Description
telecom service sector
A REPORT ON
CUSTOMER RETENTION IN TELECOM SERVICE SECTOR
Submitted in Partial Fulfillment for the Award of Degree of Master of Business Administration
2012-13
Submit By:Abeyson Jose MBA II Semester (PSOM)
{DEPARTMENT OF MANAGEMENT STUDIES} POORNIMA SCHOOL OF MANAGEMENT ISI-2 RICCO INSTITUTIONAL AREA GONER ROAD SITAPURA, JAIPUR
Acknowledgement:
I would like to express my gratitude to all those who gave me the possibility to complete this Contemporary issue report. I want to thank the Department of Management Studies for giving me permission to commence this report in the first instance, to do the necessary research work and to use department data. .
I want to thank them for all their help, interest and valuable hints. A Special thanks to Miss. Ity Patni and Mrs. Joytsana Tyagi Asst. Professor DMS PGC at the final version of the report for English style and grammar, correcting both and offering suggestions for improvement, and for giving me chance to get such an experience. .
Abeyson Jose
PREFACE
The telecommunications sector is changing radically. The changes are driven by a combination of market, business and technological forces. There are many factors that influence the market: — The globalization of the economy is forcing many multinationals to expand into new markets. These companies look for a single provider to meet all their telecoms needs. — Telecom operators looking for new revenue streams are entering the international market place. — New technologies — like wireless, digital subscriber line (DSL) and voice over internet protocol (VoIP) are enabling new service opportunities. The demand for bandwidth and highspeed access is growing, driving the development of new services such as wireless broadband and DSL. — Customer awareness and knowledge is increasing. Customers want services that satisfy their unique needs and demand reliable service delivery at competitive prices. Information must be easily accessed, anytime, anywhere and anyhow.
Introduction Indian Telecom Sector:
The telecom services have been recognized the world-over as an important tool for socioeconomic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also. Status of Telecom Sector: The Indian Telecommunications network with 960.9 million connections (as on May 2012) is the second largest in the world. The sector is growing at a speed of 45% during the recent years. This rapid growth is possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sectors. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provides easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. Presently, all the telecom services have been opened for private participation.
Table of Contents Content
Acknowledgement Preface Executive Summary Industry profile Introduction Objectives and Scope Research Methodology Review of Literature Data analysis and interpretation Facts & Findings Conclusion Recommendation Limitations Bibliography
Page No.
EXECUTIVE SUMMARY
The research mainly emphasizes on the retention of customers in telecom service sector. The Indian telecom industry is the fastest growing industry with an addition of 910 million monthly subscribers. The Indian telecommunications network with over 375 Million subscribers is second largest network in the world after China. Major players in this sector are BSNL, MTNL, Airtel, Vodafone, BPL, Tata, Idea, etc. Buyer power and threat of rivalry is very high in Indian Telecom Sector. Both these factors are formidable. This could be reason of consolidation in the industry. Companies try to reduce threat of rivalry by merging or buying out rival companies. Telecom sector is one of the integrated parts of economy of any country and the Government regulatory and policy initiatives have also been directed towards establishing a world class infrastructure in India also. It provides an ideal environment for the investment but it also has a very complex structure. The challenges imposed on the Indian telecom market are increasing day by day because of the new technologies and knowledge. The government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecom industry. The booming domestic telecom market has been attracting huge amounts of investment which is likely to accelerate with the entry of new players and launch of new services. Despite the gloomy outlook owing to the global recession/slowdown in the economy, the telecom sector of India continues to attract record number of new subscribers and to retain their existing customer for their continuous growth. The Indian mobile phone operators have been adding about 8-10 million subscribers every month throughout this year, and the figure has regularly topped the 10 million mark during the last three-four months. Considering the current pace of fresh additions per month, India has the potential of taking the total tally of subscribers to 700 million in the next five years from the current level of about 350 million, second only to China.
INDUSTRY PROFILE
TELECOM SERVICE SECTOR
The telecom industry has been divided into two major segments, that is, fixed and wireless cellular services for this report. Besides, internet services, VAS, PMRTS and VSAT also have been discussed in brief in the report. In today’s information age, the telecommunication industry has a vital role t o play. Considered as the backbone of industrial and economic development, the industry has been aiding delivery of voice and data services at rapidly increasing speeds, and thus, has been revolutionizing human communication. Although the Indian telecom industry is one of the fastest-growing industries in the world, the current teledensity or telecom penetration is extremely low when compared with global standards. India’s teledensity of 36.98% in FY09 is amongst the lowest in the world. Further, the urban teledensity is over 80%, while rural teledensity is less than 20%, and this gap is increasing. As majority of the population resides in rural areas, it is important that the government takes steps to improve rural teledensity. No doubt the government has taken certain policy initiatives, which include the creation of the Universal Service Obligation Fund, for improving rural telephony. These measures are expected to improve the rural tele-density and bridge the rural-urban gap in teledensity.
Introduction – Evolution:
Indian telecom sector is more than 165 years old. Telecommunications was first introduced in India in 1851 when the first operational land lines were laid by the government near Kolkata (then Calcutta), although telephone services were formally introduced in India much later in 1881. Further, in 1883, telephone services were merged with the postal system. In 1947, after India attained independence, all foreign telecommunication companies were nationalized to form the Posts, Telephone and Telegraph (PTT), a body that was governed by the Ministry of Communication. The Indian telecom sector was entirely under government ownership until 1984, when the private sector was allowed in telecommunication equipment manufacturing only. The government concretised its earlier efforts towards developing R&D in the sector by setting up an autonomous body – Centre for Development of Telematics (C-DOT) in 1984 to develop state-of-the-art telecommunication technology to meet the growing needs of the Indian telecommunication network. The actual evolution of the industry started after the Government separated the Department of Post and Telegraph in 1985
by setting up the Department of Posts and the Department of Telecommunications (DoT). The entire evolution of the telecom industry can be classified into three distinct phases.
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Phase I- Pre-Liberalization Era (1980-89) Phase II- Post Liberalization Era (1990-99) Phase III- Post 2000
Until the late 90s the Government of India held a monopoly on all types of communications – as a result of the Telegraph Act of 1885. As mentioned earlier in the chapter, until the industry was liberalized in the early nineties, it was a heavily government-controlled and small-sized market; Government policies have played a key role in shaping the structure and size of the Telecom industry in India. As a result, the Indian telecom market is one of the most liberalized markets in the world with private participation in almost all of its segments. The New Telecom Policy (NTP-99) provided the much needed impetus to the growth of this industry and set the trend for liberalization in the industry.
Marketing for telecom sector:
1. Marketing is a core function within any organization as it is responsible for reflecting customer demand back into an organization and ensuring the organization delivers its customers what they want. . 2. Marketing uses market information to identify new ways of satisfying needs and creating value. Specific areas of include market segmentation strategies, market planning, consumer psychology and behavior, marketing research, new product development, branding strategies, channels of distribution, pricing strategies, customer relationship management, business-to-business marketing, and marketing in the region. 3. The Marketing Discipline embraces multiple research methodologies and paradigms to examine consumer decision making, judgment and purchase behavio ur. It explores the influence of broad, macro-level variables like demographics, social class and family socialization processes, as well as the effects of marketing variables such as advertising, branding, and store layout. 4. The Marketing Discipline emphasizes critical and analytical thinking and the practice of marketing as a discipline integrated with other elements of anorganizatio n. It gives you an understanding of consumer behaviour and purchase decision-making, integrating theory and practice from many branches of the social sciences.
? Marketing Strategy
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Marketing Strategy encompasses selecting and analysing of the target market/sand creating and maintaining an appropriate marketing mix that satisfies the target market and the organization. Marketing Strategy articulates a plan for the organization’s resources and tactics to meet its objectives. Organization must not pursue strategies that are not consistent with their objectives or that would stretch significantly their resources. We can say that a product’s value is chosen, provided and communicated to the consumer. The upper management will choose the value for the product by segmenting the market, choosing the target market and positioning the productive. Marketing Strategy. Then the lower level management will provide and communicate the value to consumer, Tactical Marketing, using the four P?s (Place, Promotion, Product and Price)
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? Types of Marketing Strategies
Going through the Value Creation and Delivery Sequence process may not bring the main objectives. There are three types of marketing strategies put forward by Michael Porter that are important to consider whenever using the value creation and delivery sequence process. They are: Low-Cost Strategy, Differentiation Strategy, and Focus Strategy. . ? Low-Cost Strategy A company or a SBU (Strategic Business Unit), typically large, seeks tosatisfy a broad market by producing a standard product or service at a lower cost and then under pricing competitors. Such Strategy will aim atreducin g the cost of producing the product or service and also cost alongthe supply chain of the product or service. The advantages of such strategy are high profits, brand loyalty, economies of scale and reduction in competition in the Market. But its disadvantages are that if there exists a strong competitor in the market then by going on such strategy the competitor might reply by reducing its price also and thus the product can be a failure. Differentiation Strategy Through this type of strategy, an organization creates a distinctive, perhaps unique, product through its unsurpassed quality, innovative design, or some other feature and as a result, can charge a higher than average price. It can be used to pursue either a broad or narrow target market. The advantages of differentiation strategy are the creation of brand loyalty and higher profit in the short-term and long-term. Its disadvantage is risk as great loss can be incurred if consumers do not like the product or service. Focus Strategy
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A firm or a SBU concentrates on part of a market and tries to satisfy it with either a very low-priced or highly distinctive product. The target market is set apart by some factors as geography or specialized needs. The advantages of such strategy are brand loyalty and high profits in long term (short- term) for Low-priced product (highly distinctive product). The disadvantages are high competition and new trend in consumer’s taste may influence negatively on the sales.
Current Status:
Globalization has made telecommunication an integral part of the infrastructure of the Indian economy. The telecom sector in India has developed as a result of progressive regulatory regime. According to the TRAI, the total gross revenue of the Indian telecom services industry was Rs 1,524 bn in FY09 up from Rs 1,291 bn in FY08 registering a growth of 18.03% over FY08 and its subscriber base grew by 43% over FY08 to touch 429.70 mn subscribers in FY09.
The telecom sector in India experienced a rapid growth over the past decade on account of regulatory liberalization, structural reforms and competition, making telecom one of the major catalysts in India’s growth story. However, much of this growth can be attributed to the unprecedented growth in mobile telephony as the number of mobile
subscribers grew at an astounding rate from 10 million in 2002 to 392 million in 2009. Besides, the growth in the service and IT and ITeS sector also increased the prominence of the telecom industry in India. Telecom has emerged as a key infrastructure for economic and consumer growth because of its multiplier effect and the fact that it is beneficial to trade in other industries. The contribution of the sector to GDP has been increasing gradually (its contribution in GDP has more than doubled to 2.83% in FY07 from 1.0% in FY92). Telecom is one of the fastest-growing industries in India; on an average the industry added 8 million wireless subscribers every month in FY08. The government had set a target of 500 million telecom connections by 2010. However, according to the TRAI, the total subscriber base (wireless and wire line) in the industry crossed the 500-mnmark and reached 509.03 mn by the end of September 2009, which took India to the second position in terms of wireless network in the world next only to China. Prior to liberalization, the telecom sector was monopolized by the public sector and recorded marginal growth; in fact, during 1948-1998, the incremental teledensity in the country was just 1.92%. However, the introduction of NTP’99 accelerated the growth of the sector and the teledensity increased from 2.33 in 1999 to 36.98 in 2009; however, much of this growth was brought about by the NTP-99 policy changes such as migration from fixed license fee to revenue sharing regime and cost-oriented telecom tariffs. From 2003 onwards the government has taken certain initiatives such as unified access licensing regime, reduced access deficit, introduction of calling party pays (CPP) and revenue sharing regime in ADC that has provided further impetus to the sector. The Indian telecom industry is characterized with intense competition, and continuous price wars. Currently, there are around a dozen telecom service providers who operate in the wired and wireless segment. The government has been periodically implementing suitable fiscal and promotional policies to boost domestic demand and to create volumes for the industry. The Indian telecom industry has immense growth potential as the teledensity in the country is just 36 as compared with 60 in the US, 102 in the UK and 58 in Canada. The wireless segment growth has played a dominant role in taking the teledensity to the current levels. In the next few years, the industry is poised to grow further, in fact, it has already entered a consolidation phase as foreign players are struggling to acquire a pie in this dynamic industry.
Role in India’s Development
Contribution to GDP:
According to the UNCTAD, there is a direct correlation between the growth in mobile teledensity and the growth in GDP per capita in developing countries, which tend to have a high percentage of rural population. The share of the telecom services industry in the total GDP has been rising over the past few years (the telecom sector contribution in GDP went up from 2.52% in FY05 to 2.83% in FY07).
Employment:
The Indian telecommunication industry employs over 400,000 direct employees and about 85% of these employees are from government-owned companies. The ratio of number of subscribers to employees, an indication of efficiency and profitability, is much higher for private companies than for government companies .
The Indian telecom industry has been an attractive avenue for foreign investors over the years. As per DIPP figures, the cumulative FDI inflow during August 1991 to June 2009 period, in the telecommunication sector amounted to US$ 113 bn. FDI calculation takes into account radio paging, cellular mobile and basic telephone services in the telecommunication sector.
In the 2004-05 Budget, the government raised the FDI limit from 49% to 74% in the telecom services segment subject to retention of local management control. According to the new norms, 26% share out of the 74% should be held by an Indian company or an Indian citizen with Indian management. Further, 100% FDI is permitted in telecom manufacturing, category I infrastructure providers, ISPs without gateway, call centers and IT-enabled services. Further, direct or indirect FDI up to 74% is permitted subject to licensing and security requirements for ISPs with gateways, radio paging operators and category II infrastructure providers. The relaxation in FDI norms has attracted many foreign telecom majors to the sector. The presence of foreign players has not only encouraged faster infrastructure development and up gradation but also has opened up the domestic industry to foreign competition. Since 2004, there has been a large inflow of FDI in the sector. During 2004-05 and 2005-06, a period during which the FDI norms were relaxed, the FDI inflow grew by an astounding 300% to US$ 624 mn in 2005-06 from merely US$ 125 mn in 2004-05. The inflow of FDI has provided tremendous impetus to the sector in the past few years and the attractiveness of the sector has kept the FDI inflows growing steadily. During FY09 the FDI in the telecom sector at US$ 2,558 mn was 103% higher than that seen in FY08 at US$ 1,261 mn. Further, the FDI in the sector has already reached US$ 2010 mn for a six month period of FY10 (Apr-Sep 09) and is expected to surpass the total FDI for FY09. The government’s liberalized FDI policies have resulted in several foreign companies entering into the Indian markets. The influx of foreign players in the Indian telecom industry has led to capacity creation, and better infrastructure, which in turn has bettered the network quality. The rise in FDI has also enabled technology transfer, market access and has improved organizational skills; going forward, FDI could be used for providing telecom services to rural areas, where teledensity is still very low. The change in FDI policy that has raised the FDI limit from 49% to 74% for the sector has made it more attractive for foreign players. In the long run the growth prospects of telecom players that have foreign partners will improve and other players will get new avenues to raise capital.
Growth of IT-ITeS and Financial Sector
India has entered the league of countries with the most-advanced telecommunication infrastructure after the industry was deregulated. Furthermore, deregulation has stimulated India’s economic growth through industry growth and through rise in investments. It is evident that a well-developed communication sector improves access to social networks, lowers transaction costs, increases economic opportunities, widens markets, and provides better access to information, healthcare and educational services. The growth in Indian telecom sector has been concomitant with overall
growth in GDP, government revenue, employment et al. Besides, telecommunication has increased efficiency, reduced transaction costs, attracted investments and has created new opportunities for business and employment. The NTP-99 was particularly helpful for the ITeS-BPO industry as it ended the government monopoly in international calling by introducing IP telephony. After the introduction of IP telephony, there was rapid growth in the number of data processing centers and inbound/outbound call centers, which ultimately led to the outsourcing revolution in India. The telecom sector has been instrumental in creating jobs for a vast pool of talented and knowledge professionals in the IT and ITeS-BPO industry, which thrives on reliable telecommunication infrastructure. India has become an important outsourcing destination for the world and the boom in this sector also has transformed India’s economic dynamics. The evolution of telecom sector has brought about a revolutionary change in the way some businesses operate. Another beneficiary of the telecom revolution is the financial services industry, which has been on a growth trajectory. The progress and quality of the financial sector has been a key factor that has driven the pace and diversity of the real economy. India has an extensive and well-developed financial sector with wide and sophisticated banking network. Banking in India has become service-oriented, and has matured greatly from the days of walk-in customers to the present situation when banks have migrated to a 24-hour banking platform to attract customers; however, this disintermediation in the business has led banks to be extremely prudent in terms of their internal operations and has led them to adopt newer products and delivery channels. Further, with introduction of internet & mobile banking the long ques at the banks are slowly becoming a thing of the past. Both the financial and the IT-ITeS segments rely on good domestic as well as international network connectivity; therefore, there is a need for a sound telecommunication network.
Factors Facilitating Growth of the Sector
The phenomenal growth in the Indian telecom industry was brought about by the wireless revolution that began in the nineties. Besides this, the following factors also aided the growth of the industry.
Liberalization
The relaxation of telecom regulations has played a major role in the development of the Indian telecom industry. The liberalization policies of 1991 and the consequent influx of private players have led the industry on a high growth trajectory and have increased the level of competition. Post-liberalization, the telecom industry has received more investments and has implemented higher technology.
Increasing Affordability of Handsets
The phenomenal growth in the Indian telecom industry was predominantly aided by the meteoric rise in wireless subscribers, which encouraged mobile handset manufacturers to enter the market and to cater to the growing demand. Further, the manufacturers introduced lower-priced handsets with add-on facilities to cater to the increasing number of subscribers from different strata of the society. Now even entrylevel handsets come with features like coloured display and FM radio. Thus, the falling handset prices and the add-on features have triggered growth of the Indian telecom industry.
Prepaid Cards Bring in More Subscribers
In the late nineties, India was introduced to prepaid cards, which was yet another milestone for the wireless sector. Prepaid cards lured more subscribers into the industry besides lowering the credit risk of service providers due to its upfront payment concept. Prepaid cards were quite a phenomenon among first-time users who wanted to control their bills and students who had limited resources but greater need to be connected. Pre-paid cards greatly helped the cellular market to grow rapidly and cater to the untapped market. Further, the introduction of innovative schemes like recharge coupons of smaller denominations and life time incoming free cards has led to an exponential growth in the subscriber base.
