI - Actionable Insights
To Reduce Your Churn Problem
Pointillist AI explores billions of data points in places you’d You can focus on evaluating insights and deciding which ones to
never think to look, and finds every relationship in the data that act on first, rather than spending all your time managing data.
exists. Unlike other ‘black box’ AI tools that present their results
without context, Pointillist AI is truly your analytics partner. Pointillist AI can even discover whole new customer segments

For the first time, you have the power to know precisely where, and behaviors that are predictive of churn. New behavioral

when and why churn occurs as your customers interact with segments discovered by Pointillist AI, defined by profitability,

your company. readiness to leave and the likely response to offers to stay, can
then be used to inform your strategies for churn reduction,
With Pointillist AI, simply indicate that you’re looking to reduce customer retention and growth.
churn and it will discover those customer behaviors and
attributes that have the highest impact on churn, within the
context of your customers’ actual journeys.

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