Friends use the same phone service together

Auren Hoffman · January 25, 2010 · Short URL:

Understanding your customers friends can go a long way to better customer retention

We tend to behave similar to our friends. Generally speaking, we like the same music, wear the same clothes, share the same hobbies, eat similar types of food, and even vote in a similar fashion. Now, there is evidence that we even like to use the same mobile phone service.

Mobile_phone_couple Michael Driscoll, founder of data analytics firm Dataspora, studied over 2.4 million customers of a major mobile carrier and found that people have a surprisingly strong influence on the service provider of their immediate caller network (defined as the friends and family who the person calls at least once a month for over one minute).  In fact, Driscoll found that users who cancel service from the telecom company are 600% more likely to be within each others' caller network, or directly connected, than one would expect by chance. In other words, if you leave your cell phone service provider, the chance of your friends and family also leaving the service provider is significantly higher.

But is the contributing factor really social influence? Or are these findings just a byproduct of the prevalence of family plans in which entire groups of subscribers quit together?

To find out, Driscoll looked at cancellations within caller networks one month apart since family plans customers switch carriers at the same time.  His findings suggest that family plans only explain part of the collective behavior, and that users within the same caller network have significant influence over one another's phone service provider.

Mobile_phone_people Driscoll discovered that a customer is twice as likely to cancel their phone service and three times as likely to port-out their phone service to another provider if someone within their network had canceled or switched carriers one month earlier. For the phone service provider, this means that a departure by a few can quickly and easily turn into a mass migration towards a competitor's services.

Some of this might be explained by similar people leaving to get a new phone (like an iPhone) that is exclusive to another carrier.  But only some of the exodus can be attributed to something positive about another carrier - dissatisfaction with one's current carrier is a more significant contributing factor.

Telecom companies today seem to approach customer retention efforts reactively, often offering last-minute promotions or free upgrades to sway customers on the cusp of cancellation. Based on Driscoll's findings, a supplementary and cost-effective action phone service providers could take is to proactively offer discounts or service enhancements to customers in a recent canceler's caller network, especially to customers with large networks themselves.

While these exact findings are specific to the mobile carrier and its customers, there are several lessons that all businesses can learn about taking care of customers and customer retention.

Phone First, take good care of your customers (especially your best and most-connected ones). Your customers can be your biggest billboards and will help you draw in even more customers, but they can also be your biggest enemy and drive away both current and potential customers. To prevent the latter, make sure you offer your customers - especially your VIPs - exceptional customer service.

Second, try reaching out to the friends of customers you lose. This may be done more easily for certain businesses than others since networks within a customer base are usually not known. Companies unsure of relationships between customers should (1) ask for or incentive customer referrals or (2) use an outside service to determine customer social graphs and friend connections.

Birds of a feather do many things together - including leaving you for competitors.

(special thanks to Michael Hsu for his help in writing and editing this piece)

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Auren Hoffman

CEO SafeGraph. fmr CEO at LiveRamp. GIS nerd.

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