In 2003, losses caused by churn amounted to €4.5bn in unnecessary expenses and €5.6bn in lost revenue, according to a new report from Analysys Research, "Retaining Customers and Minimising Churn: strategies for mobile markets". With Western European mobile markets saturated, controlling churn will be the key differentiator for ongoing success and profitability. The report warns that mobile operators must pursue cost-effective churn-management strategies that suit their market position, or face significant loss of market share over the coming years.

There are already significant differences in churn levels from operators in the same markets. "We have observed churn rates as different as 17% and 35% in the same market", explains Eddie Murphy, author of the report. "Control of churn relative to the rest of the market will become a key differentiator between the successful operators and the 'also rans'. How good operators are at retaining their existing customers will be critical to determining which operators will weather the storm and which operators will go into decline".

The report evaluates a range of strategies varying in cost and effectiveness, including the use of account managers, retail outlets, brand-building, handset upgrades, bundling, special offers and longer contract terms. It points out that operators need to take different approaches to churn depending on circumstances. For example, large, established operators will choose from a range of defensive strategies, while new 3G entrants need to aggressively build their customer base, but will be attracting customers with a willingness to churn.
Ian Channing