Introduction of Calling Party Pays (CPP)
The CPP regime was introduced in India in 2003 and under this regime, the calling party who initiated the call was to bear the entire cost of the call. This regime came to be applicable for mobile to mobile calls as well as fixed line to mobile calls. So
far India had followed the Receiving Party Pays (RPP) system where the subscriber used to pay for incoming calls from both mobile as well as fixed line networks. Shifting to the CPP system has greatly fuelled the subscriber growth in the sector.
Changing Demographic Profile
The changing demographic profile of India has also played an important role in subscriber growth. The changed profile is characterized by a large young population, a burgeoning middle class with growing disposable income, urbanization, increasing literacy levels and higher adaptability to technology. These new features have multiplied the need to be connected always and to own a wireless phone and therefore, in present times mobiles are perceived as a utility rather than a luxury.
Increased Competition & Declining Tariffs
Liberalization of the telecom industry has fuelled intense competition, especially in the cellular segment. The ever-increasing competition has led to high growth of subscribers and has put pressure on tariffs, which have seen a sharp drop over the years. When the cellular phones were introduced, call rates were at a peak of Rs 16 per minute and there were charges for incoming calls too. Today, however, incoming calls are no longer charged and outgoing calls are charged at less than a rupee per minute. Thus, the tariff war has come a long way indeed. Increased competition and the subsequent tariff war has acted as a major catalyst for attracting more subscribers. Apart from these major growth drivers, an improved network coverage, entry of CDMA players, growth of value-added services (VAS), advancement in technology, and growing data services have also driven the growth of the industry.
Optimizing retention: Opportunities and challenges
Telecommunications carriers today must attract and retain customers while constantly improving each interaction. They need to manage the lifecycle of these customers to maximize revenue and reduce costs to increase profitability. They must do so while managing complex networks that support landlines and mobile phones, consumers and commercial companies—serving millions of customers and billions of calls. Their customers expect to be able to get support around the clock and to self-serve by SMS and email. Thousands, sometimes hundreds of thousands, of partners may need to be engaged and integrated into the value chain. Revenue assurance and reconciliation are
imperative. All of this takes place against the backdrop of intense competition in a saturated market. Effective customer retention is essential. Carriers need to retain the right customers at the right price. Huge numbers of customer retention decisions must be made and made quickly. One way to improve these decisions is with data. Voluminous, rapidly changing and detailed, this data can make the difference between success and failure. But only if it can be put to work. Analytics can help carriers hit churn targets, improve profitability and reduce costs yet most struggles with siloed data, undifferentiated offers and competing business units. As a result they cannot identify those at risk, predict their value or target them effectively and consistently.
? Opportunities and challenges
The opportunities for carriers in customer retention are threefold. If they can hit churn targets, increase the revenue from retained customers and reduce the cost of retaining those customers then they can directly improve their bottom line. 1. Hit churn targets: Customer service executives know that churn matters. In an increasingly saturated market, retaining customers is critical to long term growth and profitability. Replacing existing customers with new ones is expensive, time consuming and distracting. For some companies, customer retention details are a key element in quarterly earnings announcements. Regardless of the drivers in a particular company, hitting customer retention targets is mandatory. 2. Increase revenue from retained customers: Beyond the raw retention rate is the value those retained customers bring to the company. Over time, the objective must be to optimize the retention approach for each and every customer, maximizing the value of that customer and fulfilling the potential of the customer. Driving up the Average Revenue per User, or ARPU, is critical. 3. Reduce cost of retaining customers: It is impractical to try to retain all customers at any cost—companies want to retain profitable customers for the lowest cost possible. Reducing the cost to retain customers boosts a company’s bottom line and frees up cash to retain additional customers and increase growth. Companies must reduce operational costs for customer retention and find the most cost-effective retention offer for each customer. But retaining enough of the right customers, at the right price, is not a straightforward proposition. Challenges include intervening in a timely manner to identify customers at risk, estimating their future value and understanding what will help to retain those customers profitably requires new insights. Operations also need to be cost-effective, compliant and consistent across channels and business units. With millions of subscribers companies must be able to do all this at scale.
4. Identify those at risk: For most customers, the process of deciding to change suppliers takes time. By the time their current supplier realizes they are a retention risk, it may be too late to do anything about it—the customer has already identified a replacement and is committed to it. Effective customer retention approaches must include the early identification of those most at risk of changing suppliers. 5. Predict future value: Part of what makes an offer cost-effective for retaining a customer is the future value of that customer. Spending heavily to retain customers with little future value may be necessary to hit retention targets but is unlikely to be profitable in the long run. Keeping retention costs in line with future value and prioritizing those with high potential will ensure long term viability. 6. Understand customer motivation: Once a customer is identified for retention, the question becomes what to offer them to retain them. Understanding the customer and finding offers that will work cost-effectively is essential. 7. Deliver consistently: Customers today use every channel: from mobile devices to the call center, from a company’s website to social media, from store visits to kiosks. Companies cannot lose sight of the customer across these channels.
Outlook
The telecom industry in India has experienced exponential growth over the past few years and has been an important contributor to economic growth; however, the cut-throat competition and intense tariff wars have had a negative impact on the revenue of players. Despite the challenges, the Indian telecom industry will thrive because of the immense potential in terms of new users. India is one of the mostattractive telecom markets because it is still one of the lowest penetrated markets. The government is keen on developing rural telecom infrastructure and is also set to roll out next generation or 3G services in the country. Operators are on an expansion mode and are investing heavily on telecom infrastructure. Foreign telecom companies are acquiring considerable stakes in Indian companies. Burgeoning middle class and increasing spending power, the government’s thrust on increasing rural telecom coverage; favorable investment climate and positive reforms will ensure that India’s high potential is indeed realized.
Current data or telecom industry
India's teledensity has improved from under 4% in March 2001 to around 76% by the end of March 2012. Cellular telephony continues to be the fastest growing segment in the Indian telecom industry. The mobile subscriber base (GSM and CDMA combined) has grown from under 2 m at the end of FY00 to touch 919 m at the end of March 2012 (average annual growth of nearly 64% during this 12 year period). Tariff reduction and decline in handset costs has helped the segment to gain in scale. The cellular segment is playing an important role in the industry by making itself available in the rural and semi urban areas where teledensity is the lowest. ? The fixed line segment continues to decline in terms of the subscriber base. It has declined to 32.17 m subscribers in March 2012 from 34.73 m in March 2011. The decline was mainly due to substitution of landlines with mobile phones . ? As far as broadband connections (>=256 kbps) are concerned, India currently has a subscriber base of 13.8 m. Broadband penetration received a boost from the auction of broadband spectrum. The network providers have stated that they would be looking at boosting the contribution of data to their revenues. This bodes well for the future of broadband services.
Key Points :
Supply
Intense competition has resulted in prompt service to the subscribers. Given the low tariff environment and relatively low rural and semi urban penetration levels, demand will continue to remain higher in the foreseeable future across all the segments.
Demand
Barriers to entry High capital investments, well-established players who have a nationwide network, license fee, continuously evolving technology and lowest tariffs in the world. Bargaining power of suppliers Bargaining Improved competitive scenario and commoditization of telecom services has led to reduced bargaining power for services providers. A wide variety of choices available to customers both in fixed as well
power of customers Competition
as mobile telephony has resulted in increased bargaining power for the customers. Competition has intensified with the entry of new cellular players in circles. Reduced tariffs have hurt all operators.
FINANCIAL YEAR '12 : ? FY12 saw the continuance of growth for the Indian telecom market, which witnessed a 12% YoY increase in its subscriber base during the 12-month period. At the end of March 2012, the country’s total telecom subscriber base (fixed plus mobile) stood at about 951 m. The tele-density level stood at about 76% by the end of the fiscal.
Data source: Trai, Company Data
Data source: Trai, Company Data
? Growth remained robust in the GSM mobile space. GSM added 115 m subscribers during the year. After a robust 46% YoY increase in subscriptions during FY11, the growth in GSM industry has slowed down to 17% YoY in FY12. The year saw the apex court of the country cancelling the disputed 2G licenses that were issued in 2008. The cancellation caused the exit of Etisalat and Batelco from the sector. ? During FY12, India's mobile subscriber base grew by 13% YoY, from 812 m to 919 m, while the fixed subscriber base declined by about 7%, from 34.73 m to about 32.71 m.
Prospects :
? As far as the fixed line business goes, the low penetration levels in the country and the increasing demand for data based services such as the Internet will act as major catalysts in the growth of this segment. However, the growth would be mitigated by
increasing substitution of landlines by mobile phone. The PSUs will however continue to retain their dominant position. This is on account of high capital investments required in setting up a nationwide network. As a result, the private sector players will have to rely on key business centres and pockets of high urbanisation for their growth. ? Increasing choice and one of the lowest tariffs in the world have made the cellular services in India an attractive proposition for the average consumer. The penetration levels in urban areas have already crossed 100%. Therefore the main driver for future growth would be the rural areas where tele-density is around 39.22%. During FY12, a number of things were carried out. The Supreme Court cancelled the 2G licenses that were issued in 2008 by the erstwhile telecom minister. The Court also directed the regulator to formulate new rules for auctioning the spectrum and cancelled licenses. The regulator, TRAI has come up with regulations which price the 2G spectrum at sky high prices. The operators have vehemently opposed the pricing which they state will strain their stretched balance sheets further. The cancellation of the licenses and subsequent TRAI's proposals on pricing of the new spectrum prompted the exit of 2 foreign operators from the country. The other operators too have revisited their investment plans in India. However, the regulator is optimistic that foreign operators would still participate in the upcoming 2G auction. The operators continued to operate on thin margins during FY12. Due to intense competition, tariffs continue to remain low. At the same time rising operating costs will force operating margins to continue remaining depressed during the current fiscal as well. At the same time, operators are likely to see their balance sheets come under pressure as well. Most operators have taken huge loans to fund their 3G spectrum obligations. Now they would have to raise more funds to fund the 2G spectrum licenses. With such low margins and high debt to equity ratios, banks have been skeptical about lending further to the telecom companies. As a result, most of them are exploring other options of raising funds including listing of unlisted subsidiaries. ? In a latest move, operators have cut tariffs on the premium 3G services. Most of them have stated that the decline in tariffs would be offset by increase in volumes which would help boost 3G revenues. Indian consumers are known to be highly sensitive to price decrease and therefore this move to cut prices is expected to drive growth for 3G in the coming years. However, if the operators go for predatory pricing, like they did for 2G, then it would harm the fundamentals of the sector by forcing companies to cut margins further. While tariff increase on the 2G side will have to happen eventually, it remains to be seen if all operators would make this move in the current fiscal or not.
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TOP 4 LEADING TELECOM SERVICE PROVIDERS OF INDIA 1. Bharti Airtel : Bharti Airtel Limited popularly known as Airtel, is an Indian telecommunications company founded in the year 1995. It operates in 19 countries across Asia and Africa. Headquartered in New Delhi, India the company ranks amongst the top 5 mobile service providers globally in terms of subscribers. Bharti Airtel had over 244 million customers across its operations at the end of January 2012. Headed by Sunil Bharti Mittal, Airtel is one of the largest providers of mobile and fixed telephony in India. It operates a GSM network in several countries, providing 2G or 3G services depending upon the country of operation. Airtel also acts as a carrier for national and international long distance communication services. The company has a submarine cable landing station at Chennai, which connects the submarine cable connecting Chennai and Singapore. It is known for being the first mobile phone company in the world to outsource all of its business operations except marketing, sales and finance. On 18 November 2010, Airtel rebranded itself in India in the first phase of a global rebranding strategy. The company unveiled a new logo with 'airtel' written in lower case. Designed by London-based brand agency, Brand Union, the new logo is the letter 'a' in lowercase, with 'airtel' written in lowercase under the logo. Bharti Airtel more commonly known as Airtel is on top of the list of Top 10 telecom companies in India. Why Airtel is on the top of charts because their reach in all corners of India. You will find Airtel service in all major cities as well as small towns also. So, this helps Airtel to become number one is race. 2. Vodafone Essar : Vodafone is one of the world's largest mobile communications companies by revenue with approximately 398 million customers in its controlled and jointly controlled markets as at 31 December 2011. Vodafone currently has equity interests in over 30 countries across five continents and more than 40 partner networks worldwide. Vodafone Group Plc is a British multinational telecommunications company headquartered in London, United Kingdom. Vodafone owns and operates networks in over 30 countries and has partner networks in over 40 additional countries. It owns 45% of Verizon Wireless, the largest mobile telecommunications company in the United States measured by subscribers. The name Vodafone comes from voice data fone, chosen by the company to "reflect the provision of voice and data services over mobile phones". Vodafone has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalization of approximately £89.4 billion as of 23 December 2011, the second-largest of any company listed on the London Stock Exchange. It has a secondary listing on NASDAQ.
3. Reliance: Reliance Communications Ltd. commonly called RCOM is an Indian broadband and telecommunications company headquartered in Navi Mumbai, India. Established in 2004, a subsidiary of the Reliance Group. It ranks among the top 5 telecommunications companies. Reliance Communications corporate clientele includes 2,100 Indian and multinational corporations, and over 800 global, regional and domestic carriers. The company has established a pan-India, nextgeneration, integrated (wireless and wire line), convergent (voice, data and video) digital network that is capable of supporting services spanning the entire communications value chain, covering over 24,000 towns and 600,000 villages. Reliance Communications owns and operates the next-generation IP-enabled connectivity infrastructure, comprising over 190,000 kilometers of fiber optic cable systems in India, USA, Europe, Middle East and the Asia Pacific region. In July 2007, the company announced it was buying US-based managed Ethernet and application delivery services company Yipes Enterprise Services for a cash amount of 1200 crore (the equivalent of US$300 million). The deal was announced of the overseas acquisition, the Reliance group has amalgamated the United States-based Flag Telecom for $210 million. RTL operates in Madhya Pradesh, West Bengal, Himachal Pradesh, Orissa, Bihar, Assam, Kolkata and Northeast, offering GSM services. 4. Idea: IDEA Cellular is a publicly listed company, having listed on BSE & NSE in March 2007. Idea is a pan-India integrated GSM operator and has its own NLD and ILD operations, and ISP license. With traffic in excess of a billion minutes a day, Idea ranks among the Top 10 country operators. Idea has a network of over 70,000 cell sites covering the entire length and breadth of the country. Idea has over 3,000 Service Centres servicing Idea subscribers across the country, including 450 special Experience Zones for 3G promotion. Idea's service delivery platform is ISO 9001:2008 certified, making it the only operator in the country to have this standard certification for all 22 service areas and the corporate office. Idea's strong growth in the Indian telephony market comes from its deep penetration in non-urban & rural markets. It has the highest share of rural subscribers as a percentage of total subscribers, amongst other GSM players. In fact, 2 out of every 3 new Idea subscribers come from rural/ semi-urban India. IDEA Cellular is an Aditya Birla Group Company. The group operates in 33 countries, and is anchored by more than 132,000 employees belonging to 42 nationalities.
INTRODUCTION OF CUSTOMER RETENTION
A Customer-focused approach among its employees is still not present. In this era of intense competition, it is very important for any service company to understand that merely acquiring customers is not sufficient because there is a direct link between customer retention over time and profitability & growth. “Customer retention is called silent attrition where the customer stops purchasing the product and services and divert to other suppliers without even informing them.’’ Customer retention to a great extent depends on service quality and customer satisfaction. It also depends on the ability of the organization to encourage customers to complain and then recover when things go wrong. Complaints are natural part of any service activity as mistakes are an unavoidable feature of all human endeavor and thus also of service recovery. Service recovery is the process of putting things right after something goes wrong in the service delivery. Customer retention highly depends on attrition and silent attrition rates. Attrition is the process when customers no longer want to use product and services provided by the supplier and breaks the relationship bond by informing the supplier that he will be no more a customer. Most of the defecting customers don’t even intimate the supplier that they are defecting. Customer Retention is the activity that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship. A company’s ability to attract and retain new customers, is not only related to its product or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace.
It is difficult to exactly define customer retention as it is a variable process. A basic definition could be ‘customer retention is the process when customers continue to buy products and services within a determine time period’. However this definition is not “Customer applicable for most of the high end and low purchase frequency products as each every product is not purchased by the customer.
Definition
Retention is an imperative in modern business - a strategy whose objective is to keep a company's customers and to retain their revenue contribution.” Primarily it aims to prevent customers from defecting to alternative brands / going to the competition. As all managers know, it costs less to keep an existing customer than to acquire a new one, thus having a customer retention strategy is common sense. Customer retention is the driving force behind Customer Relationship Management (CRM), relationship marketing and loyalty marketing. Customer retention is a strategic process to keep or retain the existing customers. Studies across a number of industries have revealed that the cost of retaining an existing customer is only about 10% of the cost of acquiring a new customer, so customer retention makes powerful, economic sense. Putting in place a customer retention strategy increases customer profitability as acquisition costs only occur at the beginning of a relationship, so the longer the relationship, the lower the amortized cost; account maintenance costs decline as a percentage of total costs . ?Customer retention plays an important role for the organizations. It can create more economic efficiency for the organizations. Therefore, the sales
persons have realized the importance of customer retention. The purpose of this essay is to discuss the key areas that the organizations must manage to increase the customer retention. Firstly, this essay will have a brief definition about the customer retention. After that, it will discuss how to increase the customer retention from different aspects. Finally, it will have a case study to illustrate the discussion.’’ Customer retention is also a concept which can lead to new clients. As with the reputation factor, a business which retains the same customers can also result in new customers due services. New customers mean not only that the business name will be on the lips of many hut also that the business owner will see a greater income due lo new clientele. Customer retention is more than giving the customer what they expect; it’s about exceeding their expectations so that they become loyal advocates for your brand. Creating customer loyalty puts ‘customer value rather than maximizing profits and shareholder value at the center of business strategy’. The key differentiator in a competitive environment is more often than not the delivery of a consistently high standard of customer service. A variety of strategies are available to small business owners seeking to improve their customer retention rates. Of course, the most basic tools for retaining customers are providing superior product and service quality. High quality products and services minimize the problems experienced by customers and create gogp will toward the company, which in turn increases customers' resistance to competitors' overtures. However, it is important that small business owners not blindly seek to improve their customer retention rate. Instead, they must make sure that they are targeting and retaining the right customers—the ones who generate high profits. "In short, customer retention should never be a stand-alone program, but rather part of a comprehensive process to create market ownership,. The first step in establishing a customer retention program is to create a time line of a typical customer relationship, outlining all the key events and interactions that occur between the first contact with and the eventual loss of the customer. The next step is to analyze the company's trends in losing customers. Customer defections may be related
increases or to a certain point in the relationship life cycle, gathered to identify warning signs of customer loss and develop retention programs to counteract it. One basic customer retention strategy available to small business owners involves focusing on employee retention and satisfaction. A company with a high turnover rate may not be able to maintain strong personal relationships with its customers. Even if relationships are established, the customer may decide to take its business to a new company when its contact person leaves. At the very least, high turnover creates a negative environment and reduces the quality of service provided to customers. In order to reduce turnover, it is important to provide employees with career development opportunities and high degrees of involvement in the business. Another possible strategy for retaining customers involves institutionalizing customer relationships. Rather than just providing contact with individual employees, a small business can provide value to customers through the entire company. For example, it could send newsletters or provide training programs in order to become a source of information and education for customers. It may also be possible to establish membership cards or frequent-buyer programs as direct incentives for customer retention. Some companies may be able to use electronic links to improve the service they provide to customers. For example, e-mail connections could be used to provide updates on the status of accounts, electronic order systems could be used to simplify reordering and reduce costs, and online services could be used to. provide general information. Online accessibility these days is another important customer retention tool. As more and more individuals become Internet savvy, having access to businesses via the World Wide Web is an ideal notion to many customers. If your business is one which can be technologically advanced in the form of Internet access and website capabilities, it is a wise idea to do so as more customers will tend to stay with a company that is up with today's technology.
