Sprint-Nextel’s Winning Strategies for Integrated Customer Management

During BetterManagement LIVE 2006, Sprint-Nextel, Amdocs and SAS presented a look ahead at the future of the communications industry and let attendees in on a secret to Sprint-Nextel's success: Integrated customer management has become a critical factor in helping the company retain, cross-sell and up-sell its most profitable customers and attract more like them.

Presenting were Mike Lurye, Director of Technical Marketing for Amdocs; Scott Radcliffe, Domain Principal for CCE at SAS; and Jennifer Powell-Elgin, Director of Customer Base Management at Sprint-Nextel. Here's an overview of what they had to say.

Success in the rapidly changing communications landscape
As new products and services flood the market, new players emerge, and new value chains and routes to the market are changing how selling happens, three key focus areas will help you outpace your competitors:

• Speed and innovation – Because the number of products is growing and the life cycles are shortening, time to market is paramount. You need to be able to get in early to gain an edge, and you also need to be able to get out quickly, because it's inevitable that not every product or service will be successful. "And that's OK," assures Lurye.
• Efficiency and reduced costs – Margin pressure increases with new competition and dropping prices. Network and service convergence has opened new opportunities for improving cost structure by helping reduce IT and operational costs.
• Customer focus – It's critical for you to create enduring customer loyalty. Customer experience (beyond reliability and price) is the key driver of satisfaction.

Your customer relationship is your most important asset. No matter what new product or service you come up with, you can rest assured that someone else will replicate it. Customers assume that they will get reliable service at a fair price. So your best opportunity to stand out is by offering a unique customer experience. The social value you offer your customers means something, and no one else can offer the same experience," Lurye says.

You need to deliver an intentional customer experience – which means thinking about your service and products from the customer's point of view instead of your own, and determining how to provide a better experience. And you'd better make sure all of your business units are agile and aligned to deliver that customer experience, and extend the practice to partners if you need to create an even stronger, more positive result for your customers.

How analytics helps you create positive customer interactions
The intentional customer experience must be intelligent. If the actions you're capable of performing operationally aren't informed, if you're executing on the wrong things, or if you have the intelligence but can't execute, you're not going to provide a good customer experience. So, what do you do?

Analytics is at the heart of a successful – and profitable – customer experience by enabling four stages of establishing a strong customer relationship:

• Opportunity identification.
• Segmentation and financial analysis.
• Program design.
• Execution and measurement of success.
  

Use analytics to help you identify opportunities: "You'll have a hard time realizing success if you don't identify specific business opportunities that you're going after by creating a customer relationship management program," Radcliffe advises. Begin by clearly defining business goals and establishing a baseline for where you are now in relation to meeting those goals. For example, imagine you're trying to forecast a large customer's spend over the next two years. If you can do that, the next step is to determine how you will make money from the forecast.

Use analytics for segmentation and financial analysis: The next step is to identify which specific customer segments will help you meet that business opportunity. Using those customer segments, you can model potential actions and conduct financial analyses of how a behavior in one segment – such as declining revenue per customer – might forecast a need for treating another segment differently to offset behaviors without losing money.
 
Use analytics to design test programs: Create a program that will help you test hypotheses you've generated from the forecasts, which help you prove a specific business case. Develop programs that include tracking reports so you can identify specific customer segment successes.

Use analytics to execute and evaluate: Now it's time to put the forecasts and programs into action. "It's not enough to simply have the forecast or the segmentation capability. You have to be able to execute a program that improves the actual customer experience – in the call center, on the Web, in your marketing promotions," says Radcliffe. "This is where the cross-pollination happens between the planners and the customer management implementers, and it's where the real money-making opportunities come in." But don't stop there. To understand whether your investment paid off, you have to evaluate the success of the program, which means tracking the behavior within these customer segments to see whether you're actually generating more revenue per customer.

Case study: How integrated customer management increased revenue at Sprint-Nextel
In 2001, Nextel was facing familiar challenges: pricing pressures, churn, limited coordination of efforts to grow revenue from existing customers. All of its accounts were treated the same, regardless of their potential value.

Within three years, Nextel was the industry leader in retention – with increased revenue from its existing customer base and a single organization that was responsible for coordinating customer strategy.

How did it achieve that transformation?

Nextel began with three goals:
1. Increase the percent of its base under contract.
2. Ensure the retention of its most profitable and most at-risk customers.
3. Increase the lifetime value of its customer base. Nextel also knew it would have to align programs and the way it treated particular customers based on the value of that customer segment.

To achieve this, Nextel implemented analytics-based targeting, segmentation and evaluation. Using predictive models, it identified key at-risk behaviors to address:

• Problem: Churn because of equipment problems.
  Solution: Discounts to upgrade to higher-performing handsets.
  
• Problem: Churn because of price plan and/or usage.
  Solution: Migration to more current price plans more tailored to the customer's current usage patterns.
  
• Problem: Dissatisfaction over network problems.
  Solution: Target customers who could benefit from upcoming network enhancements.
  
• Problem: High risk of churn despite the lack of equipment, usage or network issues.
  Solution: Issue resolution to uncover and address the source of discontent.
  
• Problem: Contracts have expired or are about to expire.
  Solution: Target customers whose contracts are getting ready to expire with offers to renew.

It's hard to argue with a 50 percent ROI
Nextel started with a small pilot program to show the value of the analytics. Churn went down by 50 percent, and customer values went up, helping Nextel retain $1 billion in revenue.

Powell-Elgin attributes the success of the program to actually being able to show a significant difference in the pilot program. "The key was putting actual numbers in front of people and showing them the impact – increases in revenue per segment and reduction in churn," she says.

Another critical component of Nextel's success was the integration of multiple teams within the organization – including the finance department, marketing, the analytical team, program managers and touch-point managers. "You have to get the broader organization involved. We agreed upon metrics for success with our finance department and relied on them for mutual analysis. The marketing team was able to show how much more responsive customers were to these more targeted offers. So we had several independent groups who were able to say, 'This is real.' That gave us believable validation of the program's payback and enabled us to achieve significant success."