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Customer loyalty ‘obsolete’ in prepaid market

Operators need to focus on reducing chrun

The average mobile customer switches service provider every 27 months, more than twice as frequently as a decade ago, according to research released this week. At the end of 2011, 44 per cent of global mobile subscribers churned – the highest level ever – according to Strategy Analytics.

Among the more fickle consumers in the prepaid market, churn has increased dramatically, as promotional SIM activity in developing markets has made customer loyalty virtually obsolete in some countries.

Strategy Analytics said that average prepaid customer lifetimes have halved over the last five years, to only 17 months. By contrast, average postpaid customer lifetimes of 67 months have improved from the depths of the global recession in 2008/09, since customers show an increased propensity for upgrading with their current provider instead of switching to better deals elsewhere.

“Prepaid churn has really been hit by promotional SIM card activity,” said Phil Kendall, director of wireless operator strategies at Strategy Analytics. “For example, prepaid churn in Asia-Pacific is nearly 100 per cent per year. It doesn’t cost much to push new SIM cards into the market, however, operators would still benefit by promoting targeted offers to existing users which build longer-term, more valuable, customer relationships.”

But with smartphone subsidies stretching operator resources, the postpaid market is where churn is more expensive to manage and the researcher notes that operators are finally looking at new device purchasing models, like instalment plans or leasing, that can alleviate pressure. But of course, consumers have become ‘addicted’ to the subsidised handset model, and the researcher notes that it will be difficult to change this.

Looking at the rise in churn levels on a more granular basis, statistics from Informa Telecoms & Media show that prepaid churn levels for operators worldwide, rise from 5.52 per cent at the end of 2010 to 6.33 per cent at the end of 2011. Postpaid churn is much more stable, at 1.4 per cent at the end of both 2010 and 2011, with blended churn at 3.8 per cent end-2011, up from 3.4 per cent end-2011.

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