In any highly competitive industry – particularly those selling subscription services to consumers – churn is a constant threat. For example, in the cable TV business, there is a growing field of competitors, including satellite, wireless and internet-based services that are constantly competing for customers with aggressive promotional offers.
Fierce competition can mean price and promotions wars which often results in heavy churn. Customers are quick to jump to the company with the latest and greatest offer, especially if they have recently received a price increase.
The churn game causes headaches for subscription service companies. When annual renewal season rolls around or when customers roll-off of promotions, any increases in subscriber prices might prompt them to consider alternatives – creating additional churn. Making matters more difficult, many decisions on promotions, packaging, rate increases and how to handle customers rolling off of promotions are often made in a gut-based environment, or even conventional wisdom as opposed to basing decisions on data and analysis.
How can companies combat churn but produce organic revenue growth at the same time? The answer lies with collaborative analytics. By leveraging advanced analytics, companies can develop improved customer insights to unify a pricing process, strategy and tactics with a goal to reduce churn and achieve organic revenue growth objectives.
When bringing together business expertise and advanced predictive modeling techniques, collaborative analytics can answer key questions such as:
- What is the historical response to promotional price expirations and annual rate increases? How does it differ by product / market? What is the revenue impact?
- What are the key drivers to subscriber responses to these price changes?
- What is the best pricing action to take to maximize revenue and minimize churn?
- How might the pricing for some products impact subscriber purchases of other product offerings?
Collaborative analytics has proven successful in answering these questions with sophisticated models that can predict subscriber response to various pricing actions and maximize Customer Lifetime Value. For most companies, this represents a significant evolution from previous goals of generating the most revenue out of a particular customer each year.
One cable industry company with millions of subscribers took this approach and had excellent results. Armed with an innovative approach to answering questions about promotion roll-off and pricing actions designed by Revenue Analytics, the innovative capability delivered $100 million in organic revenue beyond what the client would have ordinarily expected from annual price increases and promotion pricing expiration.
In addition to maximizing revenue, the solution mitigated customer churn from price actions. The result was to drive long-term savings for customers, Customer Lifetime Value for the company, and shareholder value for its investors, thus creating wins for customers, the company and shareholders alike!