A PROGRAM FOR TELCO COMPANIES IN WISCONSINArthur Middleton HughesVP The Database Marketing Institute

It’s a big state. Someone has to provide the phone service for 5.5 million talkative folks.

LAND LINES ARE IN TROUBLE

US Phone Landlines Per 100 Population

US Statistical Abstract

CREATIVE DESTRUCTION

Monopolies have become competitive

Cable is muscling in on phone companies

Phone companies are fighting back with TV

Both are offering the internet

Wireless is stealing from both

You have to offer many services to survive

CELL PHONES TAKING OVER

Annual Household Spending on Telephone Service

YOU HAVE TO OFFER EVERYTHING

THE EFFECT OF BUNDLING

Every additional product that you add improves loyalty and reduces churn by 25%.

Adding products boosts revenue AND improves the retention rate of land line customers

TO KEEP SUBSCRIBERS, BUILD A MARKETING DATABASE

A database is more than a list of subscribers

It is a tool to use to retain subscribers and to sell them additional products

MARKETING DATABASE FED FROM OPERATIONAL DATABASE

OperationalDatabase

MarketingDatabase

Transactions Promotions& Responses

Surveys &Preferences

ModelScores

RFM &Lifetime Value

GeneralLedger

Marketing CommunicationsSales, shipments, payments

AppendedData

OperationalDatabase

MarketingDatabase

Transactions Promotions& Responses

Surveys &Preferences

ModelScores

RFM &Lifetime Value

GeneralLedger

Marketing CommunicationsSales, shipments, payments

AppendedDataThe

Marketing Database can be outsourced to a vendor.

Advantage: keep the costs down, and control what he does.

This is your in house billing database

DETERMINE THE LIFETIME VALUE OF YOUR SUBSCRIBERS

We are looking at the career of 60,000 subscribers over a three year period.

The lifetime profit from each of the 60,000 is $96.33

To beat that we have to improve something.

Land Line Customer Year Year Year1 2 3

Customers 60,000 54,600 49,817 Churn Rate 0.75% 0.73% 0.71%Retention Rate 91.0% 91.2% 91.5%ARPU $41.00 $41.50 $42.00Revenue $29,520,000 $27,190,800 $25,107,788

CCPU - Cash Cost per User $18,720,000 $17,035,200 $15,542,916CPGA - Cost per gross add $9,000,000Total Cost $27,720,000 $17,035,200 $15,542,916

Gross Profit $1,800,000 $10,155,600 $9,564,872Discount Rate 1.00 1.11 1.15Net Present Value Profit $1,800,000 $9,149,189 $8,317,280Cumulative NPV Profit $1,800,000 $10,949,189 $19,266,469Lifetime Value $9.00 $54.75 $96.33

WHAT CAN WE DO TO KEEP THEM?

Communicate with them often

Put them on automatic paper-free billing

Sell them a second product: DSL, TV

EFFECT OF ADDING DSL

Churn rate downARPU Up

CCPU upCPGA up

Revenue up

Lifetime value way up.

Land Line Customer Year Year YearWith Broadband 1 2 3Customers 60,000 54,960 50,475 Churn Rate 0.70% 0.68% 0.66%Retention Rate 91.6% 91.8% 92.1%ARPU $76.00 $76.50 $80.00Revenue $54,720,000 $50,453,280 $48,456,253

CCPU - Cash Cost per User $33,120,000 $30,337,920 $27,862,346CPGA - Cost per gross add $15,000,000Total Cost $48,120,000 $30,337,920 $27,862,346

Gross Profit $6,600,000 $20,115,360 $20,593,908Discount Rate 1.00 1.11 1.15Net Present Value Profit $6,600,000 $18,121,946 $17,907,746Cumulative NPV Profit $6,600,000 $24,721,946 $42,629,692Lifetime Value $33.00 $123.61 $213.15

DSL BOOSTS PROFITS

Land Line Customer Year Year Year1 2 3

Without DSL $9.00 $54.75 $96.33With DSL $33.00 $123.61 $213.15Increase $24.00 $68.86 $116.82With 60,000 Subscribers $1,440,000 $4,131,827 $7,008,967

ADDING TV: THE TRIPLE PLAY

The LTV has gone down. Why?

It is expensive to add TV --much more than to add DSL.

And, the churn rate has gone up? Why?Competition from Cable and Satellite.

Land Line Customer Year Year YearBroadband & TV 1 2 3Customers 60,000 52,080 45,518 Churn Rate 1.10% 1.05% 1.00%Retention Rate 86.8% 87.4% 88.0%ARPU $131 $141 $151Revenue $94,320,000 $88,119,360 $82,478,471

CCPU - Cash Cost per User $58,320,000 $50,621,760 $44,243,418CPGA - Cost per gross add $72,000,000Total Cost $130,320,000 $50,621,760 $44,243,418

Gross Profit ($36,000,000) $37,497,600 $38,235,053Discount Rate 1.00 1.11 1.15Net Present Value Profit ($36,000,000) $33,781,622 $33,247,872Cumulative NPV Profit ($36,000,000) ($2,218,378) $31,029,494Lifetime Value ($180.00) ($11.09) $155.15

TV IS NOT A WORLD BEATER

There is more competition with TV: Cable, Satellite, and over the air.

