Customer relationship management (CRM) in the telecommunications space is all about finding the optimum way of putting information about clients into the hands of employees who are at the front lines -- the call center representatives (CCRs).
This is according to Daniel Kenyon, vice-president, communications and industry strategy for PeopleSoft, who on Tuesday spoke about the evolution of CRM to a crowd of about 20 business professionals at the Call Centre Canada conference in Toronto. He said CRM is evolving towards what is being called customer profitability management (CPM).
"It’s absolutely necessary to move from simple CRM to profitability management," he stressed. He said that to affect profitability over the long term, a CPM solution must be enterprise-wide and include revenue management.
Especially in the telecommunications industry, service providers need to focus on the differences between profitable and unprofitable clients, Kenyon said. Unprofitable customers are an expensive form of revenue loss for these companies and on first glance, but without sophisticated data analysis, these unprofitable customers might be hard to distinguish from the profitable ones.
For example, simply because a customer has been signed up for a cell phone plan with a particular company for eight years doesn’t mean the customer is profitable. From a churn perspective, that customer is a dream, but if they are not making lots of calls, or are not using lots of add-on services like text-messaging, voice mail, or an Internet browser, the cost to keep that client’s service afloat could exceed the amount of revenue they generate.
Churn is the term used in the telecommunications industry to describe the rate at which customers end their relationship with a service provider.
According to Kenyon, in unregulated industries such as wireless and Internet services, a minority of customers generate profits for the company, and those usually fall into the enterprise category with consumer clients generally making up the bulk of unprofitable clients. In regulated industries such as wireline telecommunications, Kenyon said the percentage of profitable customers is even smaller.
This won’t change he said, so the answer is to find a way to effectively manage this reality. The problem right now in terms of CRM, he explained, is that both profitable and unprofitable customers are usually treated equally by CCRs. This means the CCRs are missing opportunities to make the profitable clients become more profitable and chances to transform unprofitable clients into revenue-generating machines.
The main reason this happens is because CCRs are not able to access up-to-date information about clients that indicate a client’s value, what services they are using, and whether or not they’d be an ideal target for certain marketing strategies. Plus, he said, the information should be presented in an easy-to-understand format so that anyone from the CFO to marketing to the CCRs can make sense of it quickly.
For the CCRs, having access to this information allows them to employ tactics and offer incentives to clients based on their value, rather than applying the same tactics across the board.
Kenyon said service providers should focus on keeping enterprise clients positive about the brand and products and services they market. With unprofitable clients the goal is to understand their problems and use CRM to offer incentives to these clients in a timely fashion to transform them into profit-makers.
For example, he said, it wouldn’t make sense to offer an unprofitable client a new 3G phone for free because this strategy would be unlikely to create new revenue. But if a profitable enterprise client was offered some free 3G handsets, it is possible it could lead to further purchases of these handsets, wider deployment and greater adoption of mobility services leading to revenue.
The question arose whether or not companies would simply be better off allowing these unprofitable clients to churn. Kenyon did not advocate that as a strategy even though he conceded that CPM "sounds harsh and cold on one hand…but it’s not the goal to create friends, it’s the goal to create revenue streams."
Also, the opportunity would be missed to ensure these clients become profitable.
Kenyon said that when an unprofitable client becomes profitable they are no longer draining corporate financial resources, and that adds extra money in the coffers fund incentives for more profitable clients.