Customer retention has a direct impact on profitability. Research by John Fleming and Jim Asplundh indicates that engaged customers generate 1.7 times more revenue than normal customers, while having engaged employees and engaged customers returns a revenue gain of 3.4 times the norm Customer retention refers to a set of strategies and ways for preventing the customer losses and establishing the customer loyalty. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship. Customers or people, who buy from you again and again, remember: you can sell anybody anything once but can you do it again and again? Make them happy and they will return good luck. The art of implementing business strategies to an effect that will make clients and customers keep on patronizing what you have to offer be it a product or your own services. On the other hand, to retain customers, you have to employ methods that were found to be an effective way to do just that for your business. One way of doing that as a tip is to use promotional items or corporate gifts and distribute them to all your clients on a level per level basis like from a regular customer to a a prospect customer. This way, your promotional item or corporate gift helps you retain customers and at the same time grow them for business profits and higher return on investment customer retention. Customer retention is a strategic process to keep or retain the existing customers and not letting them to diverge or defect to other suppliers or organization for business and this is only possible when there is a quality relationship between customer and supplier. Usually a customer is tended towards sticking to a particular brand or product as far as his basic needs are continued to be properly fulfilled. He does not opt for taking a risk in going for a new product. More is the possibility to retain customers the more is the probability of net growth of business.
If it is difficult to attract customers, it is more difficult to retain them. Most marketing theories and practices over time have relied on attracting new customers rather than retaining the old ones. A sustainable business however, concentrates on its new as well as old customers equally. Traditionally, the emphasis has been more on new customers rather than customer retention. Customer retention needs more of building relationships and keeping after sales commitments intact. The better the after sales service, the better will be customer retention. Thus companies would be wise to perform customer satisfaction surveys regularly as customer satisfaction is the key to customer retention. A highly satisfied customer stays longer with the company, buys and self-promotes new products being launched by the company, is optimal for feedback on improving the organization and the cost of this customer is much less then attracting new customers. Customer complaints are NOT a measure of customer satisfaction. 95% of people never complain to a company. They just move on to another brand. Thus using toll free numbers and suggestions forms has become a norm in major MNC’s 0 as well as retail chains. Just so they can reach out to their customers, and possibly bring back lost customers.
Fig no 1.1
Customer Retention: The Art of Keeping Good Customers To retain a customer, keep him happy.
That is how you retain customers. It's easy to say but much harder to do. Here at we treat our clients like gold. It takes a lot of work but it always pays off. Here are a few ways that you can have the success that we have had: 1. Treat customers like they are the most important person on the earth. After all, they are the most important people! People won't spend money on a second bad experience so make them feel good. 2. Go the extra mile! If a customer has a problem, the entire company should work to fix it. We ensure that our clients have an excellent experience and they appreciate it by coming back again and again. 3. Offer incentives and let them know they are appreciated! Loyal customers are hard to come by so we occasionally give them freebie and we always tell them how much we appreciate them. Both of these actions reinforce the fact that we value them. That way we can retain them easier and everyone is happy. 4. Keeping good customers is a more sure-fire method for future success than a constant focus on attracting new customers. Keeping good customers loyal to your product, your service and your organization will be critical to your future marketing success. Having a loyal customer base of good customers it is more important to place a higher emphasis on retaining and keeping your current customers. This is particularly true in saturated markets and industries, where your customers have many, many alternatives available to them. Numerous research studies have shown that if you can reduce your attrition rate, that is the annualized rate of lost customers, by as little as five percentage points, you can increase your bottom-line profits by anywhere from 25% to 85%.
That's right, just keeping more of the customers you have and preventing them from taking their business elsewhere can have an immediate, positive impact on your bottom line profits.
Customer satisfaction:
One which will often last in duration as well as show a good financial standing. Customer retention is also a concept which can lead to new clients. As with the reputation factor, a business which retains the same customers can also result in new customers due services. New customers mean not only that the business name will be on the lips of many hut also that the business owner will see a greater income due lo new clientele. For customer satisfaction lo be high, promises and expectations must be met. This involves the organization's ability to understand customer expectations and to do it right the first time (DIRTF).. The ability to deal with problems as they arise is a key ingredient to success. Also, the organization needs lo consider complaints as a gift! Customers who have an issue dealt with to their satisfaction have a 95% likelihood of repurchasing and telling S people about their experience; If they don't complain (as 96% of people do) they will tell at least 10 Other people about their problem. 'The occurrence of problems can cause a 15-to-30-point drop in high satisfaction responses and in loyally indicators. I his puts revenue at risk to tile average tune of I! V So, some techniques to maintain and improve satisfaction must be considered. An effective complaint handling system is an excellent defensive tool. Ongoing surveys to measure customer satisfaction and loyalty, and capture the voice of the customer are also essential The biggest problem, however, are those companies do not manage the customer contact experience with sufficient detail. Therefore I often recommend my
Customer Experiene Workshop as an effective analytical and improvement tool. Il is pragmatic and leads to quick result.
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WHY CUSTOMER RETENTION IS SO IMPORTANT?
There are a few different reasons why customer retention is so important. First, due to the fact that businesses operate on the basis of customers and the purchases made by such individuals, it is crucial to keep the customer base that you have. Keeping the same customers returning back for more of your products on a continual basis will help to ensure that you receive the income necessary to run your business. A steady customer base and retaining the usual customers will help to secure a steady income. Another reason why customer retention is so important is that it shows that a business has a good reputation since it can keep a steady customer base. Businesses which show customer retention year after year can be said to be reputable in nature as the
same customers return to their store for more purchases and/or services. A reputable business is one which will often last in duration as well as show a good financial standing. Customer retention is also a concept which can lead to new clients. As with the reputation factor, a business which retains the same customers can also result in new customers due to word of mouth by the individuals who use the business for their products and/or services. New customers mean not only that the business name will be on the lips of many but also that the business owner will see a greater income due to new clientele.
Value of Customer Retention:
Customer Mention a not only a cost effective and profitable strategy, but in today's business world it's necessary this is especially true when you remember that 80% of your sales come from 20% of your customer and clients. With these statistics I am wondering why most marketing and sales campaigns are designed for the new customer. Take of instance the wireless telephone companies; if you sign a new contract you are given a large rebate or even a free cellular telephone. If you arc a current customer you have the privilege of paying full price. Can someone please explain that methodology to me. With this type of promotion are we not just pushing current customers and clients to seek services elsewhere when their contract ends' Perhaps we need to rethink our marketing and sales strategies, after all many experts will tell you that it's five limes more profitable to spend marketing and advertising dollars to retain current customers than it is to acquire new customers, hi years past the importance of focusing on customer retention was not as important, stickiness came naturally. We shopped in our neighborhood shops and our comer grocery stores. We had a personal connection on with our service providers and the thought of shopping at another store would have never crossed our minds.
That has all changed now, Our Mores our larger, the majority of the sales personnel don't know that you even exist. Not to mention that now we have the convenience of the Internet and do .1 large portion of our shopping online. where you are known by your email address. As a result, customer loyally has disappeared and large corporations and virtual storefronts arc unable lo ask the millions of disloyal customer* what caused them to stray. However, there is a solution. Sophisticated technology and database equipment has made it possible for specialized firms lo make attempts at customer retention through database marketing programs. Establishing a detailed client database will allow these companies to keep track of personal information and individual preferences of all their customers. This enables them lo provide better service and value. Just like the comer grocery More owner kept information on 200 customers in his head. the large superstore can now keep track of 20JKH) customers through Us customer database. With effective implementation of customer databases, companies will be able to reestablish contact with customers. and will be able to work successfully towards increasing customer retention, repeat sales, and customer referrals. To achieve (lie objectives of the database and customer retention programs, (he entire campaign should be designed and carried out with the customer in mind. The exercise wills only he effective if the customer recognizes and associates some value with being part of your database. If they do not perceive value in your program all of your communications, coupons, special offers, and newsletters will be discarded. Your customers have been inundated with meaningless "junk" mail and email spam, so embed your campaign with value. A few value-add strategies that you can use include" • Membership cards and programs that entitle your customers lo special offers, discounts, or preferential treatment. • Welcome, acknowledgement, sales recognition. thank you statements • After sales satisfaction and complaint inquiries and surveys.
• Event oriented communications in which the customer is genuinely interested. • Enhanced and empowered Customer, after sales, and technical support.
Steps to improve your customer retention ratios:
The most successful companies in today is markets are doing a better job of retaining good customers by finding imaginative ways of exceeding customer expectations' through the Sales/Service Relationship Formula. As a result, their competitor’s arc finding it increasingly difficult to steal these entrenched customers. The Sales Service Relationship starts with a mindset of understanding and appreciating customer need lo probe into these needs so that they can uncover the unspoken and deep-seated concerns of each individual customer. This will enable your sales force to turn service opportunities into At the heart of the Sales. Service Relationship is a commitment to quality at all times and in all instances- It is a commitment that ensures that every little error, such as typos in your customer communications, arc discovered and corrected before any customer is exposed lo them this includes e-mail. Ever notice how many e-mails you receive are loaded with spelling errors, despite the fact that most e-mail software today includes a baste spell checker application? There is no excuse other than plain sloppiness and laziness for this lo happen. Keeping customers truly loyal to your products and services requires more than numerous price discounts, decreasing margins, and "rewards" programs, To build relationships that last your company must first build customer loyalty and earn customer loyalty, before attempts arc made to reward customer loyally. Importantly, customer loyally needs to be rewarded in a relevant manner, which means that not all customers can be rewarded equally or in the same manner.
Keeping good customers is a mailer of being customer-centric in your marketing approach, understanding and applying the Sales Service Relationship Formula, building relationships that last and constantly leveraging your corporate brand (or relationship building.
Customer Retention programmes
Finding the patterns of customer defection is important to devise optimum customer retention programs. If you want to retain lost customers, then first you need to find out WHY these customers are leaving your brand / product. This can be done by analyzing internal records, sales calls, pricing and product surveys and competition studies. For example – Each and every call in a customer service department is recorded so as to improve the quality of customer calls over time. Thus, some key questions to be asked are
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What is the rate of defection? Does retention vary by office, region, sales executives or distributor? (To find out why customer retention is higher in some places)
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Does your pricing have a relation to customers and if yes, what is the magnitude of the effect.
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Where do your lost customers usually go? Which brand / product and why? What are the retention figures for your sector / industry? Which company in your sector retains their customers the longest and why? These are some questions which a company can ask of itself while devising a customer retention programme.
The two best ways to keep customers from leaving are
1. Understanding their needs, and
2. Delivering upon the promises you make to satisfy these needs.
The worst thing that happens when a customer leaves:
It is not just that you lose the revenue, and profits, from that customer this year. It is also that you are likely to lose all future income from that customer, at least for several years to come. Lost customers rarely return and certainly not quickly. But the worst thing may not be just the lost revenue to your sales figures. The worst thing is that a typical customer will tell up to 19 people when they are dissatisfied with your products or services. Thus, your ability to transact, or to develop relationships, with these 19 other prospects and customers can be quickly diminished. Another thing to remember is that not all customers are of equal value. Typically, a customer who has been with you for a longer time is more valuable than a more recently acquired customer. For instance, a customer who has been with you for five years is likely to be giving you 8-10 times the profit stream of a newly acquired customer. Hence, if you lose a customer that has been buying from you for five years, you may need to replace that customer with not one, but perhaps 8 to 10 new customers just to replace the value of this one lost customer. If there is one message you want to give your staff today, it may be a renewed emphasis on keeping and satisfying the customers you have. You've spent lots of time casting your lines, making your catch and reeling them in.The downfall for many companies is that they don't know how to keep customers. It seems like this has fast become the pot of gold at the end of the rainbow and few firms manage to do it well.
Studies across a number of industries have revealed that the cost of keeping an existing customer is around ten per cent of the cost of acquiring a new one. So, economically it makes pretty good sense. Putting together a good retention strategy will also lead to increased customer profitability, as the longer the relationship, the lower the account maintenance cost.
OBJECTIVES
Primary:
? ? ? ? To measure the effect of service quality attributes on customer loyalty in mobile phone service industry. To know the varied factors which forces customers to switch To know the customer preferences of services or they behaviour towards various telecom services on the basis of secondary data. To get the attrition ratio and reasons of attrition in Telecom Sector.
Secondary:
? ? To study the Size, Structure and Profitability of the Industry. To study Opportunities of Indian Telecommunication Industry.
SCOPE
This study helps us to analyze the factors that cause the switching behavior. As the telecom industry has been growing rapidly and the rate of penetration also increased, the number of new customers subscribing to thus can’t be reduced. Where as in the mature market with a base of shrinking potential subscribers, stealing the customers of competitors and retaining its own customers has become the most important strategy for the service firms. Therefore the service firms have got more interested in knowing and understanding the underlying factors leading to switching behavior of customers, as customers are totally heterogeneous in nature and can repeat switching from time to time. As stated in the relevant literature the service of high quality helps to create customer satisfaction, loyalty and market share growth by petition for new customers and improved financial performance and productivity (Lewis, 1993); Andereson, Fornell & Lehmann, 1994) . According to Hackl, Scharitzer, and Zuba (2000) had demonstrating it by adding that customer satisfaction is a prerequisite of customer retention, satisfaction and loyalty. Those customers who are loyal plays vital role in building up businesses, by setting up distinct moves, by paying the premium prices and providing the companies with a set of potential new customers by positive word of mouth. In fact the telecom industry losses their customers more frequently so it’s usually challenging thing for the service providers to retain their existing customers and attract the new customers
RESEARCH METHODOLOGY
RESEARCH: Research is the investigation of a particular topic using a variety of reliable, scholarly resources. The three major goals of research are establishing facts, analyzing information, and reaching new conclusions. The three main acts of doing research are searching for, reviewing, and evaluating information.
SOURES OR RESEARCH: 1. Secondary research ? Reviewing secondary research or by analyzing previously collected primary data. It can be accomplished through various methods, including questionnaires and telephone interviews in market research, or experiments and direct observations in the physical sciences, amongst others. The secondary data has been collected from various websites, books, journals, newspapers & magazines etc.
? Secondary research is research that is carried out with already existing data. It uses materials as books, magazines, journals, newspapers among others. Here, the researcher needs not go on the ground since all the information collected has been documented already
Advantages:
Easy to access There are many advantages to using secondary research. This includes the relative ease of access to many sources of secondary data. In the past secondary data accumulation required marketers to visit libraries, or wait for reports to be shipped by mail. Now with the availability of online access, secondary research is more openly
accessed. This offers convenience and generally standardized usage methods for all sources of secondary research. LOW COST ACQUIRE The use of secondary data has allowed researchers access to valuable information for little or no cost to acquire. Therefore, this information is much less expensive then if the researchers had to carry out the research themselves. Clarification of Research Question The use of secondary research may help the researcher to clarify the research question. Secondary research is often used prior to primary research to help clarify the research focus. May Answer Research Question The use of secondary data collection is often used to help align the focus of large scale primary research. When focusing on secondary research, the researcher may realize that the exact information they were looking to uncover is already available through secondary sources. This would effectively eliminate the need and expense to carry out their own primary research. May Show Difficulties in Conducting Primary Research In many cases, the originators of secondary research include details of how the information was collected. This may include information detailing the procedures used in data collection and difficulties encountered in conducting the primary research. Therefore, the detailed difficulties may persuade the researcher to decide that the potential information obtained is not worth the potential difficulties in conducting the research. Disadvantages: Quality of Research There are some disadvantages to using secondary research. The originators of the primary research are largely self-governed and controlled by the marketer. Therefore,
the secondary research used must be scrutinized closely since the origins of the information may be questionable. Moreover, the researcher needs to take sufficient steps to critically evaluate the validity and reliability of the information provided. Not Specific to Researcher’s Needs In many cases, secondary data is not presented in a form that exactly meets the researcher’s needs. Therefore, the researcher needs to rely on secondary data that is presented and classified in a way that is similar to their needs. Incomplete Information In many cases, researchers find information that appears valuable and promising. The researcher may not get the full version of the research to gain the full value of the study. This is because many research suppliers offer free portions of their research and then charge expensive fees for their full reports. Not timely when using secondary research, one must exercise caution when using dated information from the past. With companies competing in fast changing industries, an out-of-date research reports many have little or no relevance to the current market situation.
Type of research used in research:
Descriptive research: Descriptive research includes surveys and fact finding enquires of different kinds. The major purpose of descriptive research is description of the state of affairs, as it exists at present. Descriptive research, also known as statistical research, describes data and characteristics about the population or phenomenon being studied. However, it does not answer questions about e.g.: how/when/why the characteristics occurred, which is done under analytic research.
