The world is becoming generally more mobile and less loyal. With the mobile telecoms industry showing high levels of customer defection throughout Europe, it is no wonder marketers are becoming obsessed with retention strategies. Yet despite all the effort and investment going into customer retention and loyalty, the effective strategies implemented by well known success story companies are not yet the norm.

To provide a measure of the phenomenon Pitney Bowes Group 1 Software has been running research into rates of customer defection across Europe in key consumer industries for the past 5 years and has found the percentage of disloyal customers to be on the rise. In Spain in particular consumers switch mobile telephone provider more regularly than their travel agent or general insurer.

The overall results of the research toppled a number of pieces of received wisdom. The primary findings of the research are as follows:-

• The highest level of customer defection for the Mobile Phone sector in Europe last year was 38.6% in the UK, closely followed by Spain (23.1%) and then Italy (22.6%).
• The industries experiencing the highest rate of customer defection rates are Supermarket Retailers (32.4%), Internet Service Providers (29%), Banks (23.9%) and Mobile Phone Providers (23.1%).

The findings indicate that the Spanish consumer is becoming more mobile and that companies’ retention strategies need to improve to deal with this phenomenon.

The 23.1% rate of churn last year signals to Spanish mobile telecoms providers that over a quarter of their consumers felt they had reason to defect or seriously consider defecting in one year. When Pitney Bowes Group 1 Software enquired further asking Spanish consumers the reasons for their defections and found these to be, in order of importance: 1) not being recognised as a valuable customer, even though they have sent a fair amount and used the company for years; 2) ringing up a call centre and getting someone who is unable to answer your query; 3) ringing up a call centre and getting no answer.

It seems evident that the main issue at stake is customer service and in particular customer communications. As churn rates continue to grow across all industries, it is clear that we are seeing a polarisation between companies successfully adopting the best practice customer communication techniques and technology associated with customer retention, and those who are not.

The Mobile Telecoms industry remains very fluid and customers are easily won with enticing price-based offerings, yet difficult to pin down. Here, strong brands are also having an effect, with the issue of content provision likely to be another key factor in future churn (or indeed inertia) patterns. 3G provision for example has initially disappointed consumers, leading to a mass exodus of defecting customers. Nevertheless, the sector is so volatile that the situation may easily reverse after its initial customer relationship difficulties.

The research found that the US experiences far lower rates of churn, but this probably reflects the closer link in North America between cellphone carrier and handset. In Europe, the two are independent of one another, allowing the SIM card to be fairly portable between models. Now at a decade on from the liberalisation of the Spanish Mobile Telecoms market however, number portability, introduced in 2000, has provided network operators even more ammunition in the form of new and attractive handset ranges to persuade customers to switch. As Spanish mobile phone penetration rates 119% [1] it seems evident that diversification cannot be sustainably played on the field of fashionable handsets and cheaper bundles of calls much longer.

The more successful organisations are prioritising customer profiling to identify the habitual switchers and high value customers, a particularly valid strategy to reduce risk and wastage. Mobile Telephone providers who are experiencing better retention rates are also implementing data-driven marketing techniques to deliver relevant and timely customer communications, and drawing customer information from across the enterprise and out of legacy systems.

In an atmosphere of high or habitual defection rates, the importance of customer profiling becomes paramount. In the first place, the community of habitual switchers must be identified so that retention effort is not expended on high risk customers and those who will defect anyway. These serial switchers have now been given names such as “rate surfers”, “card collectors”, and so on. At the other end of the spectrum, high value (or high potential value), high inertia customers must be made to feel special and further products or services relevant to their needs offered to them under the aegis of a brand that they obviously value. It is the role of data-driven marketing techniques to identify all the shades of loyalty, value and inertia in between these more obvious behaviour polarities, and help develop strategies to keep and develop customer value.

Implementing such strategies requires a truly integrated approach to the customer across all ‘touchpoints’ with the company – face-to-face, mail, phone, email, website, SMS, and even bills, statements and customer correspondence. Every communication that a customer has with the company needs be consistent, relevant and develop customer satisfaction and value at the same time. Otherwise a terse letter, or a rude assistant, or an inappropriate phonecall can undermine all the other investment and hard work that has been put into managing the customer relationship.

The publicly quoted companies who are the main players in the industry studied in this report, are under particular pressure to measurably grow their customer bases, exposed as they are to market sentiment and shareholder scrutiny. Strategies to stem defection are therefore critical to growing the customer base for the lowest possible investment.

Which of the following suppliers have you changed in the last year?
	Italy	France	Spain	Germany	US	UK
Your main supermarket	36.0%	34.0%	32.4%	27.4%	32.9%	27.4%
Your internet services provider	25.7%	22.6%	29.0%	29.2%	38.2%	24.6%
Your mobile phone provider	22.6%	21.1%	23.1%	21.2%	11.7%	38.6%
Your bank	20.4%	16.6%	23.9%	16.8%	25.3%	18.3%
Your car or house insurer	17.6%	16.2%	21.2%	16.8%	12.6%	25.4%
Your main credit card issuer	5.9%	7.3%	9.2%	7.1%	20.6%	16.2%
Your travel agent	12.8%	7.7%	14.9%	6.5%	2.9%	8.1%
Your utilities provider	0.7%	0.4%	1.2%	5.8%	12.4%	17.3%
All sector Average	17.7%	15.7%	19.4%	16.3%	19.6%	22.0%

[1]Buddecom 2008

Pitney Bowes Group 1 Software is a leading provider of Customer Communications Management solutions that span from database to delivery, making it easy to access, enrich and transform data in both the digital and physical worlds. We add value and intelligence to every aspect of communication so you can improve profitability, increase effectiveness and strengthen customer relationships. For more information visit www.g1.com Pitney Bowes Group 1 Software