How telcos can keep their customer base amidst a high churning rate

Improving customer experience and bundling new services is key to retaining customers.

Telecommunication companies may have seen the demand and the importance of their services increase in the last two years, but this momentum declined post-pandemic as customers are now less inclined to subscribe, with churn rates remaining high. To keep their customer base, telcos should increase their attractiveness by developing innovative new services based on customer relevance and market potential, amongst other ways.

In the Global Telecommunications Study 2022, Simon-Kucher & Partners found that 58% of customers now perceive telco offerings as expensive, up from 51% before the pandemic.

“Customers actually have indicated lower willingness to pay for telco services as the price value perception of telco services has actually deteriorated over the last two years as well,” Winnie Ong, TMT Partner in Asia-Pacific at Simon-Kucher, told Asian Telecom,  adding that consumers seem to be more price sensitive.

On top of this, Ong also said that the customers’ propensity to churn has stabilised on pre-pandemic levels, but the rates were still “relatively high.”

The report found that around 22% to 24% indicated that they are likely to leave their service provider at the end of the contract period or in the next few months if their contracts have no obligations. It added that attractive offers from competitors, especially in mobile, are the main driver for leaving their service providers.

Customer retention

In addressing this hurdle for growth, telcos should work around customer retention by implementing better and more attractive offers, Ong said.

“It's a lot more effective for telcos to optimize and retain their base rather than trying to acquire many more customers at the same time,” she said.

Even if customers appeared to be more price sensitive, price is only the second reason for their purchase as consumers prioritise network speed, according to the report.

If a customer experienced poor service – a potential trigger for churning – telcos should make the right move to compensate for the negative experience, Ong said. This could be done by offering them another service they can avail of at the right time, supported by a sustainable and holistic customer base management approach. 

“All these elements can help to elevate the overall customer experience, which can then eventually also improve customer loyalty,” she said.

“Keeping the customer satisfied with network quality, and general service quality is actually super important in order to be able to retain their base,” Ong added.

Bundle

Telcos could keep their attractiveness by bundling new types of services “beyond the core connectivity services.”

Bundles offered before were heavily focused on SMS and data consumption. Ong said that in the Singapore landscape, the data offered in the tariffs exceed what the consumers typically consume. In other markets, unlimited data is being offered.

However, she noted that the ability to use core connectivity services to differentiate the tariffs offered has “eroded over time.”

“What we've seen in other markets will be using things like network speeds as a differentiator, or being able to bundle in additional value-added services such as bundling video streaming services and cybersecurity services as elements that can drive differentiation because these have better relevance in serving the customer need as well,” she said.

The report found that the up-selling element the respondents were interested in included entertainment, with 50% saying they would buy it if offered, connectivity-related services, value-added services, and sustainability.

5G adoption is also showing a “strong growth trajectory” due to higher speeds and 5G-enabled handsets, with 27% of the respondents have already availed of 5G and another 24% planning to buy one within the next 12 months.

Remaining competitive

Amidst the current macroeconomic environment, Ong said telcos should operate in line with the “customer needs perspective” and take a “customer-centric approach” in optimising the profit pools that can help them craft the most attractive value proposition structure and manage the customer base.

“One of the key changes now is to also take a conscious approach to rationalize our strategies based on the data that is available and relevant. Supplement this also with external insights from the consumers to better understand how we can serve them,” Ong said. 

“This will be the path to sustainable and profitable growth,” she added.