REVIEW OF LITERATURE
INVEST INDIA TELECOM
The article summarizes that, the telecom services have been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also.
BUILDING CUSTOMER LOYALTY BY RECOGNITION
In this article we can find that, today most businesses are so large and have so many customers that personal recognition has become very difficult. Customer loyalty has declined as a result. In the past fifteen years, however, computers have become extremely powerful, and inexpensive. It is possible today, economically, to hold in a computer the kind of information that the old corner grocers used to keep in their heads, and to use this information to provide recognition and personal attention to each customer. Many companies today have built a customer database that has relevant information. Few of them, however, have learned how to connect this database to their telephone system.
USE CUSTOMER RETENTION MARKETING TO KEEP AND GROW YOUR CUSTOMERS
These articles states or reveal that; In order to have a loyal customer, the practice today is to attract them with the price. All strategies to make a business grow must primarily focus on strengthening the connection between respective company and the customers. Again, customer retention marketing is all about looking at your business from your customer's perspective; after all, it is them that keep company in business.
Can the Govt Restart the Telecom Sector?
Article reveals that, Share of 1.68 per cent of India’s 893 million-strong wireless subscriber base. Worse, it services these customers using a pitiful 2.5 MHz of spectrum—the least among all operators across the country Three years and $3.1 billion dollars after starting operations in India, MTS—easily India’s loneliest, though pluckiest mobile operator—has managed to add roughly 15 million subscribers. Telecom, especially wireless, was supposed to be India’s ticket to economic development. How did things come to a stage where the industry is known more for the taint and not the technology?
Enhancing customer relationship & interaction process is accelerating CRM adoption, finds Net scribes
The report concludes with a section named ˜Strategic Recommendation section derived after a comprehensive analysis of the sector. Net scribes services include Sales Insights, Market Intelligence, Social Media Insights, and Brand Surveillance for global clients. Research on India (ROI) is Net scribes leading source for market intelligence on emerging sectors in India. The company’s topics provide a holistic view of an industry and are a spring board for entry strategies, private equity and venture capital investments, investor presentations and management discussions. Organizations have realized that retaining customers has more impact than acquiring new ones; CRM helps in both.
Customer Retention in BSNL: A Challenge Ahead
Liberalization has brought many challenges for the Government of India enterprise in Telecom Sector i.e. Bharat Sanchar Nigam Limited (BSNL). The market has opened up for telecom service and every company is struggling to capture maximum share of the growing market. Different strategies are being formulated to ensure the growth in customer base. In this paper, we have carved out a comprehensive study pertaining Indian Telecom market and position of BSNL in the Indian Telecom sector. Also, we have discussed the impact of liberalization on Indian Market particularly on BSNL, in terms of retention of its customers.
A Study of Service Quality Attributes and Their Impact on Customer : Loyalty in the Mobile Phone Service Industry.
According to this article; The challenges that the Indian telecom sector faces today are unique and multi-faceted and will require innovative solutions coming from operators and regulator working together. Mobile operators in the country are experiencing declining financial performance. Increased competition because of significantly high number of operators compared to global benchmarks has resulted in reduction in average revenues per minute to Rs 0.5/0.10 per call minute in FY2012 from a high of Rs 7.3 per call minute in FY2000. At the same time, the minutes of usage per subscriber has also decreased significantly from a peak of 465 minutes in FY2007 to 369 minutes in FY2011. This has resulted in average revenue per user (ARPU) per month declining from Rs 362/ Rs 256 in FY 2005 to Rs 105/ Rs 68 in FY 2011 service operators. While subscribers’ base has registered a growth rate of 43% between FY 2009 to FY 2011, the telecom industry revenue grew only by 5% for the same period much less than inflation rate of 8.72% for the same period. Besides , there are many other challenges are staring at this industry like network operating expenses, governmental fees, levies, charges etc. Consequently, operators are under immense margin pressure. Simultaneously, issue of licenses to multiple players in 2008 has resulted in increased competition in the Indian mobile market. It also worth noting that, on an average, 10 players were operating in each of the 22 circles in India with Mumbai and Bihar having a staggering 12 players. In the backdrop of this kind of stiff competition, mobile service providers are moving aggressively to attract new customers by offering attractive promotional activities and increased service. It is, therefore, necessary for a service provider to take all the steps to know what makes customer satisfied and loyal in the Telecommunication service industry. Finally, this research will encourage further study and useful guidelines for future researchers.
A Study on Consumer Switching Behaviour in Cellular Service Provider: A Study with reference to Chennai
Article reveals that; Indian mobile market is one of the fastest growing markets and is forecasted to reach 868.47 million users by 2013. India has seen rapid increase in the number of players which caused the tariff rates to hit an all-time low. This allowed the players to target the low income population thereby increasing the market share. The availability of a number of subscriber options for consumers and varied tariff rates of each player, lead the consumers to switch between service providers. The objectives of the study are to find the factors that influence the consumers in switching the service provider and to delve into finding out the likeliness of switching the service provider. The variables considered for the study are Consumer demographics, Consumer satisfaction with existing service provider, Factors influencing the switching behaviour and factors that affect the switching behaviour of consumers and these were grouped into 4 categories namely customer service, service problems, usage cost and others. The results from the study reveal that call rates plays the most important role in switching the service provider followed by network coverage, value added service and customer care while advertisement plays the least important role. It is found that there is a relation between switching the service provider and the factors (customer service, service problem, usage cost, etc.). Article also states that, the mobile providers concentrate on increasing network stability and setting tariff rates competitively.
Comparison of Privatization Processes of Telecom Services in India and Brazil
Article states that; Apart from being BRIC countries, what India and Brazil have in common is a large service sector that contributes significantly to the GDP. The service sector contributed 66% to the Brazilian GDP and 59% to the Indian GDP in 2010. Telecommunication services are a significant part of it in both the countries. This paper compares the regulatory processes of privatization of telecom services in these countries and the consequences of these on the telecom firms broadly and on the sector as a whole. Indian companies, facing harsh competition and having refined their business models to compete in this environment acquired the necessary expertise to foray abroad, opportunistically building their businesses. The highly competitive regulatory policies in India, led to the emergence of innovative business models and creation of large domestic companies both in services and infrastructure segment and consequently acquiring the necessary expertise to foray abroad.
The Indian Telecom Sector: Legal and Regulatory
The article states in it that; the telecommunications industry has impact on every aspect of our lives, from the simple reality of enabling telephonic communication between people in different locations to enabling supply-chains to work seamlessly across continents to create products and fulfill demands. Telecommunication services are now recognized as a key to the rapid growth and modernization of the economy and an important tool for socio-economic development for a nation. Telecommunications in India can be traced back to the 19th century when the British East India Company introduced telegraph services in India. The past two decades have been considered as the golden period for the telecommunications industry in India with exponential growth and development in terms of technology, penetration, as well as policy. All this has paralleled with the liberalization in this sector and huge investment by both domestic and foreign investors.
Service Quality and Customers preference of Cellular Mobile Service Providers
This study was undertaken to examine and understand the consumers' perception choice in selecting cellular mobile telecommunication service providers. Consumers' perception is widely varied in accordance with the Communication quality, call service, facilities, price, customer care and service provider's quality. Hence, from the result of researcher’s study, he deliberately concludes that price has significant positive impact on consumer perception choice in selecting telecommunication service provider. Hence, product quality from the marketer's perspective is associated with communication, price, feature, function, or performance of a product. Price plays a significant role in the purchase decision of the telecommunications sector. However, the study shows that product quality and availability has a significant impact on consumer perception choice in selecting mobile telecommunication service provider and supported.
India’s increasing Mobile Sector
According to this article; with a figure of around 110.01 million connections Indian telecom industry is characterized as the 5th largest and fastest growing sector of the world. The factors which can be held responsible for sudden shoot up are low tariffs along with the falling headset cost. The telecom reform introduced by government has opened pathways for many foreign companies to enter into Indian market sector. The Indian telecom sector is not only limited to the basic telephone but it covers internet broadband, cable TV, SMS, IPTV, soft switches etc. Currently there are nearly 42 million Internet subscribers in India. At an estimate there are primarily 9 GSM with 5 CDMA operators imparting mobile services in 19 telecommunication circles and across 4 metro cities. It covers around 2000 towns throughout the nation. Indian telecom industry is regulated and administrated by the 'Telecom Regulatory Authority of India' (trAI).
MANAGED SERVICES’ IMPACT ON THE TELECOM INDUSTRY
According to the article; the Managed Services market is in a phase of good growth and is one of the fastest growing segments of the telecom industry. It is currently characterized by agreements, of varying scope, between Managed Services providers and a broad range of telecom operators. Managed Services providers are both vendors of telecom equipment that leverage their expertise to provide additional services to customers, and other players, the nontraditional telecom vendors. Telecom equipment vendors are better positioned to take on new roles in the value chain as they can leverage their existing competences, in network management for example. In recent years operator awareness of Managed Services has increased significantly and Managed Services are beginning to become a standard element in telecom operator procurement processes. In the near future, therefore, there is a strong likelihood that the shift in responsibility for roles in the value chain enabled by Managed Services combined with increasing complexity of technology, will result in a win/win scenario for both telecom operators and Managed Services providers. The key to success will be adopting an end-to-end view of managing networks, services and business support systems, with the end-user in mind.
Customer Retention is a Priority for Mobile Phone Providers According to the article; the mobile phone industry is highly competitive as its customers have many options and offerings are hard to differentiate. Companies that want to grow their businesses must continue to invest aggressively in customer acquisition programs, as well as implement new and creative initiatives to retain their existing ones. It is challenging for enterprises to listen to their customers' issues and respond appropriately and on a timely basis. Quality assurance programs enhanced with speech analytics can give a company a competitive advantage by allowing them to identify and resolve customer issues quickly, before they become expensive problems.
Churn Behaviour of Youth On Telecom Mobile
This study reveals that; the telecom industry, especially the mobile industry of India is undergoing a transformation and the number portability is bringing about imperatives worthy enough to carry out high-end research. This study is one such attempt to enhance the exposure on customer analytics and it is also expected to facilitate the marketers to design the essential operational parameters for scheming the retention strategies and to enhance Customer Experience management.
DATA ANALYSIS AND INTERPRETATION
INTERPRETATION: ? The above chart represent service provider wise market share, in this it reveals that 20.67% market share is hold by Bharti Airtel, Vodafone holds 16.96% market share., reliance holds 14.68%, idea 12.88%, BSNL 10.81%, TATA 8.52%, aircel 7.13%, uninor 4.87%, Sistema 1.83%, MTNL 0.59%, Videocon 0.56%, Loop 0.33%, Quadrant (HFCL) 0.17% of market share. And in telecom service sector about 88.60% of market share is hold by private sector and 11.40% market share hold by public sector units.
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INTERPRETATION: The above graphical representation shows net subscriber addition during july 2012, in this it shows that bharti, Vodafone, Bsnl, idea, aircel, sistema, HCFL, are positive position in net subscriber addition whereas on the hand loop, MTNL, Videocon uninor, tata, reliance are in negative state of position in adding their customers/subscribers.
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INTERPRETATION: The above tabular format states that the data related to the telecom service sector in which it is mentioned that total wireless subscribers is 906.62 million. Recent data: ? AIRTEL (it has 183.61 million subscribers) it provides various services like 3G , 4G, Wi-Fi, airtel money, smart drive, network experience centre, I phone 3G. ? Vodafone (It has approximately 147.48 million customers). Vodafone India provides 2.75G services based on 900 MHz and 1800 MHz digital GSM technology. Vodafone India launched 3G services in the country in the January-March quarter of 2011 and plans to spend up to $500 million within two years on its 3G networks. ? Reliance (it has over 150 million subscribers). It provides 4G and 3G services.
? IDEA Cellular has been recognized as the 'Most Customer Responsive Company' in the Telecom sector. It provides 2G and 3G services.
Major factor behind why company switches to other brands.
1. Regular expansion of the product and service range. 2. Many times advertisements attract many customers to switch from their existing mobile connection. 3. Customer services are another factor. 4. Entry of new advance companies and their attractive services. 5. Average customers prefer a low cost service that’s why they switch. Customer is price sensitive. 6. Lack of differentiation among the service provider. 7. Providing value added services at competitive price. 8. Customer switches to those companies providing wide range of quality product and services. 9. Availability of number of substitutes services.
FACT AND FINDINGS
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Indian telecom sector is more than 165 years old. Telecommunications was first introduced in India in 1851. In the late nineties, India was introduced to prepaid cards, it helps telecom sector to attract more and more subscribers. Pre-paid cards greatly helped the cellular market to grow rapidly and cater to the untapped market. It also helped the industry in lowering credit risk of service providers. The CPP (Calling Party Pays) regime was introduced in India in 2003 and under this regime, the calling party who initiated the call was to bear the entire cost of the call. This regime came to be applicable for mobile to mobile calls as well as fixed line to mobile calls. When the cellular phones were introduced, call rates were at a peak of Rs 16 per minute and there were charges for incoming calls too. Today, however, incoming calls are no longer charged and outgoing calls are charged at less than a rupee per minute. Thus, the tariff war has come a long way indeed. Increased competition and the subsequent tariff war has acted as a major catalyst for attracting more subscribers. Total tele-communication subscribers till now are 960.9 million (may 2012). India generates its total revenue through communication is USD 33,350 Million. India’s telecommunication network is the second largest in the world based on the total no. of telephone users (both fixed and mobile phone). Increasing choice and one of the lowest tariffs in the world have made the cellular services in India an attractive proposition for the average consumer. Top four leading telecom service provider are Bharti Airtel, Vodafone Essar, Reliance Communication Ltd., Idea. Bharti Airtel is in no.1 position because it is not economical but provides quality and effective services to its subscribers. Airtel is on the top of charts because their reach in all corners of India. The another biggest challenge is Increased competition because of significantly high number of operators compared to global benchmarks has resulted in reduction in average revenues per minute to Rs 0.5/0.10 per call minute in FY2012 from a high of Rs 7.3 per call minute in FY2000. At the same time, the minutes of usage per subscriber has also decreased significantly from a peak of 465 minutes in FY2007 to 369 minutes in FY2011. This has resulted in average revenue per user (ARPU) per month declining from Rs 362/ Rs 256 in FY 2005 to Rs 105/ Rs 68 in FY 2011 service operators.
CONCLUSION
This research tried to find out the underlying factors that made the customer to switchover to another service provider in telecom industry. The telecommunication industry is one of the most important industries of the world. In order to gain competitive advantage as competition is getting more and more intense, the companies are compelled to innovate and do their best for the customer satisfaction. As in the telecom industry the customers have multiple choices to select among service providers and actively seek their rights of switching from one telecom service provider to another. In this ferocious competition customers requires better services at reasonable prices, while service providers concentrating on retention of the most profitable customers instead of acquisition. The technology in telecommunication industry is booming with fast pace thus bringing the changes in the sizes and types of network services. Multiple tariffs plans are usually offered by the network service providers to compete in their menu plans and to provide the quality of service. In the telecom industry the service providers try to attract the large number of customers to exploit the consumer’s preference heterogeneity. The need to understand that why customers switch to another service providers have usually become a key area of study. The switching behavior has to be analyzed to identify the possible drivers leading to customer switching behavior. It’s entirely apparent that when a customer decides to switch over to another network they try to figure out that which service provider offers them best. The switching costs also affect the customer switching behavior. The customers switch when they find that their potential savings relatively exceeds switching cost. The deep understanding of the customer’s switching behavior in the telecom industry has an important proposition for the service providers.
RECOMMENDATION
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Should focus more on new rural area where tele density is very low and competition is less. Since tele density is still around 21% therefore telecom companies have to try to those market which is still untapped by the other telecom companies. Keep their technology up to date so that they should always offer something new to their existing customer and also new customer. Should provide better customer service through better customer relation so that old customer doesn't left. Indian telecom companies should invest more in self-Research & Development activity rather than depending upon foreign suppliers to tackling the threats of substitute. Keep the price lowest in market. Actively participate in research and development activities to offer new technology. Try to maintain the uniqueness of product as long as possible. Try to eliminate the intermediaries involved in providing products and services to reduce the cost. Try to be market leader in product and service range offerings. Indian telecom industry should make alliance with foreign supplier and invest jointly in Research & Development activity.
LIMITATIONS OF THE STUDY
? Due to paucity of time only limited information can be collected. ? Present study would be confined to only top 4 telecom service provider companies. ? Present study based on secondary data and secondary data has its own limitation which might affect the study.
BIBILOGRAPHY
Newspaper: ? ? ? ? ? Times of India Hindustan Times DNA Economic Times Business Times
Books: ? ? Kothari C. R. ; Research Methodology; second edition; new age international (p) limited, publisher; 2004, pp. (1-299). Market research – D.D. Sharma
Research papers:
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Customer Retention in BSNL: A Challenge Ahead By: Labh Singh and Dr. A.S. Chawla A Study of Service Quality Attributes and Their Impact on Customer Loyalty in the Mobile Phone Service Industry. (Sudhir Kumar Singh) Customer retention through customer relationship management: The exploration of two-way communication and conflict handling. (Mornay Roberts-Lombard) The Indian Telecom Sector: Legal and Regulatory Framework (Nishith Desai) Comparison of Privatization Processes of Telecom Services in India and Brazil (Rekha Jain)
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Websites:
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http://www.dot.gov.in/osp/Brochure/images/top.jpg http://goarticles.com/article/Enhancing-customer-relationship-interaction-processis-accelerating-CRM-adoption-finds-Netscribes http://www.wekepedia.com/telecommunication India http://www.businessteacher.org.uk/free-finance-essays/indian-telecomsector.php#ixzz2PzjBFEoG http://www.grin.com/en/e-book/179126/building-customer-loyalty-through-valueadded-services?partnerid=googlebooks
doc_889696025.docx
telecom service sector
A REPORT ON
CUSTOMER RETENTION IN TELECOM SERVICE SECTOR
Submitted in Partial Fulfillment for the Award of Degree of Master of Business Administration
2012-13
Submit By:Abeyson Jose MBA II Semester (PSOM)
{DEPARTMENT OF MANAGEMENT STUDIES} POORNIMA SCHOOL OF MANAGEMENT ISI-2 RICCO INSTITUTIONAL AREA GONER ROAD SITAPURA, JAIPUR
Acknowledgement:
I would like to express my gratitude to all those who gave me the possibility to complete this Contemporary issue report. I want to thank the Department of Management Studies for giving me permission to commence this report in the first instance, to do the necessary research work and to use department data. .
