Earthlink Focuses on Spotting and Keeping Potential Churners
For Internet service provider EarthLink, silence really is golden. The company regularly analyzes its customers with an eye toward identifying those likely to drop the provider. Which does it feel most sanguine about? Those who use e-mail, surf the Web, don't have service issues and don't contact the company.
These customers churn at the rather low rate of 1.5% annually, says Stuart Roesel, EarthLink's director of customer insights, analytics and strategy. “Our contact strategy is ‘Let's just touch the customer on a monthly basis through our e-mail newsletter,’” he says. EarthLink doesn't need an elaborate strategy for retaining a customer it doesn't have to work to retain.
Roesel's energy is much better spent identifying individuals with high attrition potential — and then staving off that likelihood.
“We are not aggressively going after new customers,” he says. “With the overall cost to acquire a customer, especially a dial-up customer, the margins are razor thin. We have to be really careful about the channels we use. Through the online channel we have passive ads, but given the landscape of the marketplace and the percentage of customers who have dial-up, our whole mantra is around retention.”
A multidimensional look
The company's models predict customer behavior 60 days out. “Over the course of two or three months, you can develop a mini-lifecycle,” says Roesel. “But when we target our highest-propensity-to-churn customers, they don't respond well. They're already gone.”
Partly for this reason, Roesel eschews the typical one-dimensional number-crunching that passes for attrition analysis. Often that type of analysis is based solely on the customer's stated reason for leaving. The problem is that this information is usually captured after the customer has left, which moves the individual from the retention marketing stream to the more expensive win-back stream.
“We have to marry the traditional market research with the analytics,” he says. “We talk directly to the customer, [not just] through churn surveys, but through customer service surveys. We have a series of market research activities that are is designed to understand customers across the lifecycle.”
The goal, Roesel says, is to have more than a broad understanding of why customers churn. “[The analysis] shows our non-technical experts — product managers and such — how to talk to customers in English about what their key drivers are.”
Customers who report trouble are ranked in deciles based on several factors, including their churn propensity (which is determined, in part, by the number of calls for service they've made), payment history and use of related EarthLink products. Even a customer having more than one EarthLink address indicates increased affinity.
These rankings are calculated several times a year. Each decile is broken into multiple test and control groups, and EarthLink offers a variety of customer service scripts and incentives designed to reduce customer loss — provided the customers are worth saving.
“If you call and have a question about your bill, we have an understanding of you,” says Chris Schmidt, EarthLink's director of products marketing. The company can tailor a response in accordance with what Schmidt calls a “four-S” strategy — speed, security, service and simplicity — in its messaging.
Rewards of using rewards
The analysis also helps EarthLink target rewards based on the value of each customer. One program empowers service reps to offer Starbucks or Amazon.com gift cards to inconvenienced customers.
Next Page: Making the value case
Previous Page: A multidimensional look
This program might seem open for abuse, but EarthLink has put several checks in place. First, it limits the number of “sorry” rewards a given customer service agent can offer.
EarthLink uses Enterprise Miner, a software offering from SAS that serves as the backbone for all its analytic activities. The program helps determine which customers the company should target with retention incentives. “We've gotten very smart about using analytics [to determine] who we are targeting” with rewards, Schmidt says.
“We've seen a 70% reduction in churn just from that touch” during the critical 90-day period after a service call, adds Roesel. Given the relatively small value of the gift cards — at $5, they represent an acknowledgement of inconvenience by the company rather than a great windfall for the customer — the program pays for itself during that period. And for higher-value customers, such as high-speed Internet subscribers, EarthLink does offer a limited number of $10 cards.
In neither case does the company simply toss reward cards at customers. Customer service calls are followed up with an apologetic note, and a code recipients must cite in order to receive the card. This process accomplishes two goals: It reinforces EarthLink's apology and requires that the customer interact in order to receive the goodie. Second, the company gets a boost in goodwill even among customers who do not collect their cards.
Making the value case
Not that customers are rushing to complain. Paradoxically, the worsening economy may have served EarthLink's retention activities well, as the Internet becomes an increasingly important channel for finding employment.
“The Internet is going to be one of the last things consumers drop,” Roesel says. “They will cut back on long distance or a landline phone, but with people being laid off, they are going to search for a job online and shop for bargains online instead of getting in the car.”
Communicating this value is one of the central messages EarthLink conveys to customers in danger of lapsing, Roesel adds.
Which channels have proven most successful for retention? The company has used telemarketing and direct mail, but given the nature of the offering, it shouldn't come as a surprise that e-mail is the top medium. And Roesel appreciates the ability to track open rates and the click-through rates, which allows him to know which messaging resonates best with his customers.
