The primary segment where bundling is used for generating high loyalty due to the ability of members of this segment to overcome price pressure due to the need to have services in place to support their business models.
The most profitable of segments and also the more difficult to penetrate and sustain customers, at&T Wireless has successfully served this segment with Wide Area Networks (WLAN) and hotspot technologies in addition to the roll-out of beta tests of 3G technologies.
The services segmentation approach is also heavily used throughout the telecommunications industry as well. These include the following:
Cellular Telecommunications Services: This segment includes but is not limited to 2G and 3G services and analog (1G) services. The primary uses within this key segment include voice and network access services.
Paging and Other Wireless Services: Referring to both one-way and two-way data communications sent to a wireless device, paging can now be considered an increasingly niche-based product.
Emerging Wireless Telecommunications Services: This segment includes WiFi, hot spot and metro wireless network support including industry-specific applications, for example the use of wireless networks in hospitals for example.
Strategies for Reducing Churn
Clearly the concentration on segmentation criteria on demographics or services sold is insufficient for finding the unmet needs of both consumer and commercial customers. A direct result of this lack of ability to find unmet needs is a major contributor to churn in the industry (Bienenstock, Bonomo, Hunter, 2004). Lessons learned from churn in Korean telecommunications market are applicable to the lack of needs-based segmentation also evident in the U.S. cellular market as well (Ahn, Han, Lee, 2006). Based on the research cited, presented are three strategies for minimizing customer churn through research-driven strategies.
Needs-based segmentation based on psychographics of customers - This is the first potential solution to the impending churn that at&T Wireless will be facing as pricing becomes the preferred approach to creating differentiation on the part of competitors. Psychographics or the study of how consumers (from both consumer and commercial markets) assign themselves to market segments is critical as the foundation for finding out what unmet communication needs customers have. This includes event-based research including focus groups with youth groups and teenagers to see what their emerging unmet needs are as well.
Creating roles-based messaging for commercial accounts that tie into it architectures - the promise of 3G is that it has the potential, through information transfer speeds, to play an integral part on the convergence strategies in many corporate environments. Yet in the move to convergence in commercial accounts, there is the corresponding need to provide guidance on how to make roles-based workflows more effective for corporate accounts. Segmentation studies on this specific area have a very high potential Return on Investment (ROI) as insights from commercial accounts could lead to entire corporations standardizing on at&T Wireless.
Development of CEO and CIO Advisory Councils with commercial accounts to gain insights into how 3G will impact their companies - This entirely focuses on the needs of commercial and enterprise accounts and looks to understand how 3G fits into the plans of CEOs and CIOs and their specific unmet needs for wireless telecommunications as part of their broader information systems strategies.
Customer churn in both consumer and commercial, enterprise segments is going to accelerate in the coming years for at&T Wireless. The company needs to break immediately from being focused on demographics or services sold for segmenting their market, and concentrate on how consumers and commercial users define their groups and unmet needs. The use of psychographics research for segmentation is yielding significant results across consumer packaged goods, services and manufacturing industries (Wang, Dou, Zhou, 2006). The use of psychographics as a research strategy will also lead to a more precise definition of unmet needs and their prioritization as well.
AT&T Wireless needs to gain these insights to guide their bundling efforts to reduce customer churn over the short-term and longer term customer profitability over the long-term. Psychographics will most likely develop segments including young consumers who are predominantly focused on Instant Messaging (IM) and texting, in addition to those consumers who are seen by others as content mavens, a term Malcolm Gladwell uses in his book the Tipping Point. Psychographics will also provide insights into the mainstream consumer segment that includes parents that have hectic schedules caring for their children while trying to keep a household running. In summary the solution to customer churn is in finding out about unmet needs through groups-based segmentation over purely demographic criteria applied to at&T Wireless' segments.
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