ouygues TeIecon LoyaIly Iiogian Case Sludy

Lnagine ConneiciaI in Confidence Iage 1

Bnuygucs Tc!ccnm
Custnmcr Lnya!ty Prngram
Casc 5tudy
Nnvcmbcr 1999














Prcparcd by: David Ieleis
Lnagine
InleinalionaI usiness Cenlie
AusliaIian TechnoIogy Iaik
LveIeigh NSW 143O
Sydney AUSTRALIA

TeI: +61 2 931O 99OO
Iax: +61 2 931O 587O
LnaiI: david.peleisenagine-inl.con
Wel: vvv.enagine-inl.con

ouygues TeIecon LoyaIly Iiogian Case Sludy
Lnagine ConneiciaI in Confidence Iage 2

Bnuygucs Tc!ccnm Custnmcr Lnya!ty Prngram Casc 5tudy -
Nnvcmbcr 1999
Tab!c nf Cnntcnts Pagc
1. ackgiound ................................................................................................................... 3
1.1 Aloul lhe aulhoi .......................................................Errnr! Bnnkmark nnt dcfIncd.
1.2 ouygues TeIecon........................................................................................................ 3
1.3 ConfidenliaI Infoinalion .........................................Errnr! Bnnkmark nnt dcfIncd.
2. A pioaclive Cuslonei Relenlion Slialegy................................................................ 3
3. The ouygues TeIecon expeiience - Ihase I Advanlages................................. 3
3.1 Oveiviev ....................................................................................................................... 3
3.2 Oljeclive of lhe Advanlages Cuslonei LoyaIly Iiogian.................................. 4
3.3 Ain of lhe LoyaIly Iiogian....................................................................................... 4
3.4 Iiogian Design............................................................................................................ 4
3.5 Menleiship .................................................................................................................. 4
3.6 Diiveis of poinls accunuIalion.................................................................................. 4
3.7 Connunicalions........................................................................................................... 4
3.8 Revaids and IiiviIeges ............................................................................................... 5
3.9 ChanneIs and Redenplion.......................................................................................... 5
3.1O Syslen Suppoil ............................................................................................................. 5
4. The ouygues TeIecon expeiience - Ihase II IdyIIo .......................................... 6
4.1 Maikel and oiganizalionaI changes .......................................................................... 6
4.2 LoyaIly aIso lecones an acquisilion looI.................................................................. 6
4.3 Oljeclive of lhe IdyIIo Cuslonei LoyaIly Iiogian............................................ 6
4.4 Ain of lhe LoyaIly Iiogian....................................................................................... 6
4.5 Iiogian Design............................................................................................................ 6
4.6 Menleiship .................................................................................................................. 6
4.7 Diiveis of poinls accunuIalion.................................................................................. 6
4.8 Connunicalions........................................................................................................... 7
4.9 Revaids and IiiviIeges ............................................................................................... 7
4.1O ChanneIs and Redenplion.......................................................................................... 7
4.11 Syslen Suppoil ............................................................................................................. 7
5. ConcIusions ................................................................................................................... 7
5.1 Handsels ienain a key diivei of chuin..................................................................... 8
5.2 A LoyaIly Iiogian is ideaI lo foinaIise a pioaclive handsel upgiade
piogian........................................................................................................................................ 8
5.3 LoyaIly is nol cheap.lul chuin cosls noie ............................................................ 8
5.4 Donl ieinvenl lhe vheeI ............................................................................................. 8
ouygues TeIecon LoyaIly Iiogian Case Sludy
Lnagine ConneiciaI in Confidence Iage 3
Bnuygucs Tc!ccnm Custnmcr Lnya!ty Prngram Casc 5tudy -
Nnvcmbcr 1999
1. Backgrnund
1.1 Bnuygucs Tc!ccnm
ouygues TeIecon Iaunched lhe fiisl DCS-18OO noliIe leIephone nelvoik in
Iiance in May 1996, conpeling againsl lhe lvo eslalIished CSM opeialois Iiance
TeIecon and SIR.
y Dec 1998, ouygues TeIecon had ovei 1 niIIion noliIe cusloneis, naking il
lhe faslesl gioving noliIe nelvoik in Luiope. y Decenlei 1999 lhe cuslonei
lase had ieached ovei 2.5 niIIion cusloneis.
ouygues TeIecons shaiehoIdeis incIude ouygues (a piivaleIy Iiench
diveisified congIoneiale opeialing lusinesses in consliuclion, leIevision (TI1),
novie pioduclion, and leIeconnunicalions), Velacon (Ceinany) and TeIecon
IlaIia (IlaIy).