I want to thank them for all their help, interest and valuable hints. A Special thanks to Miss. Ity Patni and Mrs. Joytsana Tyagi Asst. Professor DMS PGC at the final version of the report for English style and grammar, correcting both and offering suggestions for improvement, and for giving me chance to get such an experience. .
Abeyson Jose
PREFACE
The telecommunications sector is changing radically. The changes are driven by a combination of market, business and technological forces. There are many factors that influence the market: — The globalization of the economy is forcing many multinationals to expand into new markets. These companies look for a single provider to meet all their telecoms needs. — Telecom operators looking for new revenue streams are entering the international market place. — New technologies — like wireless, digital subscriber line (DSL) and voice over internet protocol (VoIP) are enabling new service opportunities. The demand for bandwidth and highspeed access is growing, driving the development of new services such as wireless broadband and DSL. — Customer awareness and knowledge is increasing. Customers want services that satisfy their unique needs and demand reliable service delivery at competitive prices. Information must be easily accessed, anytime, anywhere and anyhow.
Introduction Indian Telecom Sector:
The telecom services have been recognized the world-over as an important tool for socioeconomic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also. Status of Telecom Sector: The Indian Telecommunications network with 960.9 million connections (as on May 2012) is the second largest in the world. The sector is growing at a speed of 45% during the recent years. This rapid growth is possible due to various proactive and positive decisions of the Government and contribution of both by the public and the private sectors. The rapid strides in the telecom sector have been facilitated by liberal policies of the Government that provides easy market access for telecom equipment and a fair regulatory framework for offering telecom services to the Indian consumers at affordable prices. Presently, all the telecom services have been opened for private participation.
Table of Contents Content
Acknowledgement Preface Executive Summary Industry profile Introduction Objectives and Scope Research Methodology Review of Literature Data analysis and interpretation Facts & Findings Conclusion Recommendation Limitations Bibliography
Page No.
EXECUTIVE SUMMARY
The research mainly emphasizes on the retention of customers in telecom service sector. The Indian telecom industry is the fastest growing industry with an addition of 910 million monthly subscribers. The Indian telecommunications network with over 375 Million subscribers is second largest network in the world after China. Major players in this sector are BSNL, MTNL, Airtel, Vodafone, BPL, Tata, Idea, etc. Buyer power and threat of rivalry is very high in Indian Telecom Sector. Both these factors are formidable. This could be reason of consolidation in the industry. Companies try to reduce threat of rivalry by merging or buying out rival companies. Telecom sector is one of the integrated parts of economy of any country and the Government regulatory and policy initiatives have also been directed towards establishing a world class infrastructure in India also. It provides an ideal environment for the investment but it also has a very complex structure. The challenges imposed on the Indian telecom market are increasing day by day because of the new technologies and knowledge. The government has taken many proactive initiatives to facilitate the rapid growth of the Indian telecom industry. The booming domestic telecom market has been attracting huge amounts of investment which is likely to accelerate with the entry of new players and launch of new services. Despite the gloomy outlook owing to the global recession/slowdown in the economy, the telecom sector of India continues to attract record number of new subscribers and to retain their existing customer for their continuous growth. The Indian mobile phone operators have been adding about 8-10 million subscribers every month throughout this year, and the figure has regularly topped the 10 million mark during the last three-four months. Considering the current pace of fresh additions per month, India has the potential of taking the total tally of subscribers to 700 million in the next five years from the current level of about 350 million, second only to China.
INDUSTRY PROFILE
TELECOM SERVICE SECTOR
The telecom industry has been divided into two major segments, that is, fixed and wireless cellular services for this report. Besides, internet services, VAS, PMRTS and VSAT also have been discussed in brief in the report. In today’s information age, the telecommunication industry has a vital role t o play. Considered as the backbone of industrial and economic development, the industry has been aiding delivery of voice and data services at rapidly increasing speeds, and thus, has been revolutionizing human communication. Although the Indian telecom industry is one of the fastest-growing industries in the world, the current teledensity or telecom penetration is extremely low when compared with global standards. India’s teledensity of 36.98% in FY09 is amongst the lowest in the world. Further, the urban teledensity is over 80%, while rural teledensity is less than 20%, and this gap is increasing. As majority of the population resides in rural areas, it is important that the government takes steps to improve rural teledensity. No doubt the government has taken certain policy initiatives, which include the creation of the Universal Service Obligation Fund, for improving rural telephony. These measures are expected to improve the rural tele-density and bridge the rural-urban gap in teledensity.
Introduction – Evolution:
Indian telecom sector is more than 165 years old. Telecommunications was first introduced in India in 1851 when the first operational land lines were laid by the government near Kolkata (then Calcutta), although telephone services were formally introduced in India much later in 1881. Further, in 1883, telephone services were merged with the postal system. In 1947, after India attained independence, all foreign telecommunication companies were nationalized to form the Posts, Telephone and Telegraph (PTT), a body that was governed by the Ministry of Communication. The Indian telecom sector was entirely under government ownership until 1984, when the private sector was allowed in telecommunication equipment manufacturing only. The government concretised its earlier efforts towards developing R&D in the sector by setting up an autonomous body – Centre for Development of Telematics (C-DOT) in 1984 to develop state-of-the-art telecommunication technology to meet the growing needs of the Indian telecommunication network. The actual evolution of the industry started after the Government separated the Department of Post and Telegraph in 1985
by setting up the Department of Posts and the Department of Telecommunications (DoT). The entire evolution of the telecom industry can be classified into three distinct phases.
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Phase I- Pre-Liberalization Era (1980-89) Phase II- Post Liberalization Era (1990-99) Phase III- Post 2000
Until the late 90s the Government of India held a monopoly on all types of communications – as a result of the Telegraph Act of 1885. As mentioned earlier in the chapter, until the industry was liberalized in the early nineties, it was a heavily government-controlled and small-sized market; Government policies have played a key role in shaping the structure and size of the Telecom industry in India. As a result, the Indian telecom market is one of the most liberalized markets in the world with private participation in almost all of its segments. The New Telecom Policy (NTP-99) provided the much needed impetus to the growth of this industry and set the trend for liberalization in the industry.
Marketing for telecom sector:
1. Marketing is a core function within any organization as it is responsible for reflecting customer demand back into an organization and ensuring the organization delivers its customers what they want. . 2. Marketing uses market information to identify new ways of satisfying needs and creating value. Specific areas of include market segmentation strategies, market planning, consumer psychology and behavior, marketing research, new product development, branding strategies, channels of distribution, pricing strategies, customer relationship management, business-to-business marketing, and marketing in the region. 3. The Marketing Discipline embraces multiple research methodologies and paradigms to examine consumer decision making, judgment and purchase behavio ur. It explores the influence of broad, macro-level variables like demographics, social class and family socialization processes, as well as the effects of marketing variables such as advertising, branding, and store layout. 4. The Marketing Discipline emphasizes critical and analytical thinking and the practice of marketing as a discipline integrated with other elements of anorganizatio n. It gives you an understanding of consumer behaviour and purchase decision-making, integrating theory and practice from many branches of the social sciences.
? Marketing Strategy
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Marketing Strategy encompasses selecting and analysing of the target market/sand creating and maintaining an appropriate marketing mix that satisfies the target market and the organization. Marketing Strategy articulates a plan for the organization’s resources and tactics to meet its objectives. Organization must not pursue strategies that are not consistent with their objectives or that would stretch significantly their resources. We can say that a product’s value is chosen, provided and communicated to the consumer. The upper management will choose the value for the product by segmenting the market, choosing the target market and positioning the productive. Marketing Strategy. Then the lower level management will provide and communicate the value to consumer, Tactical Marketing, using the four P?s (Place, Promotion, Product and Price)
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? Types of Marketing Strategies
Going through the Value Creation and Delivery Sequence process may not bring the main objectives. There are three types of marketing strategies put forward by Michael Porter that are important to consider whenever using the value creation and delivery sequence process. They are: Low-Cost Strategy, Differentiation Strategy, and Focus Strategy. . ? Low-Cost Strategy A company or a SBU (Strategic Business Unit), typically large, seeks tosatisfy a broad market by producing a standard product or service at a lower cost and then under pricing competitors. Such Strategy will aim atreducin g the cost of producing the product or service and also cost alongthe supply chain of the product or service. The advantages of such strategy are high profits, brand loyalty, economies of scale and reduction in competition in the Market. But its disadvantages are that if there exists a strong competitor in the market then by going on such strategy the competitor might reply by reducing its price also and thus the product can be a failure. Differentiation Strategy Through this type of strategy, an organization creates a distinctive, perhaps unique, product through its unsurpassed quality, innovative design, or some other feature and as a result, can charge a higher than average price. It can be used to pursue either a broad or narrow target market. The advantages of differentiation strategy are the creation of brand loyalty and higher profit in the short-term and long-term. Its disadvantage is risk as great loss can be incurred if consumers do not like the product or service. Focus Strategy
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A firm or a SBU concentrates on part of a market and tries to satisfy it with either a very low-priced or highly distinctive product. The target market is set apart by some factors as geography or specialized needs. The advantages of such strategy are brand loyalty and high profits in long term (short- term) for Low-priced product (highly distinctive product). The disadvantages are high competition and new trend in consumer’s taste may influence negatively on the sales.
Current Status:
Globalization has made telecommunication an integral part of the infrastructure of the Indian economy. The telecom sector in India has developed as a result of progressive regulatory regime. According to the TRAI, the total gross revenue of the Indian telecom services industry was Rs 1,524 bn in FY09 up from Rs 1,291 bn in FY08 registering a growth of 18.03% over FY08 and its subscriber base grew by 43% over FY08 to touch 429.70 mn subscribers in FY09.
The telecom sector in India experienced a rapid growth over the past decade on account of regulatory liberalization, structural reforms and competition, making telecom one of the major catalysts in India’s growth story. However, much of this growth can be attributed to the unprecedented growth in mobile telephony as the number of mobile
subscribers grew at an astounding rate from 10 million in 2002 to 392 million in 2009. Besides, the growth in the service and IT and ITeS sector also increased the prominence of the telecom industry in India. Telecom has emerged as a key infrastructure for economic and consumer growth because of its multiplier effect and the fact that it is beneficial to trade in other industries. The contribution of the sector to GDP has been increasing gradually (its contribution in GDP has more than doubled to 2.83% in FY07 from 1.0% in FY92). Telecom is one of the fastest-growing industries in India; on an average the industry added 8 million wireless subscribers every month in FY08. The government had set a target of 500 million telecom connections by 2010. However, according to the TRAI, the total subscriber base (wireless and wire line) in the industry crossed the 500-mnmark and reached 509.03 mn by the end of September 2009, which took India to the second position in terms of wireless network in the world next only to China. Prior to liberalization, the telecom sector was monopolized by the public sector and recorded marginal growth; in fact, during 1948-1998, the incremental teledensity in the country was just 1.92%. However, the introduction of NTP’99 accelerated the growth of the sector and the teledensity increased from 2.33 in 1999 to 36.98 in 2009; however, much of this growth was brought about by the NTP-99 policy changes such as migration from fixed license fee to revenue sharing regime and cost-oriented telecom tariffs. From 2003 onwards the government has taken certain initiatives such as unified access licensing regime, reduced access deficit, introduction of calling party pays (CPP) and revenue sharing regime in ADC that has provided further impetus to the sector. The Indian telecom industry is characterized with intense competition, and continuous price wars. Currently, there are around a dozen telecom service providers who operate in the wired and wireless segment. The government has been periodically implementing suitable fiscal and promotional policies to boost domestic demand and to create volumes for the industry. The Indian telecom industry has immense growth potential as the teledensity in the country is just 36 as compared with 60 in the US, 102 in the UK and 58 in Canada. The wireless segment growth has played a dominant role in taking the teledensity to the current levels. In the next few years, the industry is poised to grow further, in fact, it has already entered a consolidation phase as foreign players are struggling to acquire a pie in this dynamic industry.
Role in India’s Development
Contribution to GDP:
According to the UNCTAD, there is a direct correlation between the growth in mobile teledensity and the growth in GDP per capita in developing countries, which tend to have a high percentage of rural population. The share of the telecom services industry in the total GDP has been rising over the past few years (the telecom sector contribution in GDP went up from 2.52% in FY05 to 2.83% in FY07).
Employment:
The Indian telecommunication industry employs over 400,000 direct employees and about 85% of these employees are from government-owned companies. The ratio of number of subscribers to employees, an indication of efficiency and profitability, is much higher for private companies than for government companies .
The Indian telecom industry has been an attractive avenue for foreign investors over the years. As per DIPP figures, the cumulative FDI inflow during August 1991 to June 2009 period, in the telecommunication sector amounted to US$ 113 bn. FDI calculation takes into account radio paging, cellular mobile and basic telephone services in the telecommunication sector.
In the 2004-05 Budget, the government raised the FDI limit from 49% to 74% in the telecom services segment subject to retention of local management control. According to the new norms, 26% share out of the 74% should be held by an Indian company or an Indian citizen with Indian management. Further, 100% FDI is permitted in telecom manufacturing, category I infrastructure providers, ISPs without gateway, call centers and IT-enabled services. Further, direct or indirect FDI up to 74% is permitted subject to licensing and security requirements for ISPs with gateways, radio paging operators and category II infrastructure providers. The relaxation in FDI norms has attracted many foreign telecom majors to the sector. The presence of foreign players has not only encouraged faster infrastructure development and up gradation but also has opened up the domestic industry to foreign competition. Since 2004, there has been a large inflow of FDI in the sector. During 2004-05 and 2005-06, a period during which the FDI norms were relaxed, the FDI inflow grew by an astounding 300% to US$ 624 mn in 2005-06 from merely US$ 125 mn in 2004-05. The inflow of FDI has provided tremendous impetus to the sector in the past few years and the attractiveness of the sector has kept the FDI inflows growing steadily. During FY09 the FDI in the telecom sector at US$ 2,558 mn was 103% higher than that seen in FY08 at US$ 1,261 mn. Further, the FDI in the sector has already reached US$ 2010 mn for a six month period of FY10 (Apr-Sep 09) and is expected to surpass the total FDI for FY09. The government’s liberalized FDI policies have resulted in several foreign companies entering into the Indian markets. The influx of foreign players in the Indian telecom industry has led to capacity creation, and better infrastructure, which in turn has bettered the network quality. The rise in FDI has also enabled technology transfer, market access and has improved organizational skills; going forward, FDI could be used for providing telecom services to rural areas, where teledensity is still very low. The change in FDI policy that has raised the FDI limit from 49% to 74% for the sector has made it more attractive for foreign players. In the long run the growth prospects of telecom players that have foreign partners will improve and other players will get new avenues to raise capital.
Growth of IT-ITeS and Financial Sector
India has entered the league of countries with the most-advanced telecommunication infrastructure after the industry was deregulated. Furthermore, deregulation has stimulated India’s economic growth through industry growth and through rise in investments. It is evident that a well-developed communication sector improves access to social networks, lowers transaction costs, increases economic opportunities, widens markets, and provides better access to information, healthcare and educational services. The growth in Indian telecom sector has been concomitant with overall
growth in GDP, government revenue, employment et al. Besides, telecommunication has increased efficiency, reduced transaction costs, attracted investments and has created new opportunities for business and employment. The NTP-99 was particularly helpful for the ITeS-BPO industry as it ended the government monopoly in international calling by introducing IP telephony. After the introduction of IP telephony, there was rapid growth in the number of data processing centers and inbound/outbound call centers, which ultimately led to the outsourcing revolution in India. The telecom sector has been instrumental in creating jobs for a vast pool of talented and knowledge professionals in the IT and ITeS-BPO industry, which thrives on reliable telecommunication infrastructure. India has become an important outsourcing destination for the world and the boom in this sector also has transformed India’s economic dynamics. The evolution of telecom sector has brought about a revolutionary change in the way some businesses operate. Another beneficiary of the telecom revolution is the financial services industry, which has been on a growth trajectory. The progress and quality of the financial sector has been a key factor that has driven the pace and diversity of the real economy. India has an extensive and well-developed financial sector with wide and sophisticated banking network. Banking in India has become service-oriented, and has matured greatly from the days of walk-in customers to the present situation when banks have migrated to a 24-hour banking platform to attract customers; however, this disintermediation in the business has led banks to be extremely prudent in terms of their internal operations and has led them to adopt newer products and delivery channels. Further, with introduction of internet & mobile banking the long ques at the banks are slowly becoming a thing of the past. Both the financial and the IT-ITeS segments rely on good domestic as well as international network connectivity; therefore, there is a need for a sound telecommunication network.
Factors Facilitating Growth of the Sector
The phenomenal growth in the Indian telecom industry was brought about by the wireless revolution that began in the nineties. Besides this, the following factors also aided the growth of the industry.
Liberalization
The relaxation of telecom regulations has played a major role in the development of the Indian telecom industry. The liberalization policies of 1991 and the consequent influx of private players have led the industry on a high growth trajectory and have increased the level of competition. Post-liberalization, the telecom industry has received more investments and has implemented higher technology.
Increasing Affordability of Handsets
The phenomenal growth in the Indian telecom industry was predominantly aided by the meteoric rise in wireless subscribers, which encouraged mobile handset manufacturers to enter the market and to cater to the growing demand. Further, the manufacturers introduced lower-priced handsets with add-on facilities to cater to the increasing number of subscribers from different strata of the society. Now even entrylevel handsets come with features like coloured display and FM radio. Thus, the falling handset prices and the add-on features have triggered growth of the Indian telecom industry.
Prepaid Cards Bring in More Subscribers
In the late nineties, India was introduced to prepaid cards, which was yet another milestone for the wireless sector. Prepaid cards lured more subscribers into the industry besides lowering the credit risk of service providers due to its upfront payment concept. Prepaid cards were quite a phenomenon among first-time users who wanted to control their bills and students who had limited resources but greater need to be connected. Pre-paid cards greatly helped the cellular market to grow rapidly and cater to the untapped market. Further, the introduction of innovative schemes like recharge coupons of smaller denominations and life time incoming free cards has led to an exponential growth in the subscriber base.
