A Analysis of Churn Management in China Telecom Industry

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Contents

1. Introduction………………………………………………………………….. 1 2. Researches on churn management……………………………….…...............1 3. Customer value and churn analysis……………………………….…..............2 4. Churn analysis in china telecom industry..........................................................3 5. Recommendations..............................................................................................4 6. Conclusion..........................................................................................................5 7. References...........................................................................................................6 An analysis of churn management of telecom industry in China

Introduction

Traditional marketers emphasised that increasing sales volume should be the first in the market strategy. With the traditional strategy marketers are oriented toward single sales and they concentrate on products’ features rather than customer services, which leads to the result that it is limited to meet customers’ demands. (Payne et al., 1995) However, today’s competitive market strategies mainly focus on maintaining the relationship with targeted customers in specific segments, which call customer relationship management (CRM). Churn management, a vital component of customer relationship management (CRM), which is critical for a competitive customer relationship management strategy. Companies’ profitability increase year by year due to effective customer retention approaches. Conversely, a high rate of customer attrition tends to gobble up companies’ profits. One good example to illustrate it is that the one of biggest electrical retailer Comet plans to close all stores in the UK because it loses a majority of clients in the keen competition with E-business retailers such as Amazon. Customer churn and customer retention are two significant aspects of churn management. The aim of churn management is to minimize the proportion of customer churn and maximize the proportion of customer retention.

This essay attempts to assess researches to evaluate the importance of churn management. Then the following section will concentrate on the customer lifetime value (CLTV) and churn analysis process. After that this essay will look into the situation of customer churn management in China telecom industry and find out what actions should managers to take to predict, manage and reduce customer attrition in order to achieve competitive advantages.

Researches on churn management

Customer churn always happens, not only in a saturated market but in an emerging market as well. There are two sets of various reasons why customer to switch to another companies or service providers. One set of factors are controllable, for example, a customer passes away or his relocation to a distant location from companies. The other set is controllable, for example, subscribers are dissatisfied with the low quality products, poor after-service, uncompetitive price or competitor activity and word of mouth . The latter set is mainly about customer relationship and which can be improved. According to that, the marketing strategy should concentrate on it to improve customer loyalty and make profits.

Acquiring new customers contributes greatly to profits of corporations and may become a powerful profit engine. However, it is widely recognised that retaining existing customers is much cheaper than recruiting new customers. Gummesson(1999) argues that customer acquisition is 5 and 10 times more expensive than customer retention. The ‘front-end’ expenses of customer acquisition that go over the expenses of customer retention including five aspects in general: ‘personal selling, commission,data collection, supply of equipment , and advertising and other communication costs. ’ (Egan ,2011) It reported that the net present client value have an apparent rise(25%-85%) in several industries including financial service and real-estate...
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