Lessons in CRM: when it comes to caring for customers, telecom firms need to wise up. Here's a primer of best practices, complied from a roster of CRM

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September means back to school--and telecom service providers could take some refresher courses as well. The summer of 2002 marked an unprecedented loss of consumer confidence in the telecom industry, as stocks plummeted and the inner workings of companies such as WorldCom and Qwest were put under the microscope. Meanwhile, despite the CLEC crash, incumbent telcos continue to face a competitive threat in many of their markets, long-distance carriers are waging a war against wireless substitution as mobile operators grapple with high churn rates and saturated markets. There's never been a better time to learn more about customer relationship management (CRM).

Most CRM vendors agree that telecom service providers have a lot to learn. "Most telecom companies have perceived themselves as being good at doing CRM, and frankly, in most cases, I find that they have a very insular view," says Steve Home, president and CEO of consultancy Analytici. "They do not understand what CRM is--they think of it as a technology solution, not as a change in business processes. The reality is that telecom companies need to fundamentally change the way they do business in order to become business-focused."

Granted, telecom carriers have challenges that other industries haven't had to face. For one thing, they have huge volumes of customers, meaning that any systems they put in place need to be large-scale.

Additionally, Raghav Sahgal, managing director for CSG Systems Asia Pacific, says every service provider will soon have to make those CRM upgrades as mass adoption of new services like Multimedia Messaging Services (MMS) and mobile commerce are just around the corner. "Service providers who want to offer these new mobile services must either supplement or replace their legacy billing platform. So, while billing systems are improved to collect revenue for these new services--the information collected on the back end becomes much richer, much more knowledgeable in terms of who the customer is, what services they use and what services they are likely to buy in the future."

But Jeff Maling, vice president of strategic accounts for consulting firm Roundarch, has a drill-sergeant approach to telecom CRM. "To me, the telecom industry doesn't have any excuses," Maling says, "Other industries have faced some of the same issues and have overcome them effectively. Telecom has just been too focused on other issues, such as domination and consolidation, and now survival, to really get CRM right. Ultimately, this industry needs to decide whether or not they care about customers."

Once carriers do indeed decide to focus on CRM, they have one significant advantage--they can learn from the successes and mistakes of other industries. Granted, sectors such as manufacturing, hospitality and banking have many fundamental differences from telecom, but ultimately, it boils down to one simple fact: A customer is a customer, and telecoms could stand to learn some lessons on how to treat them right.

Lesson 1

Use lots of customer data

The telecom industry has a significant advantage over other sectors--it has a huge amount of customer data. The key is collecting and integrating that data to create a single, comprehensive view of the customer across all of his/her services. Telecom carriers need to start understanding that a customer may have other relationships with the company. Daniel Kenyon, vice president of communications industry strategy at PeopleSoft, cites as an example a high-volume business user who also buys services from the same carrier for his home.

"Telecom's existing systems aren't very good at relating one customer to another and figuring out that while two customer may have different account numbers, they're actually one and the same," Kenyon says. "They need to be able to manage customer relationships beyond the obvious."

Similarly, telcos need to learn how to identify a customer's value using more than the traditional metrics. Historically, carriers have valued their customers purely by minutes used and revenue brought in. As airlines have learned, however, basing a customer profile entirely on usage--in their case, miles flown--can create a one-dimensional view of the customer.

"Historically a lot of companies, not just telecom, have been able to capture a lot of information about how their products are performing," Kenyon says, "but few have designed systems that allow them to take information about customer data, profitability, customer usage, likes and dislikes, and using that information to extend the customers' relationship with the corporation."

Lesson 2

Obey Pareto's principle

In the early 1900s, Italian economist Vilfredo Pareto determined that 80% of the wealth in most countries was controlled by about 20% of the people, a phenomenon which he called a "predictable imbalance". The basic premise of this theory--that the majority of results come from a minority of input--has since been extended to other areas, including telecom, where a small percentage of customers generally produce the majority of a carrier's revenue.

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