Contact Center Solutions Featured Article

Social Network Analysis Comes of Age

April 06, 2009
By ContactCenterSolutionsWorld Special Guest
Aidan Connolly, Chief Executive Officer of Idiro Technologies


Since the economy began its decline about a year and a half ago, many mobile operators in highly saturated markets like Western Europe and North America have come to an epiphany. The constant battles waged between operators for market share were becoming less and less effective as margins became compressed, operating costs continued to escalate, and the mood of consumers grew more wary. Shotgun-style techniques that were once highly effective in building a customer base, like price wars, aggressive promotions, and the doling out of free or highly subsidized handsets, have become relics as mobile providers struggle to keep their heads above water in a down market.

 
In a business where acquisition was once king, retention has taken hold as the modus operandi to increase revenue and improve profitability. And for good reason.
 
Just a few years ago, operators could stomach a 20 percent churn rate because history taught them that they could always dangle enough carrots to attract a boatload of new customers to overcome any contraction in the base. Today, many of these same providers are realizing that out-acquiring their competitors just doesn’t work in an environment where both technologies and bundles are commoditized, operating costs are high, margins are narrowing, and subscribers are exploring every possible angle to save their hard earned money. In many markets around the globe, mobile penetration is at 100 per cent — in Italy, for example, it’s at around 150 per cent. There just aren’t enough new customers around to overcome churn.
 
So now operators face two options in trying to make their numbers. They can continue to focus their efforts on customer acquisition and try to steal as many subscribers as possible from competitors — a high cost strategy — or they can take a more cost effective approach which is to focus on retaining customers by enhancing customer service, intelligently offering new value-add services like data and video, and demonstrating long-term value to customers by offering cost-saving vehicles and assistance.
 
Clearly, retaining a loyal and profitable base is the preference. But how do providers keep their subscribers satisfied and profitable at the same time? They’re already in the cellar regarding pricing, and the shotgun approach of selling features and functions to a hesitant and cynical audience may actually turn off their base and ignite churn. To remedy this situation, a number of high-profile, market-leading operators have turned to Social Network Analysis (SNA) solutions as a means to better understand customer dynamics, and then apply this information to make more intelligent and relevant offers to their customers.
 
About Social Network Analysis
Simply defined, SNA is a well-established science that maps the relationships that exist between groups of people, requiring intensive data collection to correctly depict the links between people. In the world of mobile communications, SNA is conducted through analysis of the operators’ CDRs, giving a more detailed understanding of the interrelationships between users and their propensities to adopt certain products and services.
 
SNA technology has evolved to a point where it can accurately identify subscribers who are most likely to leave, most open to receive targeted offers, and who have influence over other customers. Based on both advanced mathematics and sociology, SNA is considered cost-effective, reliable, and in complete compliance with customer privacy and data protection regulations.
 
Operators have found a high degree of success using SNA to refine existing retention strategies, intelligently up-sell and cross-sell high margin services, such as data and video through both viral and more conventional marketing, and to increase profitability by extending customer lifecycles and reducing operating expenditures.
 
SNA: How It Works
Powerful SNA solutions collect data from billing records that are typically stored in the operator’s data warehouses. In most cases, a minimum of three months’ data is required in order to perform a proper analysis. Once the data is cleansed and verified, the SNA solution begins a complex series of functions to classify the relationships between users that are based on several criteria, such as frequency and length of interactions (telephone calls, texts, IM, etc.) the directionality of these interactions (who is calling whom), as well as the time of day and day of week these events took place. The application then maps out all the social networks that exist within the base, and identifies the role each customer plays within a particular group, as well as quantifying the level of influence each individual has within these groups. Once this process is complete, the provider can use this “social model” to develop customized scores according to the mobile operator’s needs. For example, details of recent churners can be utilized to predict how churn is going to spread within the mobile operator’s customer base and which subscribers are most likely to churn next — this is a phenomenon commonly referred to as churn contagion and is something that can only be quantified using SNA.
 
Privacy and Security
It is important to note that mature SNA solutions do not compromise customer security and privacy. Specific customer identities are anonymized in SNA. Even user account numbers are redacted in the process. What’s more all this information is intended solely for the use of the operator to better understand the activities and behaviors of its subscribers as it pertains to mobile service. The information cannot be sold to marketers or other vendors according to EU and US law.
 
Reports generated by SNA can be quickly delivered, usually in a couple of days, to retention teams, marketing groups, customer service representatives, and other front- and back-end staff.
 
SNA in Action
Providers that have chosen to leverage SNA are reporting profound improvements in many areas of their businesses, including reduced churn, higher margins and greater profitability.
 
One recent example is a large mobile operator in Europe, which like many of its competitors, suffered from high customer churn. Through the effective use of SNA, this provider has been able to identify more “at risk” subscribers, not only in terms of those looking to leave, but just as importantly, customers who can influence family, friends, and associates to jump ship. By using SNA, this operator more than doubled the effectiveness of its traditional retention efforts, and added seven million euro to the bottom line in the process.
 
Success can be just as common when looking to increase revenue. Another operator recently conducted a trial to compare SNA against a traditional marketing campaign they were conducting to promote a new brand of handset. By using SNA to target the handset to a subset of influential subscribers who then virally marketed the product to their peers, the SNA solution showed a 400 per cent higher take up rate than the traditional marketing campaign — with higher margins and lower operating costs.
 
Conclusion
As mobile providers seek new methods to increase revenue and remain profitable, many are using Social Network Analysis as a viable and cost-effective resource to address core business needs, such as retaining good customers, increasing margins, and reducing operating costs. Advanced SNA solutions are secure and reliable, meeting both U.S. and EU data privacy mandates.
 
Most importantly, powerful SNA tools enable operators to build long-lasting, mutually beneficial relationships with customers, which, as everyone agrees, is always good for business.
 
Aidan Connolly serves as chief executive officer of Idiro Technologies, a Dublin, Ireland-based provider of Social Network Analysis services to mobile operators in North America and Europe. He can be reached at aidan.connolly@idiro.com.

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Edited by Greg Galitzine

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