CLM Strategy For Telecom

CUSTOMER LIFECYCLE MANAGEMENT STRATEGY For Telecom Sector

Aggressive competition in the Telecom Sector, Low-profit margins, regulatory restrictions on services (due to law & order, New Sales etc.), ever-increasing price wars & high operational costs hasn’t left much room for the telecom operators to have easy profits. In hard times like these companies have to turn towards smart ways to address these issues. One of the best-known techniques that the companies have adopted in recent times is Customer Life Cycle Management (CLM) Strategy. Through CLM company very smartly isolates homogenous customers and targets them in marketing initiatives by keeping their common need or potential of these customers.

Faiza Aymann (Faizaaymann@gmail.com) Department of Business Administration, Foundation University Islamabad Pakistan

Role of Customer Life Cycle Management Telecom operators have now begun to pay attention to the vast quantities of data at their disposal. Based on this evidence, they are now concentrating on developing cost-effective strategies and instruments that minimize time to market and can provide them with responsive and creative capabilities. In such cases, the tremendous expense incurred during ATL promotions and the conventional media is no longer possible and digital media such as SMS, IVR and Call Centre have gained precedence.

Attention was paid not only to the value added to the network by the subscriber, but also to the subscriber's detailed analysis of the entire period from his/her acquisition on to the network until the day the subscriber reaches the maturity stage and then churns.

Now the need for the hour is the task of Consumer Lifecycle Management. Ideally, each client is a section in itself, but this is sadly not feasible. CLM enables clients to be segmented into categories and targeted in line with their characteristics with goods or services and all this is done at little to no expense. Depending on which aspect of the lifecycle the consumer lies in, customer conduct may be changed. If the customer has just been purchased on the network, the customer can be targeted by advertising messages or campaigns not just to remind him of the different goods and services at his disposal, but also to shape the customer's actions from the very beginning, which better fits the operator's needs.

The consumer can be targeted in the growth process with promotions that either sell or crosssell various goods and services. The consumer is targeted with campaigns in the mature process to sustain its present use. It is possible to deal effectively with the main source of concern, Churn, for any operator using CLM. Different indicators can be set up to warn whether the subscriber is about to turn and can then be threatened with an offer in no time that will force him to remain on the network.

The operators that were never before possible during ATL campaigns were offered by CLM. Telenor was the pioneer in this field and was the first to use an SAS-named campaign management method effectively. The future benefits to be gained from this unique proposal have only been recognized by other operators and are now considering making it an integral part of their company portfolio.

Customer Life Cycle Management CLM or Customer Life Cycle Management is an integral part of Customer Relationship management program that is used by organizations to address variety of issues.

The top two key reasons why companies need CLM are:

 

Revenue generation in the times of Market Saturation.

Customer Engagement for long term returns.

Customer Life cycle is the process of breaking down the customer life into distinct stages and devising strategy against each stage for deriving maximum value. Thus a regular life cycle of a customer starts from its acquisition ends at churn.

Figure 1: Customer Life Cycle Stages There are 5 distinct stages in customer lifecycle broken down based on Customer age with the network and his Life Time Value. Each of this stage is described below.

Entry Stage: Entry stage refers to customer entry with the mobile network. This stage caters all the new customers on the mobile network. Customers whose have their age less than 30 days on the network are categorized in entry stage.

This stage primarily focuses on introducing customer with all the services that are available on his price plan, thus guiding him with the available options and determining his type of usage i.e.

Voice / Data or VAS.

Growth Stage: Any initial data related to consumer behavior is collected before the customer hits the growth stage, providing substantial insights into customer use behavior, allowing the marketer to upsell goods accordingly. In the growth period, the age of the client is between 31-120 days. The sole emphasis is to diversify the use of customers by pushing similar goods or services, relying on advanced analytics to cross-sell products and helping customers understand their potential.

Maturity Stage: The Maturity Stage symbolizes that the consumer has not only realized his needs, but also has a clear understanding of the goods available that suit his needs. Maturity stage is all about avoiding

his churn risks from milking clients, attempting to drive his sales further up and closely tracking his usage patterns for any slip ups. In this group, clients aged between 120-720 days are classified.

Decline Stage: A customer enters the decline stage when he starts declining his revenue significantly thus presenting a churn threat. This decline in revenue continues till customer actually churns.

Marketers come up with different strategies to either slow down the decline process (delayed Churn) or revitalize the customer by addressing his problems. Usually decline stage can either come early or late depending on the customer life cycle and his intentions to switch to another network. Customer remains in decline stage for 90 days before reported as churn.

