Cover Story : The Customer's Keepers
With a ramped-up loyalty and retention program, Charter Communications is having positive, measureable churn reduction resultsDecember 2008 By Heather Fletcher
"For any subscription services firm, and cable would be that business model, churn is always, always an issue," Doolittle says. "So while the economy might be impacting the rate of churn, our tactics are generally fairly robust, just because of the nature of the business. We have 12 million subscribers in the footprint, and about half of those are customers. And in any given month, they are choosing whether or not they're going to continue their service with us."
Charter seems to be holding its own, according to industry judges. In August, JPMorgan analysts characterized Charter's subscriber "loss stabilization," or churn reduction, as a bright spot in the company's second-quarter performance.
How Charter is doing compared to other cable providers is difficult to independently measure. The industry's overall churn rate is a closely guarded secret—even the Cable and Telecommunications Association for Marketing won't disclose it. Therefore, Charter declined to reveal its churn rate.
Keeping Customers 101
Every customer is subject to leaving on any given day, says Phil Bellaria, Charter's vice president of customer loyalty.
So, Bellaria says, the company approaches retention on three levels:
- through improving end-to-end customer service, such as increasing network reliability and customer relations (i.e., allowing call-center agents to route customers with service issues through the "same-day service" queue);
- by marketing methods, including launching "Live It" nationwide in July and continuing trigger-based retention programs;
- via enhancing brand perception, through the media (i.e., commercials on Charter's cable stations) and speaking to customers regarding Charter's value to them and differentiation from other brands.
"My favorite retention success stories are just the stories I hear from different agents about how they were able to resolve [a] customer's issues and the customer wrote back and said, ‘Thank you so much,'" Bellaria says.
Doolittle adds in the truism that it's more expensive to pull in new customers than it is to keep the old ones. So on the analytics side, Charter maintains two predictive models geared toward divining which households will churn.
The first overlays the following data: demographics; service history, including what customers buy and whether they are amenable to cross-sells and upsells; contact center history regarding customer experience; and engineering data, such as how many service outages the household endured.
The second model sounds simple: It looks at how long the customer has been a subscriber, as longer-term customers tend to be more stable.
"We've been able to pretty effectively push analytics into our direct response marketing tactics, primarily direct mail, outbound telemarketing and online," Belle Isle says. "And what we want to also do is push that same type of insight to our contact center. So as people call in, in response to a direct mail piece or an e-mail offer, the call-center representatives are enabled with the same customer insight for that transaction as we have when we're trying to decide what to mail and who to mail or who to call or what offer to place in an e-mail, to really guide that interaction."
Meanwhile, even though Doolittle says some subscribers are considering disconnecting or downgrading service because of the volatile economy, Bellaria adds that most customers are staying put.
"On the retention side, we haven't seen much of an impact from the worsening economy," he says. "I think in a situation like this, a lot of people kind of hunker down and cut out discretionary spending. But, therefore, things like Internet access and savings through your telephone service and entertainment through your cable TV service become even more important. I'd say we have seen impacts on the margin, but not as much from a retention perspective."
A Closer Look
"A real key to retention is to offer good service to the customer and then to also overlay that with some retention programs that help keep the customer around longer," Doolittle says.
Belle Isle says any given month, Charter has at least four loyalty and retention plans in full swing. The mainstays are "Live It" and trigger-based programs, such as "Double Trouble" and promotion roll-offs.
Just three months into the "Live It" program, 162,000 customers joined. Belle Isle predicts more than 200,000 will sign up for rewards by year's end, and as many as 450,000 will be living it up by the close of 2009.
"Double Trouble" customers get extra attention because they've made two service calls in 60 days, with a Charter truck needing to visit their homes at least once. Depending on the month, this group has between 3,500 and 5,000 customers in it, Belle Isle says.
Bellaria says that after Charter makes the repairs, it works on repairing the relationship. Subscribers particularly respond to the Hallmark apology card. "I think customers just appreciate the honesty," Bellaria says of the program that began in 2006.
The final example, subscribers who are nearing the end of a Charter promotional deal, tend to number around 50,000 a month, Belle Isle says. The company then works with customers to see if they prefer downgrading their service or continuing their current service levels with the standard service rates. Also, Doolittle adds, Charter offers longer-term promotions like the two-year, "Triple Play" option of bundled cable television, Internet and telephone service in one, lower bill.
"I think that the most important thing is that Charter is really on the leading edge of loyalty and retention marketing in the cable industry," Belle Isle opines. "And we're doing that, not for its own sake, but because we recognize that we need to provide extra value to our customers and that we need to really strengthen the relationship in a two-way manner. Kind of create the conversation ... really drive an actual relationship with our customers."
That Personal Touch
At times, it may seem like Charter marketing executives are taking their retention and loyalty responsibilities home with them. That's probably because they are.
Bellaria says Charter's "Good Neighbor Policy" is an aspect of brand differentiation that employees take to heart. Charter is a local company that is locally active, unlike many other competitors, he says.
Still, it's a little surprising to hear that Doolittle, Charter's vice president of marketing science, would personally handle a customer complaint. One of his mother's friends called him, upset because Charter hadn't given her an instruction manual for her DVR. "So I went to the local office near our headquarters and got that DVR instruction manual and mailed it to her to help keep her as a customer," he says, laughing. "Sometimes it's something as small as the instruction manual. Sometimes it's a bigger issue."
Belle Isle says his responsibility is his next-door neighbor: "I get calls every couple weeks: ‘The cursor's not moving on my laptop.' We're all ambassadors, I guess."