Fighting For Your Loyalty
Sydney Morning Herald
Tuesday November 14, 2000
A customer in the hand is worth two in the bush, says customer retention firm emagine. Dan Kaufman reports.
Many telcos and ISPs will lose more than half their customers as the telecommunications industry becomes more competitive, according to the customer retention firm emagine. It's because of this that Andersen Consulting, which has formed a marketing alliance with emagine, believes that customer retention is one of the top three concerns for CEOs.
``In the telco market it's not uncommon for anywhere between 25 per cent and 70 per cent of customers to be defecting, or churning, every year, which is a huge problem," says David Peters, emagine's CEO.
``And with mobile number portability coming into the Australian market, the problem is only going to get worse because people will pour a bucket of oil on this squeaky old machine and free it up, so people will be moving around between carriers.
``So I would predict that it is going to double the churn rates here in the market. Certainly in Asia and Hong Kong, where there is high competition and mobile portability, churn rates of 50 to 70 per cent are not uncommon. And how many companies are going to be able to be in business if they lose half of their customers every year?"
Created in Sydney two years ago, emagine makes half its money from consulting and the other half from software sales. After starting with Booster, an online loyalty and incentive program for telcos, the company has recently released Keeper.
``Keeper predicts the propensity of a customer to churn using data mining technology and then it recommends the most appropriate offer to save those customers," Peters says. ``That offer can either be made by telemarketing, email, fax, mail or whatever, and Keeper tracks the whole process through to completion and manages the logistics of the fulfilment that is associated with sending out whatever the offers are."
Keeper predicts how likely a customer is to defect by relying on a system of rules that looks at such variables as how many times a month customers call, what countries they call, whether they received promotions in the past and so forth.
It also calculates customers' value to the company to determine how much should be spent on keeping them.
Peters stresses that determining the value of a customer is vital. ``It's the old 80/20 rule: in telecommunications it's probably the top 20 per cent that generates between 50 and 60 per cent of a company's revenue," he says.
He also says that telcos, along with most companies, do not make the most of the information in their databases.
``They have so much data, such as who you call, when you call, where you are when you call, what's your name and address, but they just do not use it," Peters says. ``They spend ages with statisticians building their sexy models but actually getting [information] out to their sales reps and marketing guys and making it operational is not happening."
Having already been through one round of funding, which raised just under $US1 million ($1.9 million), emagine is in the process of raising a further $3.5 million by Christmas. Peters says this is needed for its expansion plans for the Asia Pacific region.
The customer base of emagine includes Dingo Blue, Media Hub, C&W Optus Australia, British Telecom and Star Hub in Singapore. However, Peters says this line-up will expand significantly once it starts focusing more on Asia.
The company, which plans to be profitable within a year, will also start targeting e-commerce companies in addition to telcos and ISPs.
``The same principle applies," he says. ``If you have a relationship with a client which is valuable, and they may leave, then there's an opportunity to use this product. It's not built to be telco-specific."
dkaufman@ozemail.com.au
© 2000 Sydney Morning Herald