Is eCRM The Answer to Mobile Churn?

Andy Wood, Managing Director of data marketing company GI Insight, discusses the results of research carried out by the company that found that the mobile scores poorly when it comes to using electronic marketing channels to attract new customers

The mobile phone industry has historically experienced high levels of churn. Research from Pitney Bowes Group 1 Software found that churn was rising. In 2007 it found that churn levels in the industry stood at 38.6% compared to 33.4% two years earlier.
Strong brands are evidently having an effect, with the issue of content provision likely to be a key factor in churn patterns. 3G provision initially disappointed consumers, leading to massive churn. And network operators use attractive handset ranges and call plans to persuade customers to switch. 
Mobile penetration in Europe now exceeds 100%, with 666 million connections. Over 50% of penetration in Europe is accounted for by prepaid mobile phones and prepaid churn is on average three times higher than postpaid. The sector is so volatile, however, that this situation could easily be reversed.
With these heightened levels of competition, in part as a result of the credit crunch and an impending recession, now is the time to for the sector to re-examine channel strategies, whether for cross-selling or for affinity activity, to stay ahead of the competition and retain customers.
Our latest research assessed the marketing merits of e-CRM (communicating via e-channels such as email). Respondents rated the mobile sector as below average at e-CRM. It also revealed a very clear opportunity for email marketing, while highlighting the dangers of over-reliance on this channel.
Email marketing continues to receive mixed press. There are those who sing its praises, highlighting the low cost, and there are those that are wary of its true efficacy, citing huge spam levels as a reason why many people may not be welcoming of marketing messages in their inboxes.

Three questions
When quizzed, confusion in the marketing community over email initiatives tends to focus on three main questions:
How much effort should I put into asking customers for permission to email them?

Will my customers and prospects respond to email initiatives at all?

Does email work stand-alone, or does it need to be combined with other channels?

Answers to these questions are desperately needed by marketers. Unhelpful debates about whether one medium is better than another have been quickly recognised for the nonsense that they represent, and have been superseded by cries for evidence about which media combinations work best, and in what circumstances. 

Surprising results
The results of our study were enlightening and surprising. Almost three quarters of UK adults (74.4%) confirmed that they had given their permission to at least one firm that they bought from regularly, to contact them by email with latest offers and products. This statistic provides a major validation of the efficacy of collecting permission emails from the customer base. There is evidently a great willingness amongst the UK population to allow firms with which they already do business to use email as a communication channel.
Equally eye-opening was the statistic for email permission with firms from which a consumer had not yet bought, coming in at 39.9%. These permission-givers will mainly be people who have made an enquiry through a company’s website – typically to download an e-voucher, get a quote on a financial services product, or enquire about a holiday, and so on. In other words, they have already indicated that they might be in the market for the company’s products or services, and so may be justifiably labelled and qualified ‘prospect’, rather than merely a ‘suspect’. 
However, marketers should not be fooled by the hyperbolic claims currently being made about email campaign return on investment. This measure is often meaningless,  precisely because of the low-cost nature of email campaigns. ROI can be well in advance of that achieved by more expensive traditional media, but achieve only a tiny fraction of the sheer volume of business that marketing overall is tasked with creating.

Eye off the ball
Too many marketing professionals have been seduced by very high ROI, and have taken their eye off the ball when it comes to generating critical business volumes. Our study confirms the potential of email marketing and consumers’ willingness to embrace this channel. Those who opt in to email communications have already moved themselves nearer to a possible purchase than other potential customers, and have made it probably worth the company’s while to keep in touch with them. However, to communicate with them over email, as well as by post, makes them doubly valuable as prospects.
In fact, we can corroborate this last point from our own experience. We conducted campaign testing over a 24-month period for some major customers to corroborate the assertion that the combination of email and direct mail is more effective than email alone. In each instance, control cells, including mail only, email only and no-contact, have been tested versus the performance of mail and email in combination. The results have been that stand-alone email and the email/direct mail combination produce around the same return on investment.  However, since the execution of email campaigns is so inexpensive, the sheer volume of premium revenue generated by email stand-alone campaigns is very small, relative to the sales volumes required to be produced by marketing overall. The critical average statistic from these real campaign experiences is that direct mail and email in combination produce seven to ten times the premium revenue of email stand-alone.
So, the importance and potential return on investment from systematic gathering of permission emails is evident, whether from existing customers, or from enquirers who have not yet bought but who have declared some sort of interest. At the same time, marketers must not be seduced by the low cost of email, to place over-reliance on this medium to meet their revenue generation targets. Indeed, real life experience shows that it is when permission email and direct mail are used in combination, that critical revenue targets are reached in the most efficient and effective way possible. This report is a wake-up call for mobile phone companies to improve their record in e-CRM as the credit crunch, plus economic tightening, takes hold.