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With prepaid now accounting for more than 75% of total mobile connections (according to Ovum) and continuing to grow, operators are feeling the pressure to shift their retention strategies to embrace the unique challenges and opportunities of this market. Although prepaid subscribers often come at lower acquisition costs, they also come with high churn propensity. With less subscriber data, operators find it difficult to manage their prepaid subscribers and build loyalty. Additionally, as more customers migrate from postpaid to prepaid, operators face revenue challenges. According to analyst firm Jeffries & Co., the average revenue per user is falling across the industry as the shift toward prepaid continues. They estimate that for every 1% of “mix shift” to prepaid customers, industry wide ARPU will decline about 0.9%.
With this shift occurring, operators need to expand their focus of maximizing prepaid ARPUs to turning their prepaid subscribers into valuable, loyal customers. The economics are simple — if you can retain 100 customers at a monthly ARPU of $40 for two years, versus retaining 100 customers at a monthly APRU of $50 for one year, you come out on top. But with prepaid customers having the means to easily ‘jump ship’ due to price, what can operators do to retain them?
From calendar-based to context-based
Many operators have made a step in the right direction by implementing a lifecycle approach to retain prepaid customers through top up stimulation. Unfortunately, many are also missing a key element for success — context. Customer lifecycle campaigns built simply on calendar-based triggers, typically ‘date from expiry’, can generate some recharge response but when tying these campaigns to increasing the overall lifetime value of a customer — which is the goal of customer lifecycle management — the results are inconclusive.
By understanding the importance of context and having the right tools in place to leverage rich customer and contextual intelligence, operators are able to determine the best way to stimulate top up and retain customers. In working with a North American operator, we undertook our own analysis to determine if being able to detect a specific context and then defining a message against that context can change subsequent behavior around prepaid recharge. The analysis revealed some interesting points:
Context matters
It’s common to hear operators share their frustrations in being able to effectively communicate with their prepaid subscribers due to lack of customer information. But do you really need to know someone’s name, income level, and marital status to market to a customer at the right time and place? Operators are leveraging contextual lifecycle management to determine what behaviors really drive top up activity — Which usage behaviors are associated with a subscriber willing to increase top up amount? Which usage behaviors are common for those at high churn risk? What level of data usage drives the most frequent top ups? What we are finding when testing a wide range of contexts is that certain contexts are strongly associated with resultant behavior around recharge, and more specifically, which contexts matter and which do not.
Deliver the right message
The right message is key. In addition to determining the effectiveness of different contexts, it’s important to determine customer sensitivity to offer messages. What you learn may be surprising. In one instance, an operator had two different messages delivered in the same context which generated very different results. Each message consisted of the same entry price for top up but with the first message, the credit bonus was more than 10x the value of the credit bonus of the second message. Marketers often think more is better when it comes to offers i.e., the better the offer, the bigger the result. Although both messages resulted in similar percentage change in the number of recharge events versus the control group, the higher credit bonus offer resulted in a dramatic decrease in the amount of recharge versus the control group. We have learned that it’s important to understand what messages drive results – What is the optimal incentive for driving top up? What incentives are actually too rich because they create a ‘Pavlov’ response in customers where they are trained to wait for an offer? How effective are warnings over offer messages?
Apply your learnings
In-base marketing teams are often comprised of innovative problem solvers but with the inability to quickly gain insights into why subscribers behave the way they do and the efficacy of ‘training’ customers to be more profitable, their efforts are minimized. Through contextual lifecycle management, operators are able to automatically integrate learnings to deliver smarter, faster results. Through our findings, an operator’s ability to test, tweak, and apply a multitude of treatments has led to increased net recharges and recharge amounts, and more importantly – retention improvements.
With the prepaid market on the rise, the issue of loyalty and churn is a growing concern for operators. There has been enormous progress in the types of devices and services now available to prepaid subscribers and next for many operators is a change in strategy to keep these customers. Operators have the ability to utilize real-time customer behavior to define the unique contexts when customers are most receptive to a communication and combine it with the right message. Those who do and advance their customer lifecycle programs beyond current calendar-based approaches will be those who meet revenue goals and drive customer loyalty over the long term.