By Shelley Dempsey
A bird in the hand, as they say, is worth two in the bush. Especially when it comes to hanging onto customers in the rough and tumble of today's cut-throat telecommunications sector.
Nowadays, with so many telco services on offer, the customer is king and has many choices. That is what makes it so difficult for telcos to foster customer loyalty.
So with the cost of acquiring new customers extremely high, telcos are now valuing customer retention much more greatly and are feeling more acutely the need to hang onto existing living and breathing subscribers.
Enter Emagine International, based in Sydney. Reducing high customer churn rates at telecoms firms is its specialty, and Emagine's software and consulting services aimed at preventing churn are proving popular with weighty players in the marketplace. Half are in the Asia Pacific region and half in Europe.
The business has four software clients and about 40 consulting clients. Software clients include Hong Kong Telecom, Star Hub in Singapore and dingo blue in Australia. "Plus we've got 30 carriers in our benchmarking study and many activities happening in Taiwan and Malaysia as well," says Peters. Consulting clients include British Telecom, Vodafone, C&W Optus, Virgin Mobile Australia, AIS in Thailand and Eircell in Ireland.
Other e-commerce companies such as eCOM Global and Media Hub have also been clients.
Telecommunications industry veteran and Emagine CEO David Peters, who set up the firm in 1998, says revenue has doubled year-on-year and that next year the plan is to again double it further.
"We've made the investment now in our product development. So this year we'll break even and have a modest profit and next year we'll be looking at full operations and profitability and moving forward."
He says growth has been spurred by industry recognition of the expensive phenomenon of customer churn. "Customers defecting and going to another provider is an endemic problem in the industry," he says. "Between 25 and 50 per cent of customers change carriers every year and it costs the industry globally in the mobile market alone about $US120 billion in lost revenue and wasted acquisition costs. So it's a huge problem."
Churn Rates Can Be Cut By a Quarter
Peters says that Emagine is scoring significant success rates with clients, in some cases lowering customer churn numbers by about 25 per cent.
"In some customers, there's a huge benefit," he says.
One of the big problems with churn is that it's simply a barometer of the health of the organisation concerned. "If customers are leaving, there are often problems which are very deep-seated and deep-rooted," he adds.
"It could be anything from the billing being incorrect, or the customer service being poor or the network not working, through to the marketing program not being effective or the product and price and brand not hitting the mark.
"It's sometimes difficult to isolate the specific cause and effect with churn, so we use a number of indicators." A major and unique offering is a global benchmarking study, where major telcos from around the world report their experiences in reducing customer churn.
Thirty to 40 carriers are consulted in the yearly study, now in its third round, and findings are presented anonymously to other carriers. "They basically report back what their churn is and how it's moved over the past 12 months and what it is they've done across the entire organisation to address churn," Peters says.
"We share the results within the club. It's a blind study, so nobody knows who anybody else is, but they can all see themselves and how they compare." Details of the study can be accessed at www.emagine-int.com
"Out of that, we can tell the operators firstly how far they are away from best practice, secondly what that is worth in dollar terms and what they should be investing to reach best practice and thirdly, give them a specific set of individual recommendations as to how they can get there."
Emagine's revenue at present derives from about 60 per cent software sales and 40 per cent consulting services. A range of effective and advanced software solutions can offer providers a profit and loss account for each customer and solutions or offers designed to stop the customer from leaving.
"The swing is moving more towards software sales, certainly," says Peters. "It's been our strategy really to be a product company with consulting products, rather than the reverse."
Internet Allows Self-Serve Options
For the phone customer, the Emagine software range is internet-enabled, with some major advantages. "It keeps the cost of operations lower and allows customers to self-serve and self-select," he says.
"We believe customers performing self-customisation is more effective in a marketing sense than personalisation, where you try to second-guess what customers want. So we let customers s elect the offers which are most appropriate for them, rather than having the operator trying to guess that, which is quite an effective strategy.
"It also enables the operator to create a community using our software. So all the communities can be online using email or SMS.
"It's basically about making the right offer to the right customer at the right time."
Riding on a new wave of thinking in the telecoms field, Peters says the whole shift in the industry now is towards profitability, rather than market share. Keeping, rather than catching customers is the key to the strategy, which is a real change in the mindset for telcos, who have historically chased after that elusive next customer instead of keeping the ones they already have.
"Existing customers are the ones that are generating the profit for operators today, with penetration rates in many markets at between 60 to 80 per cent. They are forecasting it will go up 100 per cent when we have devices talking to devices, rather than people talking to people," he says.
"With telemetry devices and geographical positioning systems on cars, they're actually forecasting penetration rates of 120 to 130 per cent in some markets."
Even the current progression to 3G has affected markets greatly already. "Because operators have invested so much, especially in Europe, with 3G auctions, it has put the pressure back on them to make their existing networks pay off.
"So you're seeing an explosion in SMS traffic, and in the GPRS networks which are coming out now, you'll see a number of innovative applications where handheld PDAs are integrated with the phone and where wireless email becomes more and more important."
With a staff of 22, half permanent and half contract, Emagine has grown from the initial efforts of Peters himself in just three years. After 10 to 11 years working in the telecoms sphere, Peters took his consulting and solutions offerings and started Emagine International in 1998.
For the past two years, the business has operated as part of the Australian Technology Park's Innovations bizConnect Incubator scheme, but has just graduated this year and moved out into independent premises near the park.
As the business has grown, so have some powerful partnerships. Major partners are Accenture, with whom Emagine has a marketing alliance for Asia Pacific and Europe and telecoms systems integrator Cap Gemini Ernst & Young.
Software consulting partners also include SAP, Peoplesoft and Oracle.
Client success has led to a new six-figure capital-raising in the market just before Christmas for Emagine, via a local boutique venture capitalist, which chooses to remain anonymous.
"We're funded well for the organic growth that we now want to continue to build on," says Peters. "This year our focus is really on survival through the next six months. I say that in the sense that now is not the time for growth, now's the time to consolidate and to really focus on building a strong presence in the Asia Pacific market."
Reprinted from australia.internet.com.