5Barz CEO: Customer attrition goes beyond incentives

Customer churn is a localised and inevitable problem that always affects mobile phone carriers. Mobile phone carriers in Europe experience a 20 to 38 percent churn, according to a report.

A Forbes report revealed in November 2013 that companies spend big amounts to reduce “churn,” or customer attrition in marketing parlance. Management consulting firm Bain & Company's data showed that while churns differ per country and operator, they average at 2 percent to 2.5 percent monthly. For a firm with 5 million subscribers, this translates to about 1.32 million people or US$2 billion [AU$2.81 billion] in revenue losses annually.

Bain & Company noted that a 50 basis points decrease in customer churn could save companies about US$240 million [AU$337 million] in lifetime value after a year and a half and US$410 million [AU$576 million] in three years. With operating expenses added to the equation, the value would be estimated at US$320 million and US$490 million [AU$450 million and AU$688 million]. Data from McKinsey meanwhile revealed that an average U.S. wireless carrier can boost its earnings by 9.9 percent by lowering its churn rate, the same Forbes report also said.

The tremendous growth of mobile data consumption is the main culprit. Data consumption on mobile devices has surpassed the pace carriers build new infrastructure, thus overloading networks and compromising the quality of connectivity. The swelling number of subscribers also bogs down the network due to a higher uptake of "airwaves" (i.e. spectrum) whenever they make a phone call, send a text, or surf the web on their mobile phone. "Network traffic is increasing," noted an official at the Federal Communications Commission's wireless bureau back in 2012, according to a report on CNN Money. "Carriers can manage it for the next couple years, but demand is inevitably going to exceed the available spectrum."

Customer churn has been quite lower for mobile carriers in the second quarter though, according to Fierce Wireless, thanks to recent promotions they rolled out to win new customers. Fierce Wireless reported that Verizon (NYSE: VZ) offered subscribers a 10GB/US$80 shared data plan, while T-Mobile (NYSE: TMUS) ran a "Never Settle Trial" for Verizon customers. Sprint (NYSE: S) also continued its promotions to reimburse costs such as early terminator fees for consumers who transfer to its network.

5Barz International Inc. (OTCQB:BARZ) chief executive Daniel Bland, who has worked in the technology sector for over two decades, says preventing churn goes beyond providing customers incentives to retain them. He believes that a combination of these promotions, and the use of alternative technologies could significantly alleviate customer churn.

"We've done studies across the globe and we saw telcos lose about 3 percent of their subscribers due to poor signal quality. That 'churn' is a very definable number. Putting up infrastructure takes time and are a financial burden, but by targeting the subset of the problem which has the greatest impact, that is, weak cellular signal, and using alternatives such as network extenders, telcos could remedy the problem," he said.

Bland's company, 5Barz, has developed a revolutionary network extender that augments cellular signals by up to 70 db. Unlike most network extenders requiring a two-boxed solution (i.e. an outside and inside antenna), and that have to be plugged into a broadband device, 5Barz's plug-and-play technology is wireless, features a small form factor (9” x 9” x 1 1/2") and can be used right away. Before launching into a certain market, the product is tested and has to be approved by the engineering departments of network operators.

According to Bland, the company has already begun the commercial rollout of its technology in India, and has been building its presence in the market for the past six months. It will also begin working with telcos in South Africa in October, and move on to Southeast Asia in November. It will also enter the Latin American and European market in early 2016, and eventually expand in the United States by the second quarter.

Currently, there are 6.8 billion mobile subscribers worldwide, according to the International Telecommunication Union’s estimates . Revenues, meanwhile, have increased by 1.99 percent to US$1.06 trillion [AU$1.5 trillion] for mobile carriers across the globe. Network operators will continue to find maintaining its signal quality a daily challenge due to these unprecedented numbers. While it is yet to be known how carriers would ultimately adapt to this challenge, network extenders and buying additional spectrum appear to be the solution at this point for them to keep up with the demand.