TACKLING CHURN – AN ENTERPRISE COMMUNICATION SERVICE PROVIDER’S PERSPECTIVE

1. November 2015 Mandar M. Mungee|
PLEASE MIND THE
GAP BETWEEN THE
GROSS & THE NET
TACKLING CHURN – AN ENTERPRISE
COMMUNICATION SERVICE PROVIDER’S
PERSPECTIVE

2. If you have any comments, questions or suggestions about Churn Management,
please email us at churn.management@tatacommunications.com
ENTERPRISES – THE HOLY GRAIL OF CUSTOMERS FOR CSPs
CHURN & LOYALTY – TWO SIDES OF THE SAME COIN
As analysts cry hoarse about Data being the new Voice, CSPs serving
enterprise customers are going through the curve that the retail
segment rode earlier on - of protecting the existing customer and
revenue base. However, prosumerism and head winds faced by the
global economy are forcing a shorter learning curve for enterprise
CSPs in keeping their customers loyal. An enterprise business
portfolio is well recognized as an attractive destination for CSPs
given the earnings potential which it presents. However, incumbents
and new entrants alike (either greenfield or lateral moves by retail
CSPs) in the enterprise space are waking up to the reality and
challenges of protecting their customer and revenue bases, i.e.
managing their churn.
Growth ambitions of enterprise CSPs are huge and each is outdoing
the other in the race for market share. Churn acts as a speed breaker
in CSPs’ unrelenting, year-on-year revenue growth aspirations and
adds to the task of already ambitious order booking targets. Often,
macro-environmental challenges as well as industry-specific problems
play spoilsport in the achievement of the CSPs new business
acquisition targets. It is during such periods of stress in the order
book that managing churn comes to the rescue of CSPs for meeting
their planned revenue targets. On the flip side, when new business
acquisition is on target, CSPs can benefit from welcome revenue
upsides vis-à-vis plan by restricting churn below provisions.
This reality underscores the need for CSPs to have a winning retention
strategy to deliver business persistency through improved revenue
certainty.
While the definition of churn may see some variations by CSP, a
suggested broad definition of churn can be:
Part or complete loss of revenue from customers arising out of:
Termination of services
Downgrading of services
Price erosion during contract renewals due to discounts extended
Revenue reversals in the books of the CSP due to internal issues
such as process/system inefficiencies or business-related
credits/waivers
Ÿ
Ÿ
Ÿ
Ÿ
Churn acts as a speed
breaker in CSPs’
unrelenting, year-on-
year revenue growth
aspirations.
A short-sighted
approach to managing
churn is more likely to
lead to short-term
outcomes.
2© 2015 Tata Communications. All Rights Reserved. TATA COMMUNICATIONS and TATA are trademarks of Tata Sons Limited in certain countries.
INTRODUCTION
A lot has been said and written about how, in the past few decades, privatization, de-regulation and high velocity
technological advancements have redefined the landscape for Communication Service Providers (CSPs). These
changes are being experienced by CSPs serving any of the three key market segments viz. retail, enterprise, or
other service providers. Natural shifts in customer behaviour across all the three segments are being observed, as
they are increasingly spoilt for choice in a hyper-competitive marketplace. Furthermore, the innate characteristics
of each of the three segments are placing different demands on the CSPs' serving them. To compound the CSPs'
challenges, technological and process innovations are eliminating exit barriers for customers.
Until about a decade ago, the loyalty challenge was more pronounced amongst CSPs serving retail customers,
given the higher propensity to ‘look for a deal’ and faster tumbling of the exit barriers in the consumer telephony
space. With many of these retail customers being professionals, they became prosumers which accelerated the
shifting of loyalty patterns in enterprises too!

