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Technology Case

Essay by   •  March 17, 2012  •  Research Paper  •  333 Words (2 Pages)  •  1,551 Views

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Nowadays, Telecommunication companies have to compete with each other

and survive in changing environment, deregulation, and a general economic

regression (Geppert, 2002). Management must shift its focus from rapid revenue and

market share growth to maintaining and enhancing margins. Margin enhancement

consists of effective revenue enhancement and cost management, leading ultimately

to increased profitability and margins (Geppert, 2002).

A persistent challenge on both the cost and revenue sides is customer churn,

the movement of customers from provider to provider in search of better and cheaper

products and services (Geppert, 2002). As markets become saturated and competition

intensifies, customers have more choices and are concerning with their purchasing

power (Geppert, 2002).Competitors in the telecommunication market is constantly

tempting customers with incentives to switch providers. That makes churn

management, the process of acquiring and retaining customers, a major challenge for

the carriers. To turn capricious subscribers into customers (Whiting, 2001). Churn

management is not just about retaining a customer. It is also about retaining and

growing their share-of-wallet (Killion, 2001). It is easier to up-sell than it is to acquire

new customers.

To illustrate how the cost of churn affects an individual wireless carrier,

suppose the carrier has three million subscribers at the start of a year and an annual

churn rate of 27 percent, amounting to a loss of about 810,000 subscribers in that

year. Assuming an equal distribution of customer churn throughout the calendar year

average revenue-per user of $45.27 a month (according to the Cellular

Telecommunications Industry Association as of the end of 2000), the total revenue

loss per year is approximately $220 million. Further, assuming the cost of acquisition

to be $350 per customer, the total cost to replace that revenue is $284 million.

Companies need to proactively identify high-value customers and also should

be able to identify customers

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