If the policy makers mean what they say on mobile phone number portability, the Indian mobile consumer will likely continue to experience not only the lowest call rates in the world, which is already prevalent, but more importantly superior service levels at these price points. The fast growing Indian telecom sector will wake up to the realities of improving the efficiency of their marketing and service operations or risk loosing market share to his competitor.

Reason to be alarmed

Number portability essentially removes one of the key barriers to churn - that of the reluctance of changing phone numbers. The telecom service providers will have to focus on retention of their subscribers, as their efforts to-date has been on new subscriber acquisition.   

More importantly retention especially of high value customers, would be critical given number portability. So far, the barrier to switching has been highest for long tenured customers given their potentially larger contact base.

For a mobile telecom operator, these customers also happen to be the most valuable in terms of monthly spends (i.e. ARPU) especially given the fact that most of the recent explosive growth has come from the low value customers. Hitherto, the switching inertia from these valuable customers, which favoured the telecom operator, will soon disappear.

Risk of losing

A telecom operator whose churn rate is 3 per cent per month now stands losing about one-third of the customer base in a year. While one can speculate on the extent of rise of the churn rate, it is certain that it will rise in emerging markets; in contrast, mature markets typically experience a churn rate of about 1 per cent—1.5 per cent.

While this in itself might sound alarming to any well-run business, it has largely been mitigated by two factors for the Indian telecom operators: huge new customer acquisitions and the switching inertia especially for most long tenured high value customers. With number portability, there is zero cost to switching in effect making the most valuable customers of the telecom operator also the most vulnerable.

For new entrants wanting to acquire these prized customers from an entrenched competitor it presents an irresistible opportunity to improve the profile (and hence margins) of their customer base. From the industry reaction to number portability, it is not hard to decipher which camp each telecom operator belongs to: the anxious entrenched player or the eager late entrant.

What could telecom operators who fear loss of their customer franchise do? Lots. Today, their knowledge about their individual customers is scant and superficial. Do they understand the reasons why he is at-risk of leaving them once presented with zero switching costs (as it surely will with number portability)? Do they know the degree of customer affinity for their products and services in order to retain customers? Can they generate this knowledge about each of their millions of customers - every day? If they acquire this knowledge, are they equipped to develop marketing and service programs that are meaningful to a new age customer who is now empowered to seek the best with no strings attached (to his phone number)?

Analyse customers

Telecom operators have a key asset that they are not using effectively. Customer Data. With advanced predictive analytics - the science of analysis of consumer transactions to infer customer behaviour and predict outcomes - it is possible to mine data to reliably characterise individual customer behaviours that impact specific business attributes. For instance, telecom operators can use predictive churn prediction models that use mathematical algorithms to assess the propensity of customer risk for churn and initiate preemptive retention actions.

The most advanced analytics using behavioural predictive models also pinpoint the specific risk factors, such a ‘sticker shock’ from the most recent bill, which may cause the customer to churn to competition. Another area of drawing useful knowledge through analytics is to identify customer affinities for specific products and services as well as forecasting demand for them.

This will help telecom operators offer differentiated and customised products and services - something a competitor, who does not possess relevant insights about the customer, cannot do. Telecom operators who invest prudently now in building deep knowledge about their individual customers and act on it to earn loyalty for their brand will eventually lead the pack in this new competitive environment.

Most mobile telecom operators in mature markets use analytics to develop proprietary knowledge about their individual customers in a manner that can be acted upon by their marketing and service operations. However, the challenges of deploying a potent weapon such as analytics for Indian telecom operators are very significant given that several of them are adding as many customers in a quarter as the entire customer base of a small European country.

Indiscriminate adoption of analytical methods developed for mature markets for a large high growth developing market such as India skews results and poses several hazards. First, the size of the customer base and its exponential growth will require new inventions to ensure that outputs from analytics are operationally viable.

For instance, can they be generated in time to match the frequency of marketing campaigns that depend on it. More crucially, analytical models and methods developed for the customer data in developed markets, cannot be adapted for the Indian customer data environment without significant efforts. For example, customer demographic and credit rating information, typically used for predictive analytic models in mature markets, is not reliable or available. Ingenious analytic methods that work within these constrains and that overcome the aforementioned challenges will be essential tools to stay competitive.

Winning the battle

Indian telecom operators can draw inspiration from success case studies of large global businesses in similar competitive market environments. A few years back, Walmart, the behemoth retailer, posed serious threats for the very survival of other large retailers with its focus on lowest prices. Today, select retailers such as Tesco have claimed market leadership in profitability and market share increases using high-end analytics to uncover deep knowledge about their customers and developing customised products and relevant marketing programs for them. Today, it is Walmart that is running for cover. A lesson that could perhaps be learnt by Indian telecom operators is Know your Profitable customer. Ignore him at your peril.

The writer is Chief Executive Officer, Fifth C Solutions. Email: mohan@fifthcsolutions.com