Customer value management: The path to profitable growth in telecom

October 24, 2012

Executive summary

As the telecommunications industry becomes even more competitive, operators are struggling to find paths to profitable growth. Markets are saturated, new subscribers are getting more expensive to acquire, and current subscribers are apt to leave (“churn out”) in their search for a better deal.

In this business environment, operators need to stop depending solely on metrics such as gross adds and market share to measure growth. Instead, they need to develop a capability we call customer value management (CVM) — a holistic way of evaluating individual subscribers in terms of their overall profitability, now and in the future. This capability covers subscribers at every stage of their relationship with their operator, and should be considered by mobile, fixed, and integrated telecom companies.

Relying on a combination of tactics, including customer payback period, budget rebalancing, tailored customer rewards, and crossand up-selling campaigns, CVM has the potential to boost EBITDA (earnings before interest, taxes, depreciation, and amortization) as much as 5 percentage points among certain customer segments, which is no small amount for operators determined to boost earnings.

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Conclusion

A complete CVM system has many advantages. It can provide an indepth understanding of the behavior and needs of customers based on a carefully tailored analysis of each individual. This in turn enables operators to use clearly defined, executable value improvement levers that can deliver short-term, measurable results, and ultimately offer a way to consistently improve value and profitability under changing market circumstances.

Given the increasing saturation of markets in the developed world, the rising pressure to retain existing customers, and the need to improve contributions to the bottom line, every operator should view CVM as more than a nice addition to their analytical skills. It can be a true competitive capability in the race to increase profits in the years ahead.

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Customer value management: The path to profitable growth in telecom