Churn Stage: The customer stayed dormant for 90 days at the Churn point, after which it is recorded as churn.

In the case of a dual sim, the customer may either port his number to another network or simply avoid using his current number. Customers, however, rejoin from the churn stage, generally known by promotions and deals as rejoinders.

Role of Analytics: Companies are building on the vast amount of data accumulated over the years regarding consumer use. As more and more businesses move towards Business Intelligence to create a competitive edge over their rivals, this has become the next turning point. On this front, Telenor does not remain behind either; the ART data warehouse is being built to solve the everchallenging market climate.

The position of analytics is essential for the Customer Life Cycle Management Program. Usually, CLM is developed by leveraging BI capabilities. BI provides CLM initiatives with multidimensional support through ready accessibility of data, use of analytics to identify patterns and offers, smooth execution through customer intelligence and visualization of the output of the unit through dashboards.

Availability of Information: Telecom companies operate on many different platforms to provide state-of-the-art communication networks that are seamlessly integrated. Each of these sources produces its own data collection, which is then processed by the Data Warehouse through the process of ETL (Extract-Transform-Load) to make this information accessible to business users in a unified form.

All business initiatives are essential to the timely and precise availability of this information. Even a few hours of delay results in the loss of millions of rupees.

Role of Analytics: For CLM initiatives, analytics is of critical importance, as all CLM activities begin with analysis and end with analysis. As extracting value from a micro-segment is primarily accomplished by preanalysis, analytics has been a major driving force behind CLM. In addition, the product design for a particular segment often relates to the detailed analysis and pricing of product assets.

Campaign Management System: CLM program without a Campaign Management System is just like a body without heart. A critical component of a CLM program is an Integrated Campaign Management System. Whole of the CLM program revolves around a campaign management system.

Campaign Management System is a sophisticated system that manages all of the CLM activities, starting from customer segmentation, Filtering, Execution, Channel Management, Digital Marketing & evaluating program performance.

Performance Dashboards: Significant pillar of overall decision making in the CLM Program is analytics program success and taking informed decisions. Business Intelligence helps the CLM program to envision the success of the program by providing performance dashboards to take measures to enhance or strengthen the steps that are beneficial to the organization. Moreover dashboards give a better visibility to the top management as well thus reinforcing the confidence of Management in CLM program.

Market Segmentation: Segmentation involves dividing the consumer market into homogeneous subsets with common needs, and then developing and implementing personalized deals using a variety of platforms that serve each segment best during its life cycle to target their needs.

Customer segmentation is a fantastic method for defining the needs of consumers and helping marketers take effective action. Historically, businesses focused on serving underserved segments have been shown to be able to comfortably outperform their competition by creating products and services customized to consumer needs.

Market segmentation is also very effective in reducing the CLM program expenses. Throwing an offer to all of your clients would cost you much more than pitching the same offer to a specific micro-segment that creates noise for the base and is most appropriate for the offer. This helps the marketer to discuss the problem scenario in question and to come up with cost-effective solutions.

In theoretical context some of the key properties of Segments is defined as following

a) b) c) d)

It is possible to measure.

It must be large enough to earn profit.

It must be stable enough that it does not vanish after some time.

It is possible to reach potential customers via the organization's promotion and distribution channel. e) It is internally homogeneous & externally heterogeneous.

How Segmentation Works: Customer Segmentation requires managers to a) Divide the market into meaningful and measurable segments according to customers' needs, their past behaviors or their demographic profiles b) Determine the profit potential of each segment by analyzing the revenue and cost impacts of serving each segment c) Target segments according to their profit potential and the company's ability to serve them in a proprietary way d) Invest resources to tailor product, service, marketing and distribution programs to match the needs of each target segment e) Measure performance of each segment and adjust the segmentation approach over time as market conditions change decision making throughout the organization

Segmentation

Why Use Segmentation: Segmentation is beneficial in many ways. Not just we get to know better about the target segment, but also it helps in designing our marketing programs by identifying the key segments to be targeted and coming up with relevant Need based products. Apart from that Segmentation has the following benefits as well; a) Prioritize new product development efforts b) Develop customized marketing programs

c) d) e) f)

Choose specific product features Establish appropriate service options Design an optimal distribution strategy Determine appropriate product pricing

There are various different forms of segmentation; the question is which one to be used for a CLM program. It majorly depends on the needs companies have and on top of that the available resources that can help in segmentation. We will discuss the relevant Segmentation in CLM strategy later.

