It is my strong belief that ACTV will benefit cable ops in reducing churn. That is why AT&T is "rolling out the red carpet" according to a previous statement attributed to ACTV's CFO.
Weekly Preview for July 19, 1999
Ops Confront Churn, the Digital Downside
By MONICA HOGAN July 19, 1999
With the excitement over early digital-cable sales, it's easy to overlook retention.
But in the face of increasing competition, MSOs are starting to eye customer-service efforts, loyalty programs and move plans to make sure new digital subscribers stick.
AT&T Broadband & Internet Services has reduced its digital churn from 7 percent per month to 5 percent, "which we think is a pretty manageable number," vice president of marketing Doug Seserman said.
"Digital churn is more comparable to premium churn than to overall basic churn," MediaOne Group Inc. senior vice president of video Judi Allen said, "and that makes sense because today our digital is positioned as a premium product."
Digital churn at AT&T Broadband is in the range of premium churn, which is normally 5 percent to 9 percent per month, but higher than expanded basic, which is 3 percent to 4 percent a month, Seserman said.
He added that he doesn't expect digital churn to drop much lower than premium churn because "any time you ask a customer to pay more, some churn is to be expected."
The reasons people give for churning out of digital mimic the ones for leaving premium, Allen noted: too much programming repetition and not enough value for the money. The value of digital cable -- more choices, more channels -- resonates with some customers but not with others, she added.
The Yankee Group analyst Bruce Leichtman said current premium customers who upgrade to digital are accustomed to paying more for cable and are less inclined to suffer sticker shock than new customers. He added that pay-per-view users are also a good bet because they're used to volatile monthly bills.
Marketing analyst Howard Horowitz, president of Horowitz & Associates Inc., recommended that operators experiencing digital churn pay closer attention to signal quality.
A Denver-area AT&T Broadband subscriber told Multichannel News last week that he recently downgraded from digital cable to analog because he was disappointed that his most frequently watched channels were delivered in analog.
When he called to disconnect, he expected an offer of free PPV movies or a $2 discount off his monthly bill, but instead, he was told where to drop off his digital box.
"I was shocked at the lack of resistance," the AT&T Broadband customer said. "They didn't even ask why I was getting rid of my digital box after only two months."
Cox Communications Inc. earlier this month launched a VIP-retention program that targets the top 20 percent of spenders in nine of its systems.
"It's totally one-to-one marketing," Cox director of direct-response and database marketing Margaret Ross said. "We interview them as we bring them into the program, and each communication is tailored around them." Digital subscribers are notified of upcoming programming that matches their interests.
InterMedia Partners executive director of marketing Donna Young admitted that her company was just starting to get better about finding out why customers drop any of their cable services. "Competition is forcing you to do that right now," she said.
Young added that because there's so much growth left in digital cable, InterMedia has put more of its focus on selling digital and less on retention.
"It's not anything we're overly concerned about except in making sure we get the boxes back, because it is an expensive piece of equipment," she said.
InterMedia's monthly digital churn averages between 6 percent and 8 percent, depending on the system, Young estimated, adding that the company's monthly premium churn is in the double-digits.
She suggested that InterMedia's digital churn was lower than its premium churn because the digital package includes basic channels, and not just expanded premium and PPV.
If cost is a factor when a customer calls to drop digital cable, InterMedia tries to get them to downgrade from multiple premiums to a single pay. With so many multiplex feeds on digital, it's often a better value for the subscriber than multiple analog pays, Young said.
Seserman said AT&T Broadband's strategy of bundling digital as part of a larger package, rather than selling it as a $10 add-on, has helped to reduce digital churn.
"We want to make digital packages as equally unattractive to leave as they are attractive to join," he said. "Customers are saving money to be in a package."
To help control churn, analysts and operators warned against overpromising the benefits of digital cable.
"We try to make sure that we're selling it appropriately upfront, and that we're not overselling the potential behind it," Comcast Cable Communications Inc. executive vice president of sales and marketing and customer service Dave Watson said.
"It's a simple value proposition," he added. "For $9.95, you get a lot more of what customers have told us they want. You get more movies."
Allen said MediaOne is trying to better identify those customers who really want digital cable in order to get the product in the hands of those who are most likely to keep it.
"So much of the churn is related to pushing something on people who never wanted it in the first place," she admitted.
During promotions created to drive sales volume of a new product, customer-service representatives can become too aggressive in selling without qualifying the customer.
Young cautioned that income levels alone won't determine good digital-cable prospects. "For some lower-income households, cable is their primary means of entertainment," she added.
While MSOs are aware of elevated digital churn, they're not obsessed by it.
"The net gain is a better story for digital than it is for basic cable, with both connects and upgrades," Seserman said. "We're gaining 80,000 to 100,000 digital customers per month. Almost one-third of our new customers sign up for digital."
When customers churn out of digital, they're doing it either because they're moving or they want to pay less for cable, he said.
AT&T Broadband and other operators are beefing up their internal move programs, especially for customers who move within a system. But they're also addressing cross-country moves within a single MSO's territories.
And ultimately, marketing executives long for an industrywide move program, although there are still some logistical issues to address before that's possible.
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