Telecommunication is assisted transmission over a distance for the purpose of communication. In earlier times, this may have involved the use of smoke signals, drums, semaphore, flags or heliograph. In modern times, telecommunication typically involves the use of electronic devices such as the telephone, television, radio or computer. Early inventors in the field of telecommunication include Alexander Graham Bell, Guglielmo Marconi and John Logie Baird. Telecommunication is an important part of the world economy and the telecommunication industry’s revenue was estimated to be $1.2 trillion in 2006.
Importance of Business Analytics in Telecommunication Industry
As the telecom markets in the developed and developing countries are nearing saturation, the telcos are experiencing increasing heat of competition and are experiencing a downtrend in their ARPU (Avearage Revenue Per User). The Revenue from voice services has decreased exponentially. There has been a considerable shift of bargaining power from the telecom service providers to the customers. In past, the telcos used to design the products/services and then find the suitable market/customers. But in the current scenario, the balance has been shifted towards customers and now the telcos need to develop products and services which address specific needs of the customers. The telcos need to retain their existing customers and subsequently increase the ARPU.
To retain the customers and to enhance their usage, the telcos need to identify and satisfy the unique needs of individual customers. To achieve this, telcos need to know their customers in a more profound manner. Herein lays the importance of the business analytics in the modern telecom industry.
The business analytics helps the telecom service providers to know more about their customer’s preferences, their behavior, their calling pattern and can predict their future actions. In the modern telecom industry, the business analytics can be widely used for the following activities:
Customer acquisition and retention is a significant challenge in all industries. In the Telecom industry it affects profitability of the company if a customer churns before the company can earn back the investment it incurred in acquiring the customer. Therefore, it is very critical to identify the profitable customers and retain them.
By the usage of business analytics and data mining, the telecom operator can build a predictive modeling on the basis of customers’ past behavior and a score is assigned to the individual customers. This score indicates the probability of the customer to leave the services of the operator. Moreover, by identifying the major contributing factors to the generated churn score, the reasons for his/her probable churn can be detected. By addressing those issues successfully, the customer can be made more loyal to the company and can be eventually prevented from churning.
With the help of business analytics, the telecom service providers can segment their customer base on the basis of various conditions.
By the analysis of various parameters (eg: Incoming & outgoing voice usage, Recharge, Revenue, Usage of value added services, Usage of data services etc.) the entire customer base can be segmented on various groups whose behavior and needs will have significant difference which can be identified and addressed to enhance their wallet share.
Moreover, the customer whose monthly usage is above the company's ARPU (Average revenue per user) can be classified as high revenue earning customer. Specific campaigns can be designed and executed to satisfy this group of customers which will be entirely different from the campaigns to be executed for low usage customers.
The customers having high STD call usage (National Long distance calls) can be targeted with specific STD tariff packs.
In a country like India with various ethnic groups, each having very unique characteristics and behavioral pattern, the usage and needs are significantly different. By analyzing their usage pattern, they can be classified into various ethnic groups.
Therefore, by business analytics and data mining, the operators can identify various segments of customers. With further analysis of the data extracted, the operators can identify and address the specific needs and demands of these customer segments.
The business analytics solutions can provide an integrated platform for campaign design and execution. Based on the customer segmentation, churn score, usage pattern, recharge history; campaigns can be designed for retention, revenue enhancement (increasing customer wallet share) and cross-sell and up sell.
For example: A retention campaign can be designed for the customers who have high usage (monthly usage more than ARPU) and have high churn score. These are valued customers and the company will not like to lose them out.
This can be extended to perform the following analysis:
Identifying campaign effectiveness
- Capturing the responses of the customers on individual campaigns
Inferring customers' responsiveness to the channels
- Historical analysis of the customer's responsiveness to particular channel
Providing only the information that customer wants
- Historical study/analysis of customer behavior – provides insights to his needs
Delivering the most relevant message to the customer at the right time
- Historical analysis of his response timings (eg: during Diwali, Holi or Christmas)
Examine the reaction of customers on an email
- Analyze aggregate email response & conversion rates by likelihood of attrition in order to identify potential targets for a new loyalty campaigns
Cross sell & Up sell
Establishing a Business analytics platform within the telcos provides an enterprise wise view of the customer. It provides data regarding the customer's preferences and his/her behavior with reference to all kinds of services provided by the telco.
Analyzing the data extracted regarding the customer usage, their balance availability and their subscription pattern, the telecom service providers can build up data models to identify the product bundling and hence can detect the opportunities for cross sell and up sell.
For example: By analyzing the historic data (say for 6 months) and building a data model on the basis of various parameters of a voice usage customer, the potential customers for data usage and other value added services provided by the telco can be identified, who can be targeted by product bundled promotions.
If it is found that customers who have high wireless voice usage, also have high sms usage, then a product bundling of voice and sms pack can be targeted for this group of customers.
If a group of customer always upgrades to the latest equipment and subscribes to the newly launched services, this group of customers can be targeted with a product bundle of latest available equipment and newly launched services (eg: 3G services with newly launched handsets)
With the help of the available data, the telcos can monitor the performance of the individual portfolios. They can measure the return on investments for individual product/services offered, price plans. Based on the performance analysis, the service providers can decide on which plan/products/services to go ahead with in future. They can perform a profitability analysis on the new products.
Credit Risk Management
Business analytics provides views regarding credit payment risk. It can rate the customers based on their historical behavior and credit dues. Therefore, the services need not have to be disconnected for those customers having low credit risk scores, whereas the customers with high credit risk score need to be dealt with lesser tolerance and can be decided for a termination or shifted to pre-paid scheme depending on further data analysis about those customers.
From the above discussion it can be inferred that business analytics can provide the telcos with the required knowledge about their customers, which can be utilized to identify the intricate needs of the customers and help the telcos to serve them better, therefore to achieve an increase in revenue from individual customers and enhance the profitability of the business.
“This article is brought to you by Gus Woltmann”.