3. In their eagerness to retain customers and revenues, CSPs are looking inwards to explore ways and means of
managing churn. However, not many of them are providing this issue the focused attention it deserves. Often, this
may lead to a myopic treatment of such a strategic area of the business. A short-sighted approach to managing
churn is more likely to lead to short-term outcomes.
In enterprise business, where relationships are the fulcrum on which two organizations associate themselves, an
unfair premium is placed on trust. A CSP earns the trust of its enterprise customers over time, by visible and
consistent demonstration of all of the following:
Tailoring optimal techno-commercial solutions
Delivering consistently superior experience across the proposal – to
– payment lifecycle
Long term commitment through consistent high market standing
and sound financials
There is an inverse correlation between the Product Penetration Ratio
(PPR) enjoyed by a CSP in an enterprise account and the propensity of
churn faced in that account. Additionally, multi-year contracts involving
complex solutions also mitigate the risk of churn.
While a fair bit of standardization has emerged over time in the
definition and measurement of churn by CSPs serving retail customers,
their enterprise serving peers are still playing catch-up in this area. As
mentioned earlier, different CSPs define and measure churn differently
making it difficult to estimate the average churn levels faced by CSPs
in the enterprise space.
A study of several research papers on churn indicate that every year
CSPs serving enterprises lose approximately 15% to 30% of annual
revenues on account of churn.
Whichever way you cut the numbers, the importance of reducing churn
to meet business growth objectives cannot be ignored.
Common myth places the responsibility of churn management with customer-facing teams. However, of late, with
churn as a metric finding a place in CEOs' dashboards, the enormity of the task of managing churn is unfolding,
demanding active participation from an increasing number of stakeholders within the organization. Depending on
the reason for the churn, correct and timely interventions need to be galvanized from across the various internal
functions of the CSP to aid the retention process.
A concerted blueprint needs to be drawn up to effectively and efficiently retain customers and revenues. A
successful churn management blueprint needs to be inclusive, covering People, Processes, Policies and Platforms.
The business case for investments in a comprehensive, on-going churn management program is justified given
that the cost of acquiring new customers and revenues is multifold, compared to retaining existing customers and
revenues.
To improve retention rates, People, Processes, Policies and Platforms need to interplay in unison.
Dedicated churn management teams focusing on retention of customers and revenues bring the
required focus on this important activity. In addition, it frees up the Sales teams' time to grow the order book.
Broadly, the churn management teams focus on the following:
Proactive renewal of contracts with minimal price erosion; opportunities for
upgrades, upselling and cross-selling to be explored and exploited during renewals
Identify ‘undesirable’ terminations via reactive, proactive and predictive means and
harness the collective power of the internal teams to do ‘whatever it takes’ to effect retention
Ÿ
Ÿ
Ÿ
ŸRenewals Management –
ŸRetention Management –
SO HOW BIG IS THE PROBLEM REALLY?
RETENTION – WE ARE ALL IN IT TOGETHER!
People:
3© 2015 Tata Communications. All Rights Reserved. TATA COMMUNICATIONS and TATA are trademarks of Tata Sons Limited in certain countries.
A successful churn
management blueprint
needs to be inclusive,
covering People,
Processes, Policies and
Platforms.
A study of several
research papers on
churn indicate that
every year CSPs serving
enterprises lose
approximately 15% to
30% of annual revenues
on account of churn.
If you have any comments, questions or suggestions about Churn Management,
please email us at churn.management@tatacommunications.com

4. Processes:
Policies:
Platforms:
Traditionally, the quote-to-cash processes of most CSPs
are skewed towards the new business workflow, with churn
management-related processes, quite often, not getting their due.
It is time that CSPs sit up and take cognizance of the strategic role
played by churn management in the achievement of their business
plan and set up ‘Retention Green Channels’ in their business
process architecture.
A strong framework of internal and customer-facing
policies complements other constituents in ensuring successful
churn management. Some of the internal policies which require
attention include Sales Incentive Plans re-designed to drive
behaviour on net order booking rather than gross order booking,
Retention Incentive Plans designed to drive behaviour towards
reducing churn factored in the annual business plan, etc. In addition
to this, depending on the reason for the churn, empowerment of
the customer-facing teams through appropriate ‘delegation of
power’ for quick decision-making greatly assists in the retention
exercise.
Robust systems for correct, complete and real-time
availability of service inventory containing all the attributes of the
service and contractual details are an essential pre-requisite for the
churn management initiatives of a CSP. It facilitates effective and
efficient contract renewal management helping control price
erosion and credit notes while enabling upgrades, upselling and
cross-selling during renewals. Retention efforts aided by system
workflows to elicit actions from relevant stakeholders stand a
greater chance of success. In recent times, churn prediction
through the use of Data Science is gaining popularity. Big Data
analytics provides the ability to predict churn, thereby providing an
opportunity to prevent the event from occurring through timely
remedial measures against potential churn.
4
SUMMARY
Churn is making itself heard in enterprise CSPs, be it in Strategic Plans, Operating Plans, Corporate
Imperatives, Business Cases, Sales Reviews or General Business Reviews. While churn management by
CSPs serving retail customers has evolved over time, for CSPs serving enterprise customers, the journey
seems to have just started. A top-down approach to churn management brings about the necessary
alignment and sensitization across the organization, which is an essential pre-requisite in driving a
behavioural change towards churn. Successful management of churn comes to the rescue of CSPs in
achieving their revenue objectives, especially when revenues forecasted from new business fall short of
plan. For successfully managing churn, CSPs need to orchestrate cross - functional efforts, enabled by the
right processes & policies which in turn need to be powered by appropriate technology.
© 2015 Tata Communications. All Rights Reserved. TATA COMMUNICATIONS and TATA are trademarks of Tata Sons Limited in certain countries.
It is time that CSPs sit
up and take cognizance
of the strategic role
played by churn
management in the
achievement of their
business plan.
In recent times, churn
prediction through the
use of Data Science is
gaining popularity.
ABOUT THE AUTHOR
Mandar M. Mungee is the VP & Head - Renewals & Retention Management for the Enterprise
business at Tata Communications. Having over 23 years of experience, Mandar has been
associated with the telecom industry for almost two decades. His area of specialization is
enterprise telecom business and network outsourcing. Mandar has successfully executed
leadership roles in key customer-facing functions like Pre-Sales, Sales, Receivables
Management, Program Management, Customer Service and Consulting.
If you have any comments, questions or suggestions about Churn Management,
please email us at churn.management@tatacommunications.com