Summary:

In the telecommunications industry, customers can choose from multiple service providers. In such a fiercely competitive telecommunications market, organizations should expect an annual churn rate of 30-35 percent and it can also cost 5-10 times more to recruit a new customer than to retain an existing one.

Since some customers are obviously more valuable than others, it is important to have a critical tool for customer segmentation and thus improve profitability across different customer groups. Segmentation is also considered one of the best ways to have more targeted communication with customers.

In any industry, customers can vary greatly in different attributes such as values, demographics, behavior, purchase frequency, etc. In the past, most segmentation was done on the basis of these attributes. Whereas, today, this model has changed and moved towards ‘Value Based Segmentation’, which focuses more on the revenue generated by each customer.

Data Collection or Mining:

Data mining is a process of understanding data and using it for further application development. There are several methods to collect data; but the basic data could be obtained based on the following seven questions;

1. How: How can a customer cause a call detail record? Making a voice call or receiving a voice call.

2. Who: Who is the customer calling? Do you call landlines? Do you call mobiles?

3. What: What is the location of the caller?

4. When: When does a customer call? A business customer can call during the office day, or during private hours in the evening or at night and during the weekend.

5. Where: Where does the customer call?

6. How long: How long does the customer call?

7. How often: How often does a customer call or receive a call?

Segmentation

Segmentation can be done on several bases:

1. Based on demographics/behavior/age group – most common
2. Surveys based on value needs
3. Usage targeting – data-driven
4. Billing segmentation

1. Based on demographics/behavior/age group – most common: Demographic targeting is one of the highly effective targeting types, where most of the targeting data will be broken down using factors like age, gender, behavior, social status, etc. It is basically done by studying the population. This segmentation helps an organization classify customers into various groups based on common variables. Therefore, based on the results, organizations can target these groups and devise better strategies. Data availability is the main advantage of this segmentation.

2. Based on value needs – Surveys: Here, organizations will send surveys based on the information they need from the customer to improve the products and services they offer. This segmentation will help organizations assess themselves as well as what is needed for a customer. Value: Needs-based surveys are often seen as an efficient means of communicating with customers.

3. Targeting by usage data driven:Organizations can categorize their customers based on their usage. So the basic values ​​would be; Nº: of minutes you have called in the last 30/15 days, to which destination you make the most nº: of calls, top 5-10 destinations to which you have made calls/sent SMS, etc. Segmentation based on usage data is one of the most focused areas in telecommunications. Based on this, organizations can work on creating a database that needs to be updated daily.

4. Billing Segmentation: Although billing systems are often perceived as business back-end operations, billing plays a vital role in the sales and marketing strategy of Communication Service Providers (CSPs). Here, customer billing data such as monthly or yearly billing data will be extracted and transformed into usable analytics for segmentation.

Conclusion:

A better segmentation strategy can lead to a lot of gains such as better profitability, growth, and communications for telcos by better understanding their customers and their needs.