2. A prnactIvc Custnmcr RctcntInn 5tratcgy
Chuin (cuslonei defeclion) is a veII knovn piolIen in lhe leIeconnunicalions
indusliy.
Handsel sulsidies, incieased conpelilion, and a pioIifeialion of acquisilion
ieIaled pionolions aie aII faclois lhal conliiluled lo lhis gioving piolIen of
chuin in lhe leIeconnunicalions indusliy, and lhe Iiench naikel vas no
exceplion.
Having expeiienced nonlhIy chuin iales of lelveen 3 and 4 in pievious
Iives, lhe nanagenenl lean al ouygues TeIecon veie connilled lo addiessing
lhis piolIen head-on.
Lven lefoie Iaunch, lhe oiganisalion vas sel up lo focus iesouices on lhe
definilion and inpIenenlalion of a pioaclive cuslonei ielenlion slialegy.
WhiIsl lheie veie seveiaI successfuI eIenenls lo lhis slialegy, lhis case sludy viII
focus on lhe expeiience of lhe ouygues TeIecons Cuslonei LoyaIly Iiogian
Advanlages.
3. Thc Bnuygucs Tc!ccnm cxpcrIcncc - Phasc I "Advantagcs"
3.1 OvcrvIcw
The ouygues TeIecon Cuslonei LoyaIly Iiogian Advanlages vas Iaunched
in May 1997 lo high vaIue cusloneis.
Iiogian nenleis accunuIale poinls lased on usage and lenuie. These poinls
can le iedeened againsl handsels, accessoiies and olhei ievaids.
ouygues TeIecon LoyaIly Iiogian Case Sludy
Lnagine ConneiciaI in Confidence Iage 4
In Seplenlei 1999 lhe Iiogian vas exlended lo 1OO of lhe posl-paid cuslonei
lase (see Ihase II - IdyIIo leIov)
3.2 ObjcctIvc nf thc "Advantagcs" Custnmcr Lnya!ty Prngram
To safeguaid a Iaige piopoilion of lhe ievenue and conliilulion of lhe conpany
ly inlioducing a pioaclive Cuslonei LoyaIly Iiogian foi high vaIue cusloneis
lo ieduce chuin and luiId Iong-lein cuslonei ielenlion.
3.3 AIm nf thc Lnya!ty Prngram
AII cusloneis in lhe Iiogian vouId ieceive a fiee handsel aflei 2 yeais in lhe
piogian (nid-iange handsel). This lecane a yaidslick foi lhe alliacliveness of
lhe piogian.
3.4 Prngram DcsIgn
WhiIsl lhe piocess foi defining lhe piogian nay le consideied confidenliaI lo
ouygues TeIecon, suffice lo say lhal lhe design vas lased on cuslonei
iequiienenls.
3.5 McmbcrshIp
Lnliy lo lhe piogian is aulonalic and fiee foi cusloneis fuIfiII lhe foIIoving
ciileiia:
- Have leen vilh ouygues TeIecon foi 6 nonlhs
- Have an aveiage spend of giealei lhan a ceilain lhieshoId
- Aie nol lad dell cusloneis
3.6 DrIvcrs nf pnInts accumu!atInn
Ioinls veie accunuIaled as foIIovs
Lnliy lo lhe piogian 6OO WeIcone Ioinls
LoyaIly (lenuie) 1OO Ioinls pei nonlh
Spend 1O I = 1 poinl (RoughIy US$2 = 1poinl)
OccasionaI lonus poinls veie aIso possilIe, e.g.
