Recent research on cellular subscriber churn conducted by customer satisfaction powerhouse J.D. Power and Associates calls into question the industry’s “more-is-better” approach to retail distribution of service.
J.D. Power for years has conducted customer satisfaction studies for a broad range of consumer products and services, including personal computers, copiers, financial services and fast food. It is best known for its work in the automobile industry.
“Cellular is an industry that hasn’t historically paid much attention to customer satisfaction,” says Andrew Moloff, senior project director at J. D. Power. As wireless telephony penetrates the mass market, customer satisfaction increasingly is becoming key to maintaining a competitive edge in the market, he added.
The company worked with carriers in five of the top 10 cellular markets and concludes that managing customer expectations at the point of sale is critical to subscriber satisfaction and retention-and carrier profitability.
“Managing churn is replacing new customer acquisition as the primary driver for profitability,” the report says.
Customers often point to cost of service when asked why they switched cellular carriers, even when there is no real or perceived cost differences between carriers.
“Failure to meet cost expectations induces churn,” J.D. Power states, adding “churn propensity is highest when the novelty of cellular service wears off and the bills begin to arrive.”
The point-of-sale experience plays an important role in increasing customer satisfaction and reducing churn by helping the prospective subscriber form realistic expectations of service cost and quality, according to the report.
Moloff questions the use of supermarket kiosks and similar low-service retail channels in selling cellular.
“Is that really where they want to be selling phones? Because they will vastly increase the likelihood that the customer will be dissatisfied in a couple of months,” Moloff says.
However, a possible upside to using these retail distribution channels, he notes, is that they may drive down the cost of attracting subscribers, perhaps allowing the carrier to make a profit despite a high churn rate.
“Concentrating on which customers is becoming more important than how many customers,” the company states, even if this slows subscriber growth.
“It depends on the company’s financials-there are high fixed costs to cover -but I do think for some carriers out there it might make sense to slow down and focus on retention rather than acquisition,” Moloff says. “Especially in some markets where customers are bought through subsidies.”