CLM Strategy So what defines a strategy that is successful? Is it all dependent on efficient segmentation being done? Or only by making offerings customized? Or maybe it is something connected with the availability of state-of-the-art systems?

Well, it's far more than that; segmentation, customization of supply and availability of resources are an important part of the overall CLM strategy, but it really depends a lot on the company management's go to market strategy for CLM. Retention can only be essential for a company, while customer engagement can be important in other situations. Whatever management emphasis, CLM's primary aim is to come up with one-to-one customer dialogue and solutions that revolve around them.

This will not only help to have a long-term commitment, but will also result in the business experiencing low churn rates. In organizations with a well-developed CLM program, higher ARPU's are typically observed.

Strategy for Telecom CLM A systematic plan is required to incorporate the CLM software. We have seen the evolution of CLM in the Pakistan market, beginning from a mere retention tool for your customer base to a full-fledged Customer Engagement program, which has developed over the last 5 years. However it has definitely been made possible due to advances in Analytics, the deployment of state-ofthe-art technologies, the availability of more integrated Big Data and the newly emerging need for CLM due to intense revenue pressures on businesses due to market saturation.

A comprehensive strategy that has been developed and successfully implemented in the Pakistan market will be discussed in this section.

Key Pillars of Strategy: The back bone of CLM strategy is the CLM framework that divides the customer life with your network in Entry, Growth, Maturity, Decline & Churn stages. The reason why we call it back

bone is that almost every action ability that is part of CLM program is primarily bifurcated based on the specific stage a customer is in. This helps the organization develop a clear focus, create feasible offerings based on the customer The strategy will have the following key dimensions a) b) c) d) e) f)

Customer Life Cycle Framework.

Behavioral Segmentation.

Focus Areas.

Quality Matrix Execution Channels Measurement Analytics.

Behavioral Segmentation: In general, when we look at the subscriber base, what we can usually infer are slight discrepancies between subscribers based on their limited use habits, such as ARPU, activity levels, recharges, etc. We can describe a typical client based on this information. In fact, however there is no such thing as an average customer and each customer is a person capable of adding a business relationship to their own value. There is also a need for behavioral segmentation, which is a strong marketing strategy that divides a group of all clients into smaller subgroups that share in their relationship with the company a number of common assets. It offers a very organized approach to targeting a client through ATL and BTL promotions.

Behavioral Segmentation

By using the K-means clustering algorithm, we run behavioral segmentation on the whole customer base. The outcome is x and y number segments respectively for mass and youth brands.

The clusters clearly distinguish homogeneous consumer groups that vary primarily from one of their main GSM consumption attributes within each brand. The division of the base into segments allows the brand team to point out clearly which segments are to be promoted, which behaviors are to be improved and which behaviors are to be modified. In addition, it allows us to dig deeper into a particular group of customers' GSM profiles to figure out why they act the way they do.

Indirectly, by keeping track of consumer movements between the different segments over time,

we can also assess the success of the various BTL and ATL initiatives and/or other external factors.

Ideally, our target is to get the entire consumer base into the highly active segments.

Micro Segmentation: On full clusters of behavioral segmentation, CLM Campaigns are not executed; instead, a very small micro-segment is defined by more filtering using a number of checks to enter the target segment. The concept of targeting the micro-segment is to hit the segment's last granular level, design an offer customized to their needs, and contact them with the platform that that microsegment likes the most.

If the BCG mapping identifies the target area and a cluster is finalized, marketers can apply a number of filters based on the type of segment the marketer is searching for, using the campaign management framework.

Micro- Segmentation is effective is so many ways. a) Helps companies in achieving true 1-1 marketing. b) Results in better uptakes of the campaigns. c) It helps in reducing overall campaign costs by focusing on only the most relevant set. d) Results in customer satisfaction by reaching them through preferred channel, with message in preferred language and by giving them the offer that is right for their needs. e) Gives marketer a room to play with the untapped base with a different set of offerings instead of sending one offer to a bigger chunk. f) Reduce the channel costs by eliminating the irrelevant audience for the campaign.

Strategy in Action: The overall flow of the strategy to connect the bits we discussed earlier is crucial to understand and more importantly, to link it with the organization's overall vision and purpose. The end to end plan implementation will be covered in this segment.

