How data science can help cellcos combat prepaid user churn

data science
Image credit: GarryKillian / Shutterstock.com

Data science can help cellcos leverage data to not only turn prepaid users into long-term customers, but also enable financial inclusion.

Across Asia and around the world, mobile network operators (MNOs) face a continuous uphill battle with declining ARPUs, increasing costs, and saturating market. According to research from the Economist Intelligence Unit, ARPU levels across 60 markets will fall another 2.3% for MNOs in 2018. Given this outlook, it’s essential that telcos step outside of their core businesses to unlock new markets and identify new sources of revenue.

For many telcos, the biggest market opportunity is also the toughest to tap into: the number of prepaid users across Asia equates to billions of potential long-term customers. But these subscribers represent a leaky bucket to MNOs, with up to 60% of new users turning over within the first 30 days and up to 80% in the first 90 days. The key to reaching and engaging this customer base means stopping this cycle. The answers that MNOs need is in the data that they already have.

Data science
The leaky bucket problem, illustrated. Image credit: Juvo

The problem with subscription-based cellular plans is that they do not speak to the realities of the billions of people who lack access to credit or live in cash-based societies. Many of these individuals have no choice but to use prepaid SIMs, since they do not have access to bank accounts or credit cards. The key to engaging these customer segments is to meet them exactly where they are – to turn to the data that they are already collecting.

MNOs sit on vast swaths of data about prepaid subscribers. This information provides critical insight, to understand behavior in a way that prevents customers from churning.  The challenge that companies run into, however, is that they lack the infrastructure to translate this information into revenue-generating insights.

It’s the hidden engagement pathway that almost no telco is equipped to navigate alone – MNOs equipped with this insight can cross-sell and upsell services, such as an airtime loans and handset financing, at the right time to mitigate the risk of subscriber churn. Moreover, by providing access to digital and financial services, they can make tangible progress against key UN Sustainable Development Goals.

The role of data science

Simply acquiring and competing over customers in a market where people depend on prepaid SIMs is not the answer. The focus must shift to understanding how to engage subscribers, not winning them back once they’ve churned.

While consumers will benefit from subscription cell phone plans, there is a major barrier standing in the way – access to credit. Continuing to upsell subscription plans won’t move the needle in terms of boosting loyalty or revenue. The behavioral economics of cash-based regions don’t support the widespread adoption of subscription plans, no matter how high demand is.

Instead, MNOs need to meet prepaid users where they are. Data science is the mechanism to achieve that. MNOs already have data on prepaid subscribers, but with the help of data science they can make sense of this data to build a picture of subscriber’s behavior. Equipped with this insight, MNOs can begin to offer customers services at their time of need in a predictive, proactive manner. For example, algorithms could notify MNOs that a prepaid subscriber has a low balance. This alert could trigger a push notification with an offer for a real-time credit extension for more minutes. Rather than switching between SIMs, users can go pay back these loans at their own convenience. Predictive models make it possible for MNOs to market to prepaid users as if they were postpaid subscribers.

One Malaysian telco has been testing this model for nine months. Every prepaid user has the ability to take credit extensions as needed. The telco collects anonymous data, learns the behavior of users, builds user identities, and starts to deploy predictive models. By engaging users in the first 30 days, the Malaysian telco has been able to increase retention in the first 90 days. The company starts by meeting users where they are, in a time of need, as early as between the initial SIM registration and first top-up. Prepaid users have the option to continue borrowing minutes. At the 91st day, operators already have 55.5% higher retention than they already would.

Enabling financial inclusion

The identities that MNOs build are more than just pathways for purchasing minutes. These transactions are often the first experiences that these users have with banking and credit systems. That’s why MNOs have a major role to play in countries with financial inclusion goals.

Revenue opportunities are well-supported policy-side and exist within data that MNOs already collect. And with the power of data science, MNOs can engage users at the right time and take them on this journey. Using this technology, MNOs can hold on to these customers for longer than 30 days, all the while opening up new business opportunities for themselves.

A business model whereby telcos do well by doing good —presents a new path to decrease churn, boost loyalty, and put MNOs in a critical position to enable financial inclusion.

Shawn Sanderson, VP of APAC at JuvoWritten by Shawn Sanderson, VP of APAC at Juvo

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