Stopping the digital churn

May 7, 2001  •  Post A Comment

At a time when cable operators are scratching their heads over the vexing puzzle of how to reduce digital churn rates, two ambitious technology companies are shifting their gaze to the lofty artificial intelligence stratosphere in search of an answer.

CSG Systems International, which supplies cable operators with billing and customer relationship management (CRM) solutions, is partnering with Athene Software to endow the cable industry with a new digital “mind” that promises to predict customers’ likelihood of ordering and renewing interactive services subscriptions.

For cable operators, the new tool’s introduction is auspicious, considering 60 percent to 80 percent of all customers who sign up for a trial period of interactive services in a given year cancel after the trial ends. Still, even Sally Else, CSG vice president of product management, concedes that the new analytical tools will be no panacea for the industry’s digital woes. “I would be ecstatic if I could reduce churn as much as 20 to 30 percent,” she said.

Such a decline, while music to multiple system operators’ ears, would still leave cable subscribers’ digital churn rates well above those recorded by digital broadcast satellite systems. DBS providers, whose customers are considered more receptive to technological innovation than cable customers, experience digital churn rates that are about a third of cable’s.

CSG plans to integrate Athene’s APT Churn application for projecting customers’ likelihood of canceling interactive subscriptions into its broader suite of billing and customer-care solutions. The new product is one instance of an emerging breed of customer relationship management software applications that have proliferated in Silicon Valley during the past couple of years, but which are just beginning to be adopted by mainstream media outlets.

Rather than inundating cable operators with streams of raw data generated by a computer algorithm, CSG and Athene are adding a human touch to their electronic brain’s calculations by presenting clients with concrete suggestions on how to change market services to subscribers.

In CSG’s latest annual report filed with the Securities and Exchange Commission, the company noted its core business of customer service for cable and satellite subscribers has grown precipitously-from 18 million customers assisted by the end of 1995 to 35.8 million customers reached at the conclusion of 2000.

In addition, CSG announced that it would look to expand into the noncable broadband markets (including those provided by overbuilders or utilities) going forward-a growth plan that CSG hopes will fortify it against competitive threats from rivals in the customer care business such as Convergys.

Some cable industry analysts believe that customer service will play an important role in the industry’s fate in coming years, given competing overbuilder network RCN’s success in courting former cable customers through aggressive customer-care initiatives.

“What we’ve seen over the past few years with DBS is their success has really been on the customer-service side,” said Sean Badding, Carmel Group senior analyst and vice president of business development. “Over the past decade, cable operators have had poor customer service.”

Educating consumers on how to use digital entertainment gadgets in the home should become part of cable operators’ overall customer service strategy, according to cable consultant Stephen Effros of Effros Communications.

“The more services you offer and the more complex those services are, the more you have to invest in customer service response to explain it to customers,” he said.