Today consumers are spectators of a price war and promotions that telephone companies offer in order to have new customers. What happens with this strategy is that users move from one company to another without showing any loyalty. Their main interest is to get the best rate. With number portability, implemented by the IFT in 2008, where the user has the right to keep their phone number when they decide to change operators, the pain of migrating from one company to another is less.
Although the number of mobile phone users has grown year after year since 2016, where a growth of 48% was registered against the previous year, the subsequent growth year after year is only 1 digit, with the exception of 2020 to 2021. The foregoing according to a report published by Statista in August 2022. Given this context, the growth strategy in new users of the telephone companies lies in bringing users from other companies through discounts on rates and plans, generating high churn rates, which intensifies one of the biggest pains in this industry.
According to a study conducted by Bain & Company, the average mobile churn rate in developed markets is around 20%, while in emerging markets it can be as high as 50%. Abandonment rate is an essential metric for telcos because it directly affects revenue. Reducing abandonment by just 1% can increase profits by up to 5%. There are many reasons customers may drop out, including poor customer service, high prices, and poor network coverage. However, one of the most common reasons is simply because customers find better deals elsewhere. This is especially true in the mobile market, where there is a lot of competition and prices can vary significantly between providers.
One of the actions that telephone companies can take to reduce the abandonment rate is to focus more on the customer service they provide to their users. The second cause of abandonment, after the part of fees, is precisely the one related to the poor service to B2C and B2B customers that the industry generally offers. Not for nothing, but the lowest NPS reported is precisely that of the telephone industry. The foregoing is in accordance with the publication made by experience benchmarks, which states that the NPS of this industry is 31% while others such as financial services is 44%. If there is a correlation between churn rate and NPS: Promoters rarely churn, while Neutrals and Detractors are more likely to churn. The net NPS score can be an early warning that the customer may soon end the relationship with the phone company.
According to the same study published by Bain & Company, across most industries, net NPS scores explain roughly 20% to 60% of the variance in organic growth rates. On average, the NPS leader in a particular industry outperforms its competitors by a factor of more than two times. In other words, a company’s NPS is a good indicator of future growth. There is another important caveat about the connection between NPS scores and growth: a high score by itself is not the real goal. A high score alone does not guarantee success. NPS simply measures the quality of a company’s relationships with its current customers, and high-quality relationships are a necessary but not everything.
A promoter user can become a sales channel by referring their friends and family while the detractor, in addition to abandoning, will surely tell a group of close people to do the same.