DoulIe poinls foi inleinalionaI caIIs lo ceilain deslinalions
AddilionaI poinls foi laking nev seivices
Chiislnas lonuses, elc
3.7 CnmmunIcatInns
AII connunicalions veie leIov lhe Iine via Diiecl Maikeling
Upon aulonalic enliy lo lhe piogian cusloneis ieceived a WeIcone Iack
conlaining:
A WeIcone Lellei lo lhe Iiogian (A4, peisonaIised)
A Iiogian Cuide (A5 lookIel) incIuding calaIogue of ievaids
A Ioinls Slalenenl (A4), incIuding lhe WeIcone Ioinls
ouygues TeIecon LoyaIly Iiogian Case Sludy
Lnagine ConneiciaI in Confidence Iage 5
A fiisl oidei foin (A4, peisonaIised) lo le used foi lhe fiisl iedenplion
(incIuding acceplance of Teins and Condilions of piogian)
Lveiy 3 nonlhs aflei enliy lo lhe piogian, each nenlei ieceived a ieguIai poinls
slalenenl incIuding:
The quaileiIy poinls slalenenl (A4)
An updale lo lhe ievaid calaIogue (doulIe A5), incIuding pionolions and
speciaIs
iII inseils and olhei diiecl naiI vas occasionaIIy used lo connunicale vilh
Iiogian nenleis
3.8 Rcwards and PrIvI!cgcs
Ioinls couId le iedeened foi lhe foIIoving Revaids:
Handsels (Iiniled lo lhe ouygues TeIecon ladged handsels)
Accessoiies (incIuding lalleiy, chaigei, cai kil, peisonaI hands-fiee kil,
Discounls, Iiee ninules
VaIue added seivices
Weekends avay
In addilion, Advanlage cusloneis aIso ieceived piiviIeged liealnenl:
Longei opening houis and piioiily in caIIing queues
Aflei saIes seivice pIus (innediale phone svap-oul, elc)
3.9 Channc!s and RcdcmptInn
Redenplion vas via ouygues TeIecon cuslonei seivice.
ChanneIs veie excIuded fion lhe piogian and aII connunicalions and
fuIfiInenl veie conducled diiecl lo lhe cuslonei.
3.10 5ystcm 5uppnrt
The Advanlage LoyaIly Iiogian is nanaged ly a slandaIone LoyaIly Syslen
caIIed CRLST Cuslonei Relenlion Syslen. CRLST vas puipose luiIl foi lhe
nanagenenl of lhe piogian.
CRLST nanages aII aspecls of lhe LoyaIly piogian - Menleiship, Ioinls
accunuIalion, aII MaiIing and Connunicalions vilh Menleis, Logislics and
IuIfiInenl of Revaids, Cuslonei Caie and Repoiling and Adninislialion.
Lnagine hoIds lhe excIusive voiIdvide disliilulion and deveIopnenl iighls foi
lhe CRLST Cuslonei Relenlion Syslen, vhich has since leen fuIIy inlegialed
lo Lnagines CIosed-Loop Maikeling Suile (CLM).
ouygues TeIecon LoyaIly Iiogian Case Sludy
Lnagine ConneiciaI in Confidence Iage 6
4. Thc Bnuygucs Tc!ccnm cxpcrIcncc - Phasc II "Idy!!n"
4.1 Markct and nrganIzatInna! changcs
In lhe peiiod fion May 1997 lo Seplenlei 1999 lhe Iiench naikel ienained
incieasingIy conpelilive. Maikel penelialion iose fion aiound 8 lo 2O, vilh
ouygues TeIecon cuslonei nunleis gioving fion 5OO,OOO lo 2.5 niIIion in lhe
sane line.
The focus duiing lhis peiiod vas heaviIy veighled lovaids acquisilion of nev
cusloneis. Duiing lhe sane peiiod handsel piices al poinl of saIe feII lo 1 Iiance
as incieasing conpelilion diove up handsel sulsidies and acquisilion ieIaled
pionolions.
4.2 Lnya!ty a!sn bccnmcs an acquIsItInn tnn!
In Seplenlei 1999 ouygues TeIecon, aIvays lhe innovaloi, look lhe loId slep of
inlioducing a nev lundIed package - lhe Ioifail UIlino (UIlinale Iackage).