But TV and Wireless are important ways of staying in the game and keeping your customers.

The main way to win: communicate often.

Land Line Customer Year Year Year1 2 3

With Landline Only $9.00 $54.75 $96.33With DSL and TV ($180.00) ($11.09) $155.15Increase ($189.00) ($65.84) $58.82With 60,000 Subscribers ($11,340,000) ($3,950,270) $3,528,907

WHY COMMUNICATION IS VITAL

All Wisconsin Telcos have additional services to sell.

All have churn problems.

Solution: set up regular e-mail communications with all subscribers.

Use those communications to sell more services, and keep from losing the subscribers you have now.

E-MAILS: LOW COST SELLING

E-MAIL – VERSATILE AND INEXPENSIVE

FIRST STEP: AUTOMATIC BILL PAYING

“Stop by or call us” You cannot do this on line.

What is the benefit to the subscriber?

YOU CANNOT SIGN UP ON LINE IN WISCONSIN

“Visit or call our office”

SEE HOW AT&T DOES AUTO BILL PAYING

WHY AT&T AND VERIZON SEND E-MAILS

Automatic Bill Paying is the entry point for monthly e-mails that promote additional products.

This is why they pay you $10 or $15 for signing up.

SUPPOSE WISCONSIN TELCOS USED A COOP EMAILING SERVICE

One company could provide online bill paying service application service with a link on each Telco website.

Each subscriber would get a weekly e-mail from his Telco, with local news, sports news, and what is on TV this week, plus info about Telco products.

A coop e-mail and text mail service might reach most of the households of WSTCA members with news and promotions from their local Telco.

EACH TELCO GETS THEIR OWN E-MAIL SERVICE

WHAT DOES IT COST TO SEND E-MAILS TO SUBSCRIBER HOMES?

52 e-mail campaigns per year to for 20 Telcos with 6,000 subscribers per Telco.

Cost $10.00 per thousand. Cost per Telco per year – 20 companies participating, perhaps $3,120 per year for the delivery plus $12,000 per year for the part time editor.

What would be the benefits?

ASSUMPTIONS

Assume that 20 Telcos participate.

There are 52 e-mail campaigns per year.

There is a monthly contest for e-mail subscribers. One winner of $5,000 per month. To enter: click on an entry box in the e-mail. Nothing to buy.

Each Telco designs their own e-mails. Each has one part time editor @ $1000 per month developing e-mail copy.

WHAT WOULD BE IN THE E-MAILS?

What sports, events and movies would be on TV this week – time and channel

Local results of local sports teams.

Video of local sports supplied by teams, and their supporters. Local to the Telco area.

Every opened e-mail is an automatic entry in the monthly $5,000 contest. Nothing to buy,

Ads from local merchants

Ads for Telco products

BENEFITS OF THE E-MAILS

Assume each Telco has 6,000 e-mail subscribers

The open rate is 30% because of the $5,000 prize per month.

One half of one percent of the e-mails result in a sale of a Telco product (DSL or TV or PC) with an annual revenue per product of $419.40

Note, average sales due to e-mails from other companies varies from 0.5% to 3%.

Resulting sales per Telco per year $196,279

DETAILS OF THE E-MAIL PROGRAM

Assume a phone company with 6,000 subscribers who sign up for e-mails.

Assume 20 Telcos sign up as members to send emails

Assume a part time local e-mail editor who gets $1,000 per month for creating the four e-mails sent out by the Telco

Over three years the e-mail marketing program could produce total profits of $362,350 per Telco

Subscribers 6,000E-mails/Sub 52E-mails 312,000 Open Rate 30%Opened E-mails 93,600 Sales per opened e-mail 0.50%Saes per year 468 Revenue per sale $419.40Annual Revenue New Sales $196,279Annual Profit @ 40% $78,512Cost per thousand e-mails $10E-mail Delivery Cost per Year $3,120Part time e-mail creator / year $12,000Share of $5,000 prizes $3,000Total Cost $18,120First Year Profit after costs $60,392Three year profit from year 1 $181,175Two year profit from Year 2 $120,783One Year Profit from Year 3 $60,392Total three year profit $362,350

SERVICES PROVIDED BY THE E-MAIL VENDOR COMPANY

Link to sign up subscribers and auto bill payers for each member Telco. Telcos do their own billing, and receive all revenue directly from subscribers.

Maintain a central database of subscribers for each Telco. Send e-mails from this database. Telcos can access DB on line and do segmentation. Use cookies so Telco websites and e-mails are personalized.

Shopping cart in e-mails so subscribers can buy services from Telcos on line.

Deliver all e-mails for the Telcos.

Provide a template to each Telco for them to enter their own content for the e-mails.

HOW TO GET STARTED

WSTCA enlists members in the project. Get at least 20 to sign up. Set up an e-mail corporation with each Telco an owner.

WSTCA drafts an RFP for a company to provide the services.

Selected vendor creates software for each Telco website to enlist auto bill payers, subscribers, and shopping carts to sell Telco services. Sends both e-mails and cell phone text content. Creates the monthly contest.

GET THE BOOKS

Arthur Middleton Hughes

VP The Database Marketing Institute, Ltd.

Arthur.hughes@dbmarketing.com 954 767 4558