The CLM software often begins with the CLM structure, which is the cornerstone of CLM initiatives. It effectively breaks the entire customer base into different phases based on their network age and lifetime value. This is an essential step in understanding that tells the exact stage of consumer life and lets marketers determine the necessary care.

Following this behavioral segmentation, the full basis is added. Based on its behavioral variables, it assigns each subscriber to one cluster. Typically, behavioral segmentation is a brand wise practice, because each brand has its own segmentation. Once this is successfully applied, it will now give the marketer a clearer picture.

Designing "brand wise strategies" is the next step in implementing this strategy. There is a Mainstream Consumer brand and a Young Brand for all telecoms firms. Because of different base dynamics, category of consumers and the deals on these products, we need separate strategies for each of them; we need brand wise strategies for a CLM program. This is also useful as it clarifies the aim for the marketer.

Once the above measures are effectively executed, campaign design is carried out the target areas are further micro-segmented at this point to come up with granular deals based on need or potential. This contributes to monthly schedules and buy-ins, such as plans, product creation and customer service teams, from different stakeholders. When the calendar has been created and rolled out, it becomes the final step in the design of campaigns.

We also introduced a thorough review process to assess the initiative, which is explicitly designed to measure the efficacy of initiatives, provide insights to strengthen campaigns and in some cases, discard non-performing campaigns. In the overall value chain, this is a very critical field because a lot of information from the Pre & Post Analysis comes in.

Program Execution: CLM Program execution requires a lot of focus and detail, because this is the main things that drives the detailed strategy and analytics to work.

There are two important aspects when it comes to Program execution. a) Message Construction b) Channel Selection.

Message Construction: Message construction is the process of creating an effective campaign message that is to be delivered to the customer through any channel.

The message needs to have the following attributes a) b) c) d)

Easy to understand / comprehend.

Clearly states the offer and benefits to customer.

Clearly commit a deadline for any bonus posting deadlines.

Message is aligned with over all brand communications.

These are the guiding principles that guide all the message construction stages. It is important for any of the CLM strategy as it is the first impression on your customer regarding your brand, your offerings, the type of rewards offered and the execution channel selected.

A well-constructed message can help you even sell a low selling products, however if it is a badly constructed message it can ruin a very well-constructed campaign with a best-selling offering. That is the importance of message construction.

Channel Selection: With technological advancement marketers now have a lot of choice when it comes to channel selection. This gives them whole new freedom when it comes to executing a CLM program.

Following are the available channels. a) b) c) d) e) f)

Outbound SMS Outbound IVR Inbound IVR Email Digital media ( twitter, Facebook) Outbound calling

However channel selection is as important as message construction. Looking at the literacy rate in Pakistan and provided that roughly 40% of customers carry low end handsets selecting the right channel is really important.

Analytics & Measuring profitability: It is important to assign a "dollar value to the overall efforts of CLM, not only to measure the overall efforts, but also to provide leadership with insights into the potential of this field. This segment will attempt to clarify the process for revenue estimation.

Measurement is the key to success, implementing and learning two elements across which micro segmentation revolves, learning cannot be accomplished without a concrete or solid methodology of measurement. The underlying phenomenon is that it can't be changed if you can't quantify it! This is why in order to strengthen them, measurement methodologies are developed to measure micro-segmented campaigns.

Conclusion & Key Recommendations The best aspect of the CLM software is that it is Easy, Inexpensive and HIGHLY Efficient.

Companies operating in a competitive market need to adapt rapidly, cheaply and effectively to competition moves on short notice if a move is not expected by market intelligence. Not only this, firms are able to camouflage their products from their competition. In fierce competitive environments, this is particularly helpful because it keeps the competitor guessing all the time, and it is not easy to copy the deals.

CLM campaigns will raise sales by 2-3 percent in 6-9 months for businesses operating in emerging markets, according to a study conducted by McKinsey & Company. This is enormous if we equate it with the expense of running the CLM program. Likewise, if we analyze the effect on churn, with businesses adopting a fully integrated CLM program, 5-7% less churn is observed. The competition does not draw the customers directly as time to submit an offer against an ATL competition is very low and if a company has a well-integrated system, the time to market is very low.

To conclude, management of the Consumer Life Cycle is an important aspect of the marketing strategy of companies. However, how the CLM software is implemented by management is essential. A successful CLM software must have a good Campaign Management Framework that covers end-to-end campaign management across every digital marketing tool, starting from pre-analysis, campaign design, segmentation and execution. As all the insights from campaign analysis go into the improvement of subsequent runs, it is also helpful in post campaign assessments that are significant.