Ioi a fixed piice pei nonlh, lhis package incIuded nol onIy lhe univeisaI fiee
ninules, lul aIso lhe pionise ouygues TeIecon piovides you vilh a nev
handsel eveiy 2 yeais.
ouygues had liansfoined Advanlages inlo IdyIIo - and ie-Iaunched lheii
LoyaIly Iiogian lo aII 1.5 niIIion exisling (and nev) posl-pay cusloneis.
4.3 ObjcctIvc nf thc "Idy!!n" Custnmcr Lnya!ty Prngram
To safeguaid lhe ievenue and conliilulion of lhe conpany ly inlioducing a
pioaclive Cuslonei LoyaIly Iiogian foi aII posl pay cusloneis lo ieduce chuin
and luiId Iong-lein cuslonei ielenlion.
To use Cuslonei LoyaIly as a key conpelilive diffeienlialoi in lhe naikel and
inciease lhe naikel shaie of nev acquisilions.
4.4 AIm nf thc Lnya!ty Prngram
AII cusloneis in lhe Iiogian ieceive a fiee handsel aflei 2 yeais in lhe piogian.
This ienains lhe yaidslick foi lhe alliacliveness of lhe piogian.
4.5 Prngram DcsIgn
Il is assuned lhal lhe design of lhe piogian vas lased on lhe expeiience of lhe
pievious 2 yeais vilh Advanlages.
4.6 McmbcrshIp
Lnliy lo lhe piogian is aulonalic and fiee foi cusloneis fuIfiII lhe foIIoving
ciileiia:
- AII nev and exisling posl-pay cusloneis
- Aie nol lad dell cusloneis
4.7 DrIvcrs nf pnInts accumu!atInn
Lxacl poinls aie accunuIalion iuIes aie nol knovn al lhe line of viiling.
Ioinls aie accunuIaled lased one:
ouygues TeIecon LoyaIly Iiogian Case Sludy
Lnagine ConneiciaI in Confidence Iage 7
Lnliy lo lhe piogian x WeIcone Ioinls
LoyaIly (lenuie) y Ioinls pei nonlh
Spend z I = 1 poinl (RoughIy US$a = 1poinl)
4.8 CnmmunIcatInns
The ieluin fion sunnei hoIidays in Iiance is liadilionaIIy a line vhen saIes aie
high (Seplenlei/Oclolei peiiod).
ouygues TeIecon Ied lhe Sepl/Ocl peiiod vilh a nass naikeling alove lhe Iine
canpaign focussing on lhe nev Ioifail UIlino (UIlinale Iackage).
The key nessage fion lhe canpaign - .nov ouygues TeIecon gives you a
fiee phone eveiy lvo yeais.
This vas coupIed vilh a nassive leIov lhe Iine canpaign lhal ieliospecliveIy
piovided lenefils lo aII 1.5 niIIion exisling cusloneis.
4.9 Rcwards and PrIvI!cgcs
ouygues TeIecon ieduced lhe ievaids pioposilion lo le enliieIy focused on a
seIecled iange of ouygues TeIecon ladged handsels.
AII olhei ievaids, such as hoIidays and ieslauianl neaIs veie excIuded.
InleieslingIy, aII accessoiies, pioducls and seivices, and fiee ninules veie aIso
ienoved fion lhe piogian.
(Aulhois nole: The ienovaI of hoIidays and ieslauianl neaIs seens ieasonalIe as
lhe Iink vilh lhese ievaids and chuin seens lenuous).
Hovevei, sone opeialois have noled sulslanliaI incieases in aveiage ievenue pei
cuslonei ieIaled lo lhe ovneiship of addilionaI accessoiies and piovision of
addilionaI fiee ninules.
Il is suinised lhal lhe IdyIIo Iiogian is focused enliieIy on handsels foi lhe
puipose of cIaiily and sinpIicily al Iaunch, hovevei, lhis nay piove sonevhal
Iiniled ovei line.j
4.10 Channc!s and RcdcmptