We tend to behave similar to our friends. Generally
speaking, we like the same music, wear the same clothes, share the same
hobbies, eat similar types of food, and even vote in a similar fashion. Now,
there is evidence that we even like to use the same mobile phone service.
Michael Driscoll, founder of data analytics firm Dataspora,
studied over 2.4 million customers of a major mobile carrier and found that people
have a surprisingly strong influence on the service provider of their immediate
caller network (defined as the friends and family who the person calls at least
once a month for over one minute). In
fact, Driscoll found that users who cancel service from the telecom company are
600% more likely to be within each others’ caller network, or directly
connected, than one would expect by chance. In other words, if you leave your
cell phone service provider, the chance of your friends and family also leaving
the service provider is significantly higher.
But is the contributing factor really social influence? Or
are these findings just a byproduct of the prevalence of family plans in which
entire groups of subscribers quit together?
To find out, Driscoll looked at cancellations within caller
networks one month apart since family plans customers switch carriers at the
same time. His findings suggest that
family plans only explain part of the collective behavior, and that users
within the same caller network have significant influence over one another’s
phone service provider.
Driscoll discovered that a customer is twice as likely to cancel their phone service and three times as likely to port-out their
phone service to another provider if someone within their network had canceled
or switched carriers one month earlier. For the phone service provider, this
means that a departure by a few can quickly and easily turn into a mass
migration towards a competitor’s services.
Some of this might be
explained by similar people leaving to get a new phone (like an iPhone) that is
exclusive to another carrier. But only
some of the exodus can be attributed to something positive about another
carrier – dissatisfaction with one’s current carrier is another significant contributing
Telecom companies today seem to approach customer retention
efforts reactively, often offering last-minute promotions or free upgrades to
sway customers on the cusp of cancellation. Based on Driscoll’s findings, a
supplementary and cost-effective action phone service providers could take is
to proactively offer discounts or service enhancements to customers in a recent
canceler’s caller network, especially to customers with large networks
While these exact findings are specific to the mobile
carrier and its customers, there are several lessons that all businesses can
learn about taking care of customers and customer retention.
First, take good care of your customers (especially your
best and most-connected ones). Your customers can be your biggest billboards
and will help you draw in even more customers, but they can also be your
biggest enemy and drive away both current and potential customers. To prevent
the latter, make sure you offer your customers – especially your VIPs –
exceptional customer service.
Second, try reaching out to the friends of customers you
lose. This may be done more easily for certain businesses than others since
networks within a customer base are usually not known. Companies unsure of
relationships between customers should (1) ask for or incentive customer
referrals or (2) use an outside service to determine customer social graphs and
Birds of a feather do many things together – including
leaving you for competitors.
(special thanks to Michael Hsu
for his help in writing and editing this piece)