Cohorts segmentation lifts mobile telco's renewal rate
In the US, Midwest Wireless has turned to database marketing agency Cohorts for help with the segmentation of its subscriber database to mail versioned customer retention messages to customers whose contract is due to expire, with the aim of improving response rates to its direct mail campaigns.
Using its proprietary household-based segmentation tool, Cohorts divides almost all US households into 30 groups (called Cohorts Segments) that share distinct demographic, lifestyle and consumer behaviour characteristics. An analysis of Midwest's database then blended the mobile phone operator's own customer knowledge with behavioural information from market research providers.
The segmentation In the end, the process provided Midwest with a better understanding of each segment of its database, and a basis for targeting and communicating with its customers more effectively. Among the aims of the project:
- Identify and analyse Cohorts segments within Midwest Wireless' current subscriber list.
- Combine appropriate segments into unique mega-segments, based on index scores for a range of key variables.
- Target those subscribers for a versioned, customer-retention direct mail campaign based on needs and attributes unique to each mega-segment.
The strategy Cohorts enabled Midwest Wireless to identify and group subscribers within several mega-segments for direct mail purposes. The segments were defined by index scores for service plan, number of lines per account, monthly income by line, family status and level of "tech-savvyness".
A look at the distribution of segments within the database showed the overall make-up of the current subscriber base, and revealed the segments with the greatest affinity for the various wireless telephone services on offer.
The offer With help from advertising agency Flynn Wright, Midwest Wireless used the Cohorts market research data and analysis to develop five different direct mail pieces targeting the mega-segments with the services and features that were most relevant to each. Each letter highlighted an offer (such as a free phone handset) and was based in part on the contract holder's current service plan and likelihood to use specific plan features and services.
Designed as a letter with various artistic elements, each mail piece was versioned with text and imagery that would appeal to each mega-segment, with an emphasis on the company's brand promises of value and mobile coverage.
The mailers are now sent to current subscribers who are within 30 days of an expired contract. The campaign began in the first quarter of 2006, and is triggered monthly.
The results When compared with Midwest Wireless' historical contract renewal campaign results, the new personalisation of retention mailings to mega-segments has been delivering higher response rates (i.e. more activations):
- Activations increased between 111% and 132% since the versioning began.
- Deactivations decreased between 42% and 84% since the versioning began.
- All versioned mailers responded at higher rates than previous non-versioned mailings.
- The five direct mail pieces realised an average response rate of between 16% and 19%.
- Higher-than-average returns more than offset the nominal increase in costs for creating versioned mailers.
- Mailing costs per renewal decreased by up to 41%.
- New lines were added to existing accounts at a greatly reduced cost.