Customer communication: the next frontier in telecommunications
In the dynamic and highly competitive telecommunications market, businesses communicate with customers through many channels including online, contact centres and predominantly through the customer handset.
The multiple channels, millions of customers, different timings and numerous product and usage stimulation offers, create an almost unmanageable level of complexity in determining the right offer, channel and timing for each customer.
Preventing churn
In a market as competitive as telecommunications, customer retention is also often a top priority. Investment in a retention programme that seeks to proactively target high value customers at risk of churn is common and the challenge usually involves multiple contact channels, thousands of customers, numerous retention offers and complex contact preference and frequency rules.
In addition, each of the retention offers has a different churn, revenue and cost implication, generating complexity in determining the best trade-off between churn and revenue reduction. The challenge in this case is driven by individual customer propensities; churn impact and revenue reduction scores, ensuring that there is effective control over the complex trade-off between increased retention and loss in revenue by returning value to the customer.
Managing customer limits
Customer limits on spending and calls, which if exceeded leads to calls being barred are also a key element of telecommunications operators' strategies. If executed correctly this can reduce bad debt and increase profit margins without having an adverse effect on customer satisfaction.
However, if the wrong strategy is implemented it can lead to the exact opposite and a high level of call barring will occur with the associated operational costs. Many organisations use a tree based strategy for limit management and call barring, and some utilise champion / challenger testing.
Maximising cross-sell
Many organisations have previously used a simple segment driven targeting process to choose customers for each offer. This approach largely ignores individual customer needs and potential return, as well as being a consuming process to configure and requiring a high level of analytical input.
The result of this is often that some segments of customers become over targeted and receive less appropriate offers, potentially missing opportunities for the organisation to grow revenue. In many cases there is a business need to solve this challenge, with a solution driven by individual customer propensities and contact frequency rules to ensure that the maximum benefit is extracted from customer information.
Managing strategy complexity
Usually in the telecommunications sector, strategy trees are uncomplicated and focussed purely on credit risk. Many progressive companies will want to investigate and understand alternative approaches to strategy development.
Optimisation methodologies are designed to identify the optimal set of limits to be assigned to customers. Powerful “what if?” simulation capabilities enables businesses to design and evaluate alternate strategy trees that could be deployed to achieve different levels of bad debt, or call barring for example, prior to deployment.
Optimisation simultaneously considers the organisation's overall goal of maximising profitability, whilst constraining other business measures, including bad debt, average limit and the number of call bars, to ensure a satisfactory outcome for the business.
Experian's Optimisation solution
Experian offer a consultancy led solution, supported by market leading software. Their consultants help define the requirements for an optimisation solution, and utilise the software to ultimately design a new strategy for the risk team to implement in existing decisioning software.
The software enables the risk team to create and evaluate different optimised limit assignment scenarios, and develop strategy trees that can be implemented in their existing decisioning software. The users can also trade-off the number of decision tree nodes to simplify the structure and refine the limit assignment strategy.
In particular, the trees are proven to cope with the varying behaviour that exists across both the customer base and risk bands. Spend behaviour can be especially difficult to predict, as identical events often have opposite effects on 'identical' customers. The solution produces a visible decision tree with recognised decision keys.
The tool is designed to be used by business users, with no advanced mathematical or technical expertise required. The risk team create the optimised scenarios, produce reports and change any assumptions to develop the right strategy that achieves the business objectives before deployment into the existing decisioning environment.
Each scenario identifies the tree that delivers the optimal set of actions to be assigned to the accepted customer base. By optimising strategies across all decision points, businesses can ensure that each and every decision point is maximised, achieving the greatest value to the business.
Roger Williams
Senior Business Consultant
Decision Analytics
Experian
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