Introduction of Calling Party Pays (CPP)
The CPP regime was introduced in India in 2003 and under this regime, the calling party who initiated the call was to bear the entire cost of the call. This regime came to be applicable for mobile to mobile calls as well as fixed line to mobile calls. So
far India had followed the Receiving Party Pays (RPP) system where the subscriber used to pay for incoming calls from both mobile as well as fixed line networks. Shifting to the CPP system has greatly fuelled the subscriber growth in the sector.
Changing Demographic Profile
The changing demographic profile of India has also played an important role in subscriber growth. The changed profile is characterized by a large young population, a burgeoning middle class with growing disposable income, urbanization, increasing literacy levels and higher adaptability to technology. These new features have multiplied the need to be connected always and to own a wireless phone and therefore, in present times mobiles are perceived as a utility rather than a luxury.
Increased Competition & Declining Tariffs
Liberalization of the telecom industry has fuelled intense competition, especially in the cellular segment. The ever-increasing competition has led to high growth of subscribers and has put pressure on tariffs, which have seen a sharp drop over the years. When the cellular phones were introduced, call rates were at a peak of Rs 16 per minute and there were charges for incoming calls too. Today, however, incoming calls are no longer charged and outgoing calls are charged at less than a rupee per minute. Thus, the tariff war has come a long way indeed. Increased competition and the subsequent tariff war has acted as a major catalyst for attracting more subscribers. Apart from these major growth drivers, an improved network coverage, entry of CDMA players, growth of value-added services (VAS), advancement in technology, and growing data services have also driven the growth of the industry.
Optimizing retention: Opportunities and challenges
Telecommunications carriers today must attract and retain customers while constantly improving each interaction. They need to manage the lifecycle of these customers to maximize revenue and reduce costs to increase profitability. They must do so while managing complex networks that support landlines and mobile phones, consumers and commercial companies—serving millions of customers and billions of calls. Their customers expect to be able to get support around the clock and to self-serve by SMS and email. Thousands, sometimes hundreds of thousands, of partners may need to be engaged and integrated into the value chain. Revenue assurance and reconciliation are
imperative. All of this takes place against the backdrop of intense competition in a saturated market. Effective customer retention is essential. Carriers need to retain the right customers at the right price. Huge numbers of customer retention decisions must be made and made quickly. One way to improve these decisions is with data. Voluminous, rapidly changing and detailed, this data can make the difference between success and failure. But only if it can be put to work. Analytics can help carriers hit churn targets, improve profitability and reduce costs yet most struggles with siloed data, undifferentiated offers and competing business units. As a result they cannot identify those at risk, predict their value or target them effectively and consistently.
? Opportunities and challenges
The opportunities for carriers in customer retention are threefold. If they can hit churn targets, increase the revenue from retained customers and reduce the cost of retaining those customers then they can directly improve their bottom line. 1. Hit churn targets: Customer service executives know that churn matters. In an increasingly saturated market, retaining customers is critical to long term growth and profitability. Replacing existing customers with new ones is expensive, time consuming and distracting. For some companies, customer retention details are a key element in quarterly earnings announcements. Regardless of the drivers in a particular company, hitting customer retention targets is mandatory. 2. Increase revenue from retained customers: Beyond the raw retention rate is the value those retained customers bring to the company. Over time, the objective must be to optimize the retention approach for each and every customer, maximizing the value of that customer and fulfilling the potential of the customer. Driving up the Average Revenue per User, or ARPU, is critical. 3. Reduce cost of retaining customers: It is impractical to try to retain all customers at any cost—companies want to retain profitable customers for the lowest cost possible. Reducing the cost to retain customers boosts a company’s bottom line and frees up cash to retain additional customers and increase growth. Companies must reduce operational costs for customer retention and find the most cost-effective retention offer for each customer. But retaining enough of the right customers, at the right price, is not a straightforward proposition. Challenges include intervening in a timely manner to identify customers at risk, estimating their future value and understanding what will help to retain those customers profitably requires new insights. Operations also need to be cost-effective, compliant and consistent across channels and business units. With millions of subscribers companies must be able to do all this at scale.
4. Identify those at risk: For most customers, the process of deciding to change suppliers takes time. By the time their current supplier realizes they are a retention risk, it may be too late to do anything about it—the customer has already identified a replacement and is committed to it. Effective customer retention approaches must include the early identification of those most at risk of changing suppliers. 5. Predict future value: Part of what makes an offer cost-effective for retaining a customer is the future value of that customer. Spending heavily to retain customers with little future value may be necessary to hit retention targets but is unlikely to be profitable in the long run. Keeping retention costs in line with future value and prioritizing those with high potential will ensure long term viability. 6. Understand customer motivation: Once a customer is identified for retention, the question becomes what to offer them to retain them. Understanding the customer and finding offers that will work cost-effectively is essential. 7. Deliver consistently: Customers today use every channel: from mobile devices to the call center, from a company’s website to social media, from store visits to kiosks. Companies cannot lose sight of the customer across these channels.
Outlook
The telecom industry in India has experienced exponential growth over the past few years and has been an important contributor to economic growth; however, the cut-throat competition and intense tariff wars have had a negative impact on the revenue of players. Despite the challenges, the Indian telecom industry will thrive because of the immense potential in terms of new users. India is one of the mostattractive telecom markets because it is still one of the lowest penetrated markets. The government is keen on developing rural telecom infrastructure and is also set to roll out next generation or 3G services in the country. Operators are on an expansion mode and are investing heavily on telecom infrastructure. Foreign telecom companies are acquiring considerable stakes in Indian companies. Burgeoning middle class and increasing spending power, the government’s thrust on increasing rural telecom coverage; favorable investment climate and positive reforms will ensure that India’s high potential is indeed realized.
Current data or telecom industry
India's teledensity has improved from under 4% in March 2001 to around 76% by the end of March 2012. Cellular telephony continues to be the fastest growing segment in the Indian telecom industry. The mobile subscriber base (GSM and CDMA combined) has grown from under 2 m at the end of FY00 to touch 919 m at the end of March 2012 (average annual growth of nearly 64% during this 12 year period). Tariff reduction and decline in handset costs has helped the segment to gain in scale. The cellular segment is playing an important role in the industry by making itself available in the rural and semi urban areas where teledensity is the lowest. ? The fixed line segment continues to decline in terms of the subscriber base. It has declined to 32.17 m subscribers in March 2012 from 34.73 m in March 2011. The decline was mainly due to substitution of landlines with mobile phones . ? As far as broadband connections (>=256 kbps) are concerned, India currently has a subscriber base of 13.8 m. Broadband penetration received a boost from the auction of broadband spectrum. The network providers have stated that they would be looking at boosting the contribution of data to their revenues. This bodes well for the future of broadband services.
Key Points :
Supply
Intense competition has resulted in prompt service to the subscribers. Given the low tariff environment and relatively low rural and semi urban penetration levels, demand will continue to remain higher in the foreseeable future across all the segments.
Demand
Barriers to entry High capital investments, well-established players who have a nationwide network, license fee, continuously evolving technology and lowest tariffs in the world. Bargaining power of suppliers Bargaining Improved competitive scenario and commoditization of telecom services has led to reduced bargaining power for services providers. A wide variety of choices available to customers both in fixed as well
power of customers Competition
as mobile telephony has resulted in increased bargaining power for the customers. Competition has intensified with the entry of new cellular players in circles. Reduced tariffs have hurt all operators.
FINANCIAL YEAR '12 : ? FY12 saw the continuance of growth for the Indian telecom market, which witnessed a 12% YoY increase in its subscriber base during the 12-month period. At the end of March 2012, the country’s total telecom subscriber base (fixed plus mobile) stood at about 951 m. The tele-density level stood at about 76% by the end of the fiscal.
Data source: Trai, Company Data
Data source: Trai, Company Data
? Growth remained robust in the GSM mobile space. GSM added 115 m subscribers during the year. After a robust 46% YoY increase in subscriptions during FY11, the growth in GSM industry has slowed down to 17% YoY in FY12. The year saw the apex court of the country cancelling the disputed 2G licenses that were issued in 2008. The cancellation caused the exit of Etisalat and Batelco from the sector. ? During FY12, India's mobile subscriber base grew by 13% YoY, from 812 m to 919 m, while the fixed subscriber base declined by about 7%, from 34.73 m to about 32.71 m.
Prospects :
? As far as the fixed line business goes, the low penetration levels in the country and the increasing demand for data based services such as the Internet will act as major catalysts in the growth of this segment. However, the growth would be mitigated by
increasing substitution of landlines by mobile phone. The PSUs will however continue to retain their dominant position. This is on account of high capital investments required in setting up a nationwide network. As a result, the private sector players will have to rely on key business centres and pockets of high urbanisation for their growth. ? Increasing choice and one of the lowest tariffs in the world have made the cellular services in India an attractive proposition for the average consumer. The penetration levels in urban areas have already crossed 100%. Therefore the main driver for future growth would be the rural areas where tele-density is around 39.22%. During FY12, a number of things were carried out. The Supreme Court cancelled the 2G licenses that were issued in 2008 by the erstwhile telecom minister. The Court also directed the regulator to formulate new rules for auctioning the spectrum and cancelled licenses. The regulator, TRAI has come up with regulations which price the 2G spectrum at sky high prices. The operators have vehemently opposed the pricing which they state will strain their stretched balance sheets further. The cancellation of the licenses and subsequent TRAI's proposals on pricing of the new spectrum prompted the exit of 2 foreign operators from the country. The other operators too have revisited their investment plans in India. However, the regulator is optimistic that foreign operators would still participate in the upcoming 2G auction. The operators continued to operate on thin margins during FY12. Due to intense competition, tariffs continue to remain low. At the same time rising operating costs will force operating margins to continue remaining depressed during the current fiscal as well. At the same time, operators are likely to see their balance sheets come under pressure as well. Most operators have taken huge loans to fund their 3G spectrum obligations. Now they would have to raise more funds to fund the 2G spectrum licenses. With such low margins and high debt to equity ratios, banks have been skeptical about lending further to the telecom companies. As a result, most of them are exploring other options of raising funds including listing of unlisted subsidiaries. ? In a latest move, operators have cut tariffs on the premium 3G services. Most of them have stated that the decline in tariffs would be offset by increase in volumes which would help boost 3G revenues. Indian consumers are known to be highly sensitive to price decrease and therefore this move to cut prices is expected to drive growth for 3G in the coming years. However, if the operators go for predatory pricing, like they did for 2G, then it would harm the fundamentals of the sector by forcing companies to cut margins further. While tariff increase on the 2G side will have to happen eventually, it remains to be seen if all operators would make this move in the current fiscal or not.
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TOP 4 LEADING TELECOM SERVICE PROVIDERS OF INDIA 1. Bharti Airtel : Bharti Airtel Limited popularly known as Airtel, is an Indian telecommunications company founded in the year 1995. It operates in 19 countries across Asia and Africa. Headquartered in New Delhi, India the company ranks amongst the top 5 mobile service providers globally in terms of subscribers. Bharti Airtel had over 244 million customers across its operations at the end of January 2012. Headed by Sunil Bharti Mittal, Airtel is one of the largest providers of mobile and fixed telephony in India. It operates a GSM network in several countries, providing 2G or 3G services depending upon the country of operation. Airtel also acts as a carrier for national and international long distance communication services. The company has a submarine cable landing station at Chennai, which connects the submarine cable connecting Chennai and Singapore. It is known for being the first mobile phone company in the world to outsource all of its business operations except marketing, sales and finance. On 18 November 2010, Airtel rebranded itself in India in the first phase of a global rebranding strategy. The company unveiled a new logo with 'airtel' written in lower case. Designed by London-based brand agency, Brand Union, the new logo is the letter 'a' in lowercase, with 'airtel' written in lowercase under the logo. Bharti Airtel more commonly known as Airtel is on top of the list of Top 10 telecom companies in India. Why Airtel is on the top of charts because their reach in all corners of India. You will find Airtel service in all major cities as well as small towns also. So, this helps Airtel to become number one is race. 2. Vodafone Essar : Vodafone is one of the world's largest mobile communications companies by revenue with approximately 398 million customers in its controlled and jointly controlled markets as at 31 December 2011. Vodafone currently has equity interests in over 30 countries across five continents and more than 40 partner networks worldwide. Vodafone Group Plc is a British multinational telecommunications company headquartered in London, United Kingdom. Vodafone owns and operates networks in over 30 countries and has partner networks in over 40 additional countries. It owns 45% of Verizon Wireless, the largest mobile telecommunications company in the United States measured by subscribers. The name Vodafone comes from voice data fone, chosen by the company to "reflect the provision of voice and data services over mobile phones". Vodafone has a primary listing on the London Stock Exchange and is a constituent of the FTSE 100 Index. It had a market capitalization of approximately £89.4 billion as of 23 December 2011, the second-largest of any company listed on the London Stock Exchange. It has a secondary listing on NASDAQ.
3. Reliance: Reliance Communications Ltd. commonly called RCOM is an Indian broadband and telecommunications company headquartered in Navi Mumbai, India. Established in 2004, a subsidiary of the Reliance Group. It ranks among the top 5 telecommunications companies. Reliance Communications corporate clientele includes 2,100 Indian and multinational corporations, and over 800 global, regional and domestic carriers. The company has established a pan-India, nextgeneration, integrated (wireless and wire line), convergent (voice, data and video) digital network that is capable of supporting services spanning the entire communications value chain, covering over 24,000 towns and 600,000 villages. Reliance Communications owns and operates the next-generation IP-enabled connectivity infrastructure, comprising over 190,000 kilometers of fiber optic cable systems in India, USA, Europe, Middle East and the Asia Pacific region. In July 2007, the company announced it was buying US-based managed Ethernet and application delivery services company Yipes Enterprise Services for a cash amount of 1200 crore (the equivalent of US$300 million). The deal was announced of the overseas acquisition, the Reliance group has amalgamated the United States-based Flag Telecom for $210 million. RTL operates in Madhya Pradesh, West Bengal, Himachal Pradesh, Orissa, Bihar, Assam, Kolkata and Northeast, offering GSM services. 4. Idea: IDEA Cellular is a publicly listed company, having listed on BSE & NSE in March 2007. Idea is a pan-India integrated GSM operator and has its own NLD and ILD operations, and ISP license. With traffic in excess of a billion minutes a day, Idea ranks among the Top 10 country operators. Idea has a network of over 70,000 cell sites covering the entire length and breadth of the country. Idea has over 3,000 Service Centres servicing Idea subscribers across the country, including 450 special Experience Zones for 3G promotion. Idea's service delivery platform is ISO 9001:2008 certified, making it the only operator in the country to have this standard certification for all 22 service areas and the corporate office. Idea's strong growth in the Indian telephony market comes from its deep penetration in non-urban & rural markets. It has the highest share of rural subscribers as a percentage of total subscribers, amongst other GSM players. In fact, 2 out of every 3 new Idea subscribers come from rural/ semi-urban India. IDEA Cellular is an Aditya Birla Group Company. The group operates in 33 countries, and is anchored by more than 132,000 employees belonging to 42 nationalities.
INTRODUCTION OF CUSTOMER RETENTION
A Customer-focused approach among its employees is still not present. In this era of intense competition, it is very important for any service company to understand that merely acquiring customers is not sufficient because there is a direct link between customer retention over time and profitability & growth. “Customer retention is called silent attrition where the customer stops purchasing the product and services and divert to other suppliers without even informing them.’’ Customer retention to a great extent depends on service quality and customer satisfaction. It also depends on the ability of the organization to encourage customers to complain and then recover when things go wrong. Complaints are natural part of any service activity as mistakes are an unavoidable feature of all human endeavor and thus also of service recovery. Service recovery is the process of putting things right after something goes wrong in the service delivery. Customer retention highly depends on attrition and silent attrition rates. Attrition is the process when customers no longer want to use product and services provided by the supplier and breaks the relationship bond by informing the supplier that he will be no more a customer. Most of the defecting customers don’t even intimate the supplier that they are defecting. Customer Retention is the activity that a selling organization undertakes in order to reduce customer defections. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship. A company’s ability to attract and retain new customers, is not only related to its product or services, but strongly related to the way it services its existing customers and the reputation it creates within and across the marketplace.
It is difficult to exactly define customer retention as it is a variable process. A basic definition could be ‘customer retention is the process when customers continue to buy products and services within a determine time period’. However this definition is not “Customer applicable for most of the high end and low purchase frequency products as each every product is not purchased by the customer.
Definition
Retention is an imperative in modern business - a strategy whose objective is to keep a company's customers and to retain their revenue contribution.” Primarily it aims to prevent customers from defecting to alternative brands / going to the competition. As all managers know, it costs less to keep an existing customer than to acquire a new one, thus having a customer retention strategy is common sense. Customer retention is the driving force behind Customer Relationship Management (CRM), relationship marketing and loyalty marketing. Customer retention is a strategic process to keep or retain the existing customers. Studies across a number of industries have revealed that the cost of retaining an existing customer is only about 10% of the cost of acquiring a new customer, so customer retention makes powerful, economic sense. Putting in place a customer retention strategy increases customer profitability as acquisition costs only occur at the beginning of a relationship, so the longer the relationship, the lower the amortized cost; account maintenance costs decline as a percentage of total costs . ?Customer retention plays an important role for the organizations. It can create more economic efficiency for the organizations. Therefore, the sales
persons have realized the importance of customer retention. The purpose of this essay is to discuss the key areas that the organizations must manage to increase the customer retention. Firstly, this essay will have a brief definition about the customer retention. After that, it will discuss how to increase the customer retention from different aspects. Finally, it will have a case study to illustrate the discussion.’’ Customer retention is also a concept which can lead to new clients. As with the reputation factor, a business which retains the same customers can also result in new customers due services. New customers mean not only that the business name will be on the lips of many hut also that the business owner will see a greater income due lo new clientele. Customer retention is more than giving the customer what they expect; it’s about exceeding their expectations so that they become loyal advocates for your brand. Creating customer loyalty puts ‘customer value rather than maximizing profits and shareholder value at the center of business strategy’. The key differentiator in a competitive environment is more often than not the delivery of a consistently high standard of customer service. A variety of strategies are available to small business owners seeking to improve their customer retention rates. Of course, the most basic tools for retaining customers are providing superior product and service quality. High quality products and services minimize the problems experienced by customers and create gogp will toward the company, which in turn increases customers' resistance to competitors' overtures. However, it is important that small business owners not blindly seek to improve their customer retention rate. Instead, they must make sure that they are targeting and retaining the right customers—the ones who generate high profits. "In short, customer retention should never be a stand-alone program, but rather part of a comprehensive process to create market ownership,. The first step in establishing a customer retention program is to create a time line of a typical customer relationship, outlining all the key events and interactions that occur between the first contact with and the eventual loss of the customer. The next step is to analyze the company's trends in losing customers. Customer defections may be related
increases or to a certain point in the relationship life cycle, gathered to identify warning signs of customer loss and develop retention programs to counteract it. One basic customer retention strategy available to small business owners involves focusing on employee retention and satisfaction. A company with a high turnover rate may not be able to maintain strong personal relationships with its customers. Even if relationships are established, the customer may decide to take its business to a new company when its contact person leaves. At the very least, high turnover creates a negative environment and reduces the quality of service provided to customers. In order to reduce turnover, it is important to provide employees with career development opportunities and high degrees of involvement in the business. Another possible strategy for retaining customers involves institutionalizing customer relationships. Rather than just providing contact with individual employees, a small business can provide value to customers through the entire company. For example, it could send newsletters or provide training programs in order to become a source of information and education for customers. It may also be possible to establish membership cards or frequent-buyer programs as direct incentives for customer retention. Some companies may be able to use electronic links to improve the service they provide to customers. For example, e-mail connections could be used to provide updates on the status of accounts, electronic order systems could be used to simplify reordering and reduce costs, and online services could be used to. provide general information. Online accessibility these days is another important customer retention tool. As more and more individuals become Internet savvy, having access to businesses via the World Wide Web is an ideal notion to many customers. If your business is one which can be technologically advanced in the form of Internet access and website capabilities, it is a wise idea to do so as more customers will tend to stay with a company that is up with today's technology.
