Copyright © 2005, SAS Institute Inc. All rights reserved. A Holistic Approach to Customer Lifecycle Management Name: Ken King Title: Industry Strategist - Telecommunications CANTO – June 2005

Copyright © 2005, SAS Institute Inc. All rights reserved. The long-Term Challenge for Wireless Operators According to McKinsey: To justify [today’s stock] prices, the typical carrier will need, by 2008, to simultaneously:  Limit ARPU erosion to 1% annually  Reduce Churn by 9%  Reduce Acquisition costs by 20%  Reduce Service costs by 20% Source: Deutsche Bank; Morgan Stanley; McKinsey analysis The McKinsey Quarterly 2003 number 4

Copyright © 2005, SAS Institute Inc. All rights reserved. Agenda  Key Metrics in the Wireless Market  What theses Metrics reveal about Performance  Case Study  Managing Churn  Measuring Customer Profitability  Fully Integrated Customer Lifecycle Management across the enterprise

Copyright © 2005, SAS Institute Inc. All rights reserved. This chart looks at: ARPU, CCPU, CPGA, Churn, WACC Source: Lehman Brothers Q Earnings Reports Keeping a customer vs. getting a new one Payback Period on Customer Acquisition

Copyright © 2005, SAS Institute Inc. All rights reserved. This chart looks at: ARPU, CCPU, CPGA, Churn, WACC Source: Lehman Brothers Q Earnings Reports Customer Lifetime Value

Copyright © 2005, SAS Institute Inc. All rights reserved. Nextel Case Study – Phase 1  Proactive Churn management  Business Challenge Segment customers by profitability and reduce churn among the most profitable segments Mandatory Implementation of number portability in November 2003  Solution Nextel Customer LifeCycle division executed a multi-year strategy incorporating advanced customer analytics  Business Benefit Nextel’s use of advanced analytics led to a churn rate reduction from 2.6% down to 1.5% Cost per save reduced by 50% Customer claims more than $1B additional earnings

Copyright © 2005, SAS Institute Inc. All rights reserved. Nextel Case Study – Phase 2  Proactive Campaign Management  Business Challenge “Getting the Right Message to the Right Customer at the Right Time” Increasing speed to market of all campaigns Reviewing and approving development of campaigns online Providing optimization of all campaigns Tracking of customer communication history Coordinating multi-channel, multi-touch campaigns Automating campaign management capabilities as current programs were manually supported with internal, agency and IT resources  Solution Marketing Automation and Marketing Optimization solutions afforded Nextel the ability to segment customers, build models with all data points, and keep track of customer actions. The solutions will automate every existing marketing process and optimize customer segments by ARPU, LTV, likelihood to respond, etc.

Copyright © 2005, SAS Institute Inc. All rights reserved. Churn Types & Reasons Voluntary Involuntary Deliberate Incidental Fraud Non-payment Under-utilization Economics Quality Social Technology Convenience Major Life Changes Location Finance New Technology Features Handsets Subscription Activation Per Minute Friends/Family Experimenting Image Retail Channels Internet Billing Customer Service Call Quality Coverage Reasons Types (customers’ choice) (operator initiated) Source: Telecom Churn Management, The Golden Opportunity Rob Mattison

Copyright © 2005, SAS Institute Inc. All rights reserved. Customer Lifecycle can be leveraged IntensifyRetentionTermination & Recovery - $ + $ $ 0 Stages cash flow (Before) Acquisition Cost More efficient acquisition Better cross- and up-selling more effective customer retention

Copyright © 2005, SAS Institute Inc. All rights reserved. Profitability may not correlate to Revenue

Copyright © 2005, SAS Institute Inc. All rights reserved. Analyst Validation Carriers.. Will develop matchless competitive advantage if they choose to build the organizational, channel, and IT capabilities needed to identify and capture opportunities to raise their customers’ lifetime value. McKinsey, 2003

Copyright © 2005, SAS Institute Inc. All rights reserved. Vision – Decision Centric BI for ICM Transactional Platform Processes: Billing, CRM, Ordering, Collections, Network, PRM… Business Intelligence Platform Data: Revenue, Cost, Customer, Product, Usage, Partner… Extract, Transform, Load Contact Center Optim. Customer Profitability / CLTV Retention/ Churn Revenue Assur. Cross/ Up Sell Integrated Analytics Technology: Reporting, OLAP, Data Mining, Dashboards, Alerts… Segmen- tation Rate Plan Opt. Service Provision Optim. Collect- ions Optim. Channel Perform- ance

Copyright © 2005, SAS Institute Inc. All rights reserved.