Customer retention has a direct impact on profitability. Research by John Fleming and Jim Asplundh indicates that engaged customers generate 1.7 times more revenue than normal customers, while having engaged employees and engaged customers returns a revenue gain of 3.4 times the norm Customer retention refers to a set of strategies and ways for preventing the customer losses and establishing the customer loyalty. Successful customer retention starts with the first contact an organization has with a customer and continues throughout the entire lifetime of a relationship. Customers or people, who buy from you again and again, remember: you can sell anybody anything once but can you do it again and again? Make them happy and they will return good luck. The art of implementing business strategies to an effect that will make clients and customers keep on patronizing what you have to offer be it a product or your own services. On the other hand, to retain customers, you have to employ methods that were found to be an effective way to do just that for your business. One way of doing that as a tip is to use promotional items or corporate gifts and distribute them to all your clients on a level per level basis like from a regular customer to a a prospect customer. This way, your promotional item or corporate gift helps you retain customers and at the same time grow them for business profits and higher return on investment customer retention. Customer retention is a strategic process to keep or retain the existing customers and not letting them to diverge or defect to other suppliers or organization for business and this is only possible when there is a quality relationship between customer and supplier. Usually a customer is tended towards sticking to a particular brand or product as far as his basic needs are continued to be properly fulfilled. He does not opt for taking a risk in going for a new product. More is the possibility to retain customers the more is the probability of net growth of business.
If it is difficult to attract customers, it is more difficult to retain them. Most marketing theories and practices over time have relied on attracting new customers rather than retaining the old ones. A sustainable business however, concentrates on its new as well as old customers equally. Traditionally, the emphasis has been more on new customers rather than customer retention. Customer retention needs more of building relationships and keeping after sales commitments intact. The better the after sales service, the better will be customer retention. Thus companies would be wise to perform customer satisfaction surveys regularly as customer satisfaction is the key to customer retention. A highly satisfied customer stays longer with the company, buys and self-promotes new products being launched by the company, is optimal for feedback on improving the organization and the cost of this customer is much less then attracting new customers. Customer complaints are NOT a measure of customer satisfaction. 95% of people never complain to a company. They just move on to another brand. Thus using toll free numbers and suggestions forms has become a norm in major MNC’s 0 as well as retail chains. Just so they can reach out to their customers, and possibly bring back lost customers.
Fig no 1.1
Customer Retention: The Art of Keeping Good Customers To retain a customer, keep him happy.
That is how you retain customers. It's easy to say but much harder to do. Here at we treat our clients like gold. It takes a lot of work but it always pays off. Here are a few ways that you can have the success that we have had: 1. Treat customers like they are the most important person on the earth. After all, they are the most important people! People won't spend money on a second bad experience so make them feel good. 2. Go the extra mile! If a customer has a problem, the entire company should work to fix it. We ensure that our clients have an excellent experience and they appreciate it by coming back again and again. 3. Offer incentives and let them know they are appreciated! Loyal customers are hard to come by so we occasionally give them freebie and we always tell them how much we appreciate them. Both of these actions reinforce the fact that we value them. That way we can retain them easier and everyone is happy. 4. Keeping good customers is a more sure-fire method for future success than a constant focus on attracting new customers. Keeping good customers loyal to your product, your service and your organization will be critical to your future marketing success. Having a loyal customer base of good customers it is more important to place a higher emphasis on retaining and keeping your current customers. This is particularly true in saturated markets and industries, where your customers have many, many alternatives available to them. Numerous research studies have shown that if you can reduce your attrition rate, that is the annualized rate of lost customers, by as little as five percentage points, you can increase your bottom-line profits by anywhere from 25% to 85%.
That's right, just keeping more of the customers you have and preventing them from taking their business elsewhere can have an immediate, positive impact on your bottom line profits.
Customer satisfaction:
One which will often last in duration as well as show a good financial standing. Customer retention is also a concept which can lead to new clients. As with the reputation factor, a business which retains the same customers can also result in new customers due services. New customers mean not only that the business name will be on the lips of many hut also that the business owner will see a greater income due lo new clientele. For customer satisfaction lo be high, promises and expectations must be met. This involves the organization's ability to understand customer expectations and to do it right the first time (DIRTF).. The ability to deal with problems as they arise is a key ingredient to success. Also, the organization needs lo consider complaints as a gift! Customers who have an issue dealt with to their satisfaction have a 95% likelihood of repurchasing and telling S people about their experience; If they don't complain (as 96% of people do) they will tell at least 10 Other people about their problem. 'The occurrence of problems can cause a 15-to-30-point drop in high satisfaction responses and in loyally indicators. I his puts revenue at risk to tile average tune of I! V So, some techniques to maintain and improve satisfaction must be considered. An effective complaint handling system is an excellent defensive tool. Ongoing surveys to measure customer satisfaction and loyalty, and capture the voice of the customer are also essential The biggest problem, however, are those companies do not manage the customer contact experience with sufficient detail. Therefore I often recommend my
Customer Experiene Workshop as an effective analytical and improvement tool. Il is pragmatic and leads to quick result.
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WHY CUSTOMER RETENTION IS SO IMPORTANT?
There are a few different reasons why customer retention is so important. First, due to the fact that businesses operate on the basis of customers and the purchases made by such individuals, it is crucial to keep the customer base that you have. Keeping the same customers returning back for more of your products on a continual basis will help to ensure that you receive the income necessary to run your business. A steady customer base and retaining the usual customers will help to secure a steady income. Another reason why customer retention is so important is that it shows that a business has a good reputation since it can keep a steady customer base. Businesses which show customer retention year after year can be said to be reputable in nature as the
same customers return to their store for more purchases and/or services. A reputable business is one which will often last in duration as well as show a good financial standing. Customer retention is also a concept which can lead to new clients. As with the reputation factor, a business which retains the same customers can also result in new customers due to word of mouth by the individuals who use the business for their products and/or services. New customers mean not only that the business name will be on the lips of many but also that the business owner will see a greater income due to new clientele.
Value of Customer Retention:
Customer Mention a not only a cost effective and profitable strategy, but in today's business world it's necessary this is especially true when you remember that 80% of your sales come from 20% of your customer and clients. With these statistics I am wondering why most marketing and sales campaigns are designed for the new customer. Take of instance the wireless telephone companies; if you sign a new contract you are given a large rebate or even a free cellular telephone. If you arc a current customer you have the privilege of paying full price. Can someone please explain that methodology to me. With this type of promotion are we not just pushing current customers and clients to seek services elsewhere when their contract ends' Perhaps we need to rethink our marketing and sales strategies, after all many experts will tell you that it's five limes more profitable to spend marketing and advertising dollars to retain current customers than it is to acquire new customers, hi years past the importance of focusing on customer retention was not as important, stickiness came naturally. We shopped in our neighborhood shops and our comer grocery stores. We had a personal connection on with our service providers and the thought of shopping at another store would have never crossed our minds.
That has all changed now, Our Mores our larger, the majority of the sales personnel don't know that you even exist. Not to mention that now we have the convenience of the Internet and do .1 large portion of our shopping online. where you are known by your email address. As a result, customer loyally has disappeared and large corporations and virtual storefronts arc unable lo ask the millions of disloyal customer* what caused them to stray. However, there is a solution. Sophisticated technology and database equipment has made it possible for specialized firms lo make attempts at customer retention through database marketing programs. Establishing a detailed client database will allow these companies to keep track of personal information and individual preferences of all their customers. This enables them lo provide better service and value. Just like the comer grocery More owner kept information on 200 customers in his head. the large superstore can now keep track of 20JKH) customers through Us customer database. With effective implementation of customer databases, companies will be able to reestablish contact with customers. and will be able to work successfully towards increasing customer retention, repeat sales, and customer referrals. To achieve (lie objectives of the database and customer retention programs, (he entire campaign should be designed and carried out with the customer in mind. The exercise wills only he effective if the customer recognizes and associates some value with being part of your database. If they do not perceive value in your program all of your communications, coupons, special offers, and newsletters will be discarded. Your customers have been inundated with meaningless "junk" mail and email spam, so embed your campaign with value. A few value-add strategies that you can use include" • Membership cards and programs that entitle your customers lo special offers, discounts, or preferential treatment. • Welcome, acknowledgement, sales recognition. thank you statements • After sales satisfaction and complaint inquiries and surveys.
• Event oriented communications in which the customer is genuinely interested. • Enhanced and empowered Customer, after sales, and technical support.
Steps to improve your customer retention ratios:
The most successful companies in today is markets are doing a better job of retaining good customers by finding imaginative ways of exceeding customer expectations' through the Sales/Service Relationship Formula. As a result, their competitor’s arc finding it increasingly difficult to steal these entrenched customers. The Sales Service Relationship starts with a mindset of understanding and appreciating customer need lo probe into these needs so that they can uncover the unspoken and deep-seated concerns of each individual customer. This will enable your sales force to turn service opportunities into At the heart of the Sales. Service Relationship is a commitment to quality at all times and in all instances- It is a commitment that ensures that every little error, such as typos in your customer communications, arc discovered and corrected before any customer is exposed lo them this includes e-mail. Ever notice how many e-mails you receive are loaded with spelling errors, despite the fact that most e-mail software today includes a baste spell checker application? There is no excuse other than plain sloppiness and laziness for this lo happen. Keeping customers truly loyal to your products and services requires more than numerous price discounts, decreasing margins, and "rewards" programs, To build relationships that last your company must first build customer loyalty and earn customer loyalty, before attempts arc made to reward customer loyally. Importantly, customer loyally needs to be rewarded in a relevant manner, which means that not all customers can be rewarded equally or in the same manner.
Keeping good customers is a mailer of being customer-centric in your marketing approach, understanding and applying the Sales Service Relationship Formula, building relationships that last and constantly leveraging your corporate brand (or relationship building.
Customer Retention programmes
Finding the patterns of customer defection is important to devise optimum customer retention programs. If you want to retain lost customers, then first you need to find out WHY these customers are leaving your brand / product. This can be done by analyzing internal records, sales calls, pricing and product surveys and competition studies. For example – Each and every call in a customer service department is recorded so as to improve the quality of customer calls over time. Thus, some key questions to be asked are
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What is the rate of defection? Does retention vary by office, region, sales executives or distributor? (To find out why customer retention is higher in some places)
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Does your pricing have a relation to customers and if yes, what is the magnitude of the effect.
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Where do your lost customers usually go? Which brand / product and why? What are the retention figures for your sector / industry? Which company in your sector retains their customers the longest and why? These are some questions which a company can ask of itself while devising a customer retention programme.
The two best ways to keep customers from leaving are
1. Understanding their needs, and
2. Delivering upon the promises you make to satisfy these needs.
The worst thing that happens when a customer leaves:
It is not just that you lose the revenue, and profits, from that customer this year. It is also that you are likely to lose all future income from that customer, at least for several years to come. Lost customers rarely return and certainly not quickly. But the worst thing may not be just the lost revenue to your sales figures. The worst thing is that a typical customer will tell up to 19 people when they are dissatisfied with your products or services. Thus, your ability to transact, or to develop relationships, with these 19 other prospects and customers can be quickly diminished. Another thing to remember is that not all customers are of equal value. Typically, a customer who has been with you for a longer time is more valuable than a more recently acquired customer. For instance, a customer who has been with you for five years is likely to be giving you 8-10 times the profit stream of a newly acquired customer. Hence, if you lose a customer that has been buying from you for five years, you may need to replace that customer with not one, but perhaps 8 to 10 new customers just to replace the value of this one lost customer. If there is one message you want to give your staff today, it may be a renewed emphasis on keeping and satisfying the customers you have. You've spent lots of time casting your lines, making your catch and reeling them in.The downfall for many companies is that they don't know how to keep customers. It seems like this has fast become the pot of gold at the end of the rainbow and few firms manage to do it well.
Studies across a number of industries have revealed that the cost of keeping an existing customer is around ten per cent of the cost of acquiring a new one. So, economically it makes pretty good sense. Putting together a good retention strategy will also lead to increased customer profitability, as the longer the relationship, the lower the account maintenance cost.
OBJECTIVES
Primary:
? ? ? ? To measure the effect of service quality attributes on customer loyalty in mobile phone service industry. To know the varied factors which forces customers to switch To know the customer preferences of services or they behaviour towards various telecom services on the basis of secondary data. To get the attrition ratio and reasons of attrition in Telecom Sector.
Secondary:
? ? To study the Size, Structure and Profitability of the Industry. To study Opportunities of Indian Telecommunication Industry.
SCOPE
This study helps us to analyze the factors that cause the switching behavior. As the telecom industry has been growing rapidly and the rate of penetration also increased, the number of new customers subscribing to thus can’t be reduced. Where as in the mature market with a base of shrinking potential subscribers, stealing the customers of competitors and retaining its own customers has become the most important strategy for the service firms. Therefore the service firms have got more interested in knowing and understanding the underlying factors leading to switching behavior of customers, as customers are totally heterogeneous in nature and can repeat switching from time to time. As stated in the relevant literature the service of high quality helps to create customer satisfaction, loyalty and market share growth by petition for new customers and improved financial performance and productivity (Lewis, 1993); Andereson, Fornell & Lehmann, 1994) . According to Hackl, Scharitzer, and Zuba (2000) had demonstrating it by adding that customer satisfaction is a prerequisite of customer retention, satisfaction and loyalty. Those customers who are loyal plays vital role in building up businesses, by setting up distinct moves, by paying the premium prices and providing the companies with a set of potential new customers by positive word of mouth. In fact the telecom industry losses their customers more frequently so it’s usually challenging thing for the service providers to retain their existing customers and attract the new customers
RESEARCH METHODOLOGY
RESEARCH: Research is the investigation of a particular topic using a variety of reliable, scholarly resources. The three major goals of research are establishing facts, analyzing information, and reaching new conclusions. The three main acts of doing research are searching for, reviewing, and evaluating information.
SOURES OR RESEARCH: 1. Secondary research ? Reviewing secondary research or by analyzing previously collected primary data. It can be accomplished through various methods, including questionnaires and telephone interviews in market research, or experiments and direct observations in the physical sciences, amongst others. The secondary data has been collected from various websites, books, journals, newspapers & magazines etc.
? Secondary research is research that is carried out with already existing data. It uses materials as books, magazines, journals, newspapers among others. Here, the researcher needs not go on the ground since all the information collected has been documented already
Advantages:
Easy to access There are many advantages to using secondary research. This includes the relative ease of access to many sources of secondary data. In the past secondary data accumulation required marketers to visit libraries, or wait for reports to be shipped by mail. Now with the availability of online access, secondary research is more openly
accessed. This offers convenience and generally standardized usage methods for all sources of secondary research. LOW COST ACQUIRE The use of secondary data has allowed researchers access to valuable information for little or no cost to acquire. Therefore, this information is much less expensive then if the researchers had to carry out the research themselves. Clarification of Research Question The use of secondary research may help the researcher to clarify the research question. Secondary research is often used prior to primary research to help clarify the research focus. May Answer Research Question The use of secondary data collection is often used to help align the focus of large scale primary research. When focusing on secondary research, the researcher may realize that the exact information they were looking to uncover is already available through secondary sources. This would effectively eliminate the need and expense to carry out their own primary research. May Show Difficulties in Conducting Primary Research In many cases, the originators of secondary research include details of how the information was collected. This may include information detailing the procedures used in data collection and difficulties encountered in conducting the primary research. Therefore, the detailed difficulties may persuade the researcher to decide that the potential information obtained is not worth the potential difficulties in conducting the research. Disadvantages: Quality of Research There are some disadvantages to using secondary research. The originators of the primary research are largely self-governed and controlled by the marketer. Therefore,
the secondary research used must be scrutinized closely since the origins of the information may be questionable. Moreover, the researcher needs to take sufficient steps to critically evaluate the validity and reliability of the information provided. Not Specific to Researcher’s Needs In many cases, secondary data is not presented in a form that exactly meets the researcher’s needs. Therefore, the researcher needs to rely on secondary data that is presented and classified in a way that is similar to their needs. Incomplete Information In many cases, researchers find information that appears valuable and promising. The researcher may not get the full version of the research to gain the full value of the study. This is because many research suppliers offer free portions of their research and then charge expensive fees for their full reports. Not timely when using secondary research, one must exercise caution when using dated information from the past. With companies competing in fast changing industries, an out-of-date research reports many have little or no relevance to the current market situation.
Type of research used in research:
Descriptive research: Descriptive research includes surveys and fact finding enquires of different kinds. The major purpose of descriptive research is description of the state of affairs, as it exists at present. Descriptive research, also known as statistical research, describes data and characteristics about the population or phenomenon being studied. However, it does not answer questions about e.g.: how/when/why the characteristics occurred, which is done under analytic research.
REVIEW OF LITERATURE
INVEST INDIA TELECOM
The article summarizes that, the telecom services have been recognized the world-over as an important tool for socio-economic development for a nation. It is one of the prime support services needed for rapid growth and modernization of various sectors of the economy. Indian telecommunication sector has undergone a major process of transformation through significant policy reforms, particularly beginning with the announcement of NTP 1994 and was subsequently re-emphasized and carried forward under NTP 1999. Driven by various policy initiatives, the Indian telecom sector witnessed a complete transformation in the last decade. It has achieved a phenomenal growth during the last few years and is poised to take a big leap in the future also.
BUILDING CUSTOMER LOYALTY BY RECOGNITION
In this article we can find that, today most businesses are so large and have so many customers that personal recognition has become very difficult. Customer loyalty has declined as a result. In the past fifteen years, however, computers have become extremely powerful, and inexpensive. It is possible today, economically, to hold in a computer the kind of information that the old corner grocers used to keep in their heads, and to use this information to provide recognition and personal attention to each customer. Many companies today have built a customer database that has relevant information. Few of them, however, have learned how to connect this database to their telephone system.
USE CUSTOMER RETENTION MARKETING TO KEEP AND GROW YOUR CUSTOMERS
These articles states or reveal that; In order to have a loyal customer, the practice today is to attract them with the price. All strategies to make a business grow must primarily focus on strengthening the connection between respective company and the customers. Again, customer retention marketing is all about looking at your business from your customer's perspective; after all, it is them that keep company in business.
Can the Govt Restart the Telecom Sector?
Article reveals that, Share of 1.68 per cent of India’s 893 million-strong wireless subscriber base. Worse, it services these customers using a pitiful 2.5 MHz of spectrum—the least among all operators across the country Three years and $3.1 billion dollars after starting operations in India, MTS—easily India’s loneliest, though pluckiest mobile operator—has managed to add roughly 15 million subscribers. Telecom, especially wireless, was supposed to be India’s ticket to economic development. How did things come to a stage where the industry is known more for the taint and not the technology?
Enhancing customer relationship & interaction process is accelerating CRM adoption, finds Net scribes
The report concludes with a section named ˜Strategic Recommendation section derived after a comprehensive analysis of the sector. Net scribes services include Sales Insights, Market Intelligence, Social Media Insights, and Brand Surveillance for global clients. Research on India (ROI) is Net scribes leading source for market intelligence on emerging sectors in India. The company’s topics provide a holistic view of an industry and are a spring board for entry strategies, private equity and venture capital investments, investor presentations and management discussions. Organizations have realized that retaining customers has more impact than acquiring new ones; CRM helps in both.
Customer Retention in BSNL: A Challenge Ahead
Liberalization has brought many challenges for the Government of India enterprise in Telecom Sector i.e. Bharat Sanchar Nigam Limited (BSNL). The market has opened up for telecom service and every company is struggling to capture maximum share of the growing market. Different strategies are being formulated to ensure the growth in customer base. In this paper, we have carved out a comprehensive study pertaining Indian Telecom market and position of BSNL in the Indian Telecom sector. Also, we have discussed the impact of liberalization on Indian Market particularly on BSNL, in terms of retention of its customers.
A Study of Service Quality Attributes and Their Impact on Customer : Loyalty in the Mobile Phone Service Industry.
According to this article; The challenges that the Indian telecom sector faces today are unique and multi-faceted and will require innovative solutions coming from operators and regulator working together. Mobile operators in the country are experiencing declining financial performance. Increased competition because of significantly high number of operators compared to global benchmarks has resulted in reduction in average revenues per minute to Rs 0.5/0.10 per call minute in FY2012 from a high of Rs 7.3 per call minute in FY2000. At the same time, the minutes of usage per subscriber has also decreased significantly from a peak of 465 minutes in FY2007 to 369 minutes in FY2011. This has resulted in average revenue per user (ARPU) per month declining from Rs 362/ Rs 256 in FY 2005 to Rs 105/ Rs 68 in FY 2011 service operators. While subscribers’ base has registered a growth rate of 43% between FY 2009 to FY 2011, the telecom industry revenue grew only by 5% for the same period much less than inflation rate of 8.72% for the same period. Besides , there are many other challenges are staring at this industry like network operating expenses, governmental fees, levies, charges etc. Consequently, operators are under immense margin pressure. Simultaneously, issue of licenses to multiple players in 2008 has resulted in increased competition in the Indian mobile market. It also worth noting that, on an average, 10 players were operating in each of the 22 circles in India with Mumbai and Bihar having a staggering 12 players. In the backdrop of this kind of stiff competition, mobile service providers are moving aggressively to attract new customers by offering attractive promotional activities and increased service. It is, therefore, necessary for a service provider to take all the steps to know what makes customer satisfied and loyal in the Telecommunication service industry. Finally, this research will encourage further study and useful guidelines for future researchers.
A Study on Consumer Switching Behaviour in Cellular Service Provider: A Study with reference to Chennai
Article reveals that; Indian mobile market is one of the fastest growing markets and is forecasted to reach 868.47 million users by 2013. India has seen rapid increase in the number of players which caused the tariff rates to hit an all-time low. This allowed the players to target the low income population thereby increasing the market share. The availability of a number of subscriber options for consumers and varied tariff rates of each player, lead the consumers to switch between service providers. The objectives of the study are to find the factors that influence the consumers in switching the service provider and to delve into finding out the likeliness of switching the service provider. The variables considered for the study are Consumer demographics, Consumer satisfaction with existing service provider, Factors influencing the switching behaviour and factors that affect the switching behaviour of consumers and these were grouped into 4 categories namely customer service, service problems, usage cost and others. The results from the study reveal that call rates plays the most important role in switching the service provider followed by network coverage, value added service and customer care while advertisement plays the least important role. It is found that there is a relation between switching the service provider and the factors (customer service, service problem, usage cost, etc.). Article also states that, the mobile providers concentrate on increasing network stability and setting tariff rates competitively.
Comparison of Privatization Processes of Telecom Services in India and Brazil
Article states that; Apart from being BRIC countries, what India and Brazil have in common is a large service sector that contributes significantly to the GDP. The service sector contributed 66% to the Brazilian GDP and 59% to the Indian GDP in 2010. Telecommunication services are a significant part of it in both the countries. This paper compares the regulatory processes of privatization of telecom services in these countries and the consequences of these on the telecom firms broadly and on the sector as a whole. Indian companies, facing harsh competition and having refined their business models to compete in this environment acquired the necessary expertise to foray abroad, opportunistically building their businesses. The highly competitive regulatory policies in India, led to the emergence of innovative business models and creation of large domestic companies both in services and infrastructure segment and consequently acquiring the necessary expertise to foray abroad.
The Indian Telecom Sector: Legal and Regulatory
The article states in it that; the telecommunications industry has impact on every aspect of our lives, from the simple reality of enabling telephonic communication between people in different locations to enabling supply-chains to work seamlessly across continents to create products and fulfill demands. Telecommunication services are now recognized as a key to the rapid growth and modernization of the economy and an important tool for socio-economic development for a nation. Telecommunications in India can be traced back to the 19th century when the British East India Company introduced telegraph services in India. The past two decades have been considered as the golden period for the telecommunications industry in India with exponential growth and development in terms of technology, penetration, as well as policy. All this has paralleled with the liberalization in this sector and huge investment by both domestic and foreign investors.
Service Quality and Customers preference of Cellular Mobile Service Providers
This study was undertaken to examine and understand the consumers' perception choice in selecting cellular mobile telecommunication service providers. Consumers' perception is widely varied in accordance with the Communication quality, call service, facilities, price, customer care and service provider's quality. Hence, from the result of researcher’s study, he deliberately concludes that price has significant positive impact on consumer perception choice in selecting telecommunication service provider. Hence, product quality from the marketer's perspective is associated with communication, price, feature, function, or performance of a product. Price plays a significant role in the purchase decision of the telecommunications sector. However, the study shows that product quality and availability has a significant impact on consumer perception choice in selecting mobile telecommunication service provider and supported.
India’s increasing Mobile Sector
According to this article; with a figure of around 110.01 million connections Indian telecom industry is characterized as the 5th largest and fastest growing sector of the world. The factors which can be held responsible for sudden shoot up are low tariffs along with the falling headset cost. The telecom reform introduced by government has opened pathways for many foreign companies to enter into Indian market sector. The Indian telecom sector is not only limited to the basic telephone but it covers internet broadband, cable TV, SMS, IPTV, soft switches etc. Currently there are nearly 42 million Internet subscribers in India. At an estimate there are primarily 9 GSM with 5 CDMA operators imparting mobile services in 19 telecommunication circles and across 4 metro cities. It covers around 2000 towns throughout the nation. Indian telecom industry is regulated and administrated by the 'Telecom Regulatory Authority of India' (trAI).
MANAGED SERVICES’ IMPACT ON THE TELECOM INDUSTRY
According to the article; the Managed Services market is in a phase of good growth and is one of the fastest growing segments of the telecom industry. It is currently characterized by agreements, of varying scope, between Managed Services providers and a broad range of telecom operators. Managed Services providers are both vendors of telecom equipment that leverage their expertise to provide additional services to customers, and other players, the nontraditional telecom vendors. Telecom equipment vendors are better positioned to take on new roles in the value chain as they can leverage their existing competences, in network management for example. In recent years operator awareness of Managed Services has increased significantly and Managed Services are beginning to become a standard element in telecom operator procurement processes. In the near future, therefore, there is a strong likelihood that the shift in responsibility for roles in the value chain enabled by Managed Services combined with increasing complexity of technology, will result in a win/win scenario for both telecom operators and Managed Services providers. The key to success will be adopting an end-to-end view of managing networks, services and business support systems, with the end-user in mind.
Customer Retention is a Priority for Mobile Phone Providers According to the article; the mobile phone industry is highly competitive as its customers have many options and offerings are hard to differentiate. Companies that want to grow their businesses must continue to invest aggressively in customer acquisition programs, as well as implement new and creative initiatives to retain their existing ones. It is challenging for enterprises to listen to their customers' issues and respond appropriately and on a timely basis. Quality assurance programs enhanced with speech analytics can give a company a competitive advantage by allowing them to identify and resolve customer issues quickly, before they become expensive problems.
Churn Behaviour of Youth On Telecom Mobile
This study reveals that; the telecom industry, especially the mobile industry of India is undergoing a transformation and the number portability is bringing about imperatives worthy enough to carry out high-end research. This study is one such attempt to enhance the exposure on customer analytics and it is also expected to facilitate the marketers to design the essential operational parameters for scheming the retention strategies and to enhance Customer Experience management.
DATA ANALYSIS AND INTERPRETATION
INTERPRETATION: ? The above chart represent service provider wise market share, in this it reveals that 20.67% market share is hold by Bharti Airtel, Vodafone holds 16.96% market share., reliance holds 14.68%, idea 12.88%, BSNL 10.81%, TATA 8.52%, aircel 7.13%, uninor 4.87%, Sistema 1.83%, MTNL 0.59%, Videocon 0.56%, Loop 0.33%, Quadrant (HFCL) 0.17% of market share. And in telecom service sector about 88.60% of market share is hold by private sector and 11.40% market share hold by public sector units.
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INTERPRETATION: The above graphical representation shows net subscriber addition during july 2012, in this it shows that bharti, Vodafone, Bsnl, idea, aircel, sistema, HCFL, are positive position in net subscriber addition whereas on the hand loop, MTNL, Videocon uninor, tata, reliance are in negative state of position in adding their customers/subscribers.
C
INTERPRETATION: The above tabular format states that the data related to the telecom service sector in which it is mentioned that total wireless subscribers is 906.62 million. Recent data: ? AIRTEL (it has 183.61 million subscribers) it provides various services like 3G , 4G, Wi-Fi, airtel money, smart drive, network experience centre, I phone 3G. ? Vodafone (It has approximately 147.48 million customers). Vodafone India provides 2.75G services based on 900 MHz and 1800 MHz digital GSM technology. Vodafone India launched 3G services in the country in the January-March quarter of 2011 and plans to spend up to $500 million within two years on its 3G networks. ? Reliance (it has over 150 million subscribers). It provides 4G and 3G services.
? IDEA Cellular has been recognized as the 'Most Customer Responsive Company' in the Telecom sector. It provides 2G and 3G services.
Major factor behind why company switches to other brands.
1. Regular expansion of the product and service range. 2. Many times advertisements attract many customers to switch from their existing mobile connection. 3. Customer services are another factor. 4. Entry of new advance companies and their attractive services. 5. Average customers prefer a low cost service that’s why they switch. Customer is price sensitive. 6. Lack of differentiation among the service provider. 7. Providing value added services at competitive price. 8. Customer switches to those companies providing wide range of quality product and services. 9. Availability of number of substitutes services.
FACT AND FINDINGS
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Indian telecom sector is more than 165 years old. Telecommunications was first introduced in India in 1851. In the late nineties, India was introduced to prepaid cards, it helps telecom sector to attract more and more subscribers. Pre-paid cards greatly helped the cellular market to grow rapidly and cater to the untapped market. It also helped the industry in lowering credit risk of service providers. The CPP (Calling Party Pays) regime was introduced in India in 2003 and under this regime, the calling party who initiated the call was to bear the entire cost of the call. This regime came to be applicable for mobile to mobile calls as well as fixed line to mobile calls. When the cellular phones were introduced, call rates were at a peak of Rs 16 per minute and there were charges for incoming calls too. Today, however, incoming calls are no longer charged and outgoing calls are charged at less than a rupee per minute. Thus, the tariff war has come a long way indeed. Increased competition and the subsequent tariff war has acted as a major catalyst for attracting more subscribers. Total tele-communication subscribers till now are 960.9 million (may 2012). India generates its total revenue through communication is USD 33,350 Million. India’s telecommunication network is the second largest in the world based on the total no. of telephone users (both fixed and mobile phone). Increasing choice and one of the lowest tariffs in the world have made the cellular services in India an attractive proposition for the average consumer. Top four leading telecom service provider are Bharti Airtel, Vodafone Essar, Reliance Communication Ltd., Idea. Bharti Airtel is in no.1 position because it is not economical but provides quality and effective services to its subscribers. Airtel is on the top of charts because their reach in all corners of India. The another biggest challenge is Increased competition because of significantly high number of operators compared to global benchmarks has resulted in reduction in average revenues per minute to Rs 0.5/0.10 per call minute in FY2012 from a high of Rs 7.3 per call minute in FY2000. At the same time, the minutes of usage per subscriber has also decreased significantly from a peak of 465 minutes in FY2007 to 369 minutes in FY2011. This has resulted in average revenue per user (ARPU) per month declining from Rs 362/ Rs 256 in FY 2005 to Rs 105/ Rs 68 in FY 2011 service operators.
CONCLUSION
This research tried to find out the underlying factors that made the customer to switchover to another service provider in telecom industry. The telecommunication industry is one of the most important industries of the world. In order to gain competitive advantage as competition is getting more and more intense, the companies are compelled to innovate and do their best for the customer satisfaction. As in the telecom industry the customers have multiple choices to select among service providers and actively seek their rights of switching from one telecom service provider to another. In this ferocious competition customers requires better services at reasonable prices, while service providers concentrating on retention of the most profitable customers instead of acquisition. The technology in telecommunication industry is booming with fast pace thus bringing the changes in the sizes and types of network services. Multiple tariffs plans are usually offered by the network service providers to compete in their menu plans and to provide the quality of service. In the telecom industry the service providers try to attract the large number of customers to exploit the consumer’s preference heterogeneity. The need to understand that why customers switch to another service providers have usually become a key area of study. The switching behavior has to be analyzed to identify the possible drivers leading to customer switching behavior. It’s entirely apparent that when a customer decides to switch over to another network they try to figure out that which service provider offers them best. The switching costs also affect the customer switching behavior. The customers switch when they find that their potential savings relatively exceeds switching cost. The deep understanding of the customer’s switching behavior in the telecom industry has an important proposition for the service providers.
RECOMMENDATION
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Should focus more on new rural area where tele density is very low and competition is less. Since tele density is still around 21% therefore telecom companies have to try to those market which is still untapped by the other telecom companies. Keep their technology up to date so that they should always offer something new to their existing customer and also new customer. Should provide better customer service through better customer relation so that old customer doesn't left. Indian telecom companies should invest more in self-Research & Development activity rather than depending upon foreign suppliers to tackling the threats of substitute. Keep the price lowest in market. Actively participate in research and development activities to offer new technology. Try to maintain the uniqueness of product as long as possible. Try to eliminate the intermediaries involved in providing products and services to reduce the cost. Try to be market leader in product and service range offerings. Indian telecom industry should make alliance with foreign supplier and invest jointly in Research & Development activity.
LIMITATIONS OF THE STUDY
? Due to paucity of time only limited information can be collected. ? Present study would be confined to only top 4 telecom service provider companies. ? Present study based on secondary data and secondary data has its own limitation which might affect the study.
BIBILOGRAPHY
Newspaper: ? ? ? ? ? Times of India Hindustan Times DNA Economic Times Business Times
Books: ? ? Kothari C. R. ; Research Methodology; second edition; new age international (p) limited, publisher; 2004, pp. (1-299). Market research – D.D. Sharma
Research papers:
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Customer Retention in BSNL: A Challenge Ahead By: Labh Singh and Dr. A.S. Chawla A Study of Service Quality Attributes and Their Impact on Customer Loyalty in the Mobile Phone Service Industry. (Sudhir Kumar Singh) Customer retention through customer relationship management: The exploration of two-way communication and conflict handling. (Mornay Roberts-Lombard) The Indian Telecom Sector: Legal and Regulatory Framework (Nishith Desai) Comparison of Privatization Processes of Telecom Services in India and Brazil (Rekha Jain)
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Websites:
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http://www.dot.gov.in/osp/Brochure/images/top.jpg http://goarticles.com/article/Enhancing-customer-relationship-interaction-processis-accelerating-CRM-adoption-finds-Netscribes http://www.wekepedia.com/telecommunication India http://www.businessteacher.org.uk/free-finance-essays/indian-telecomsector.php#ixzz2PzjBFEoG http://www.grin.com/en/e-book/179126/building-customer-loyalty-through-valueadded-services?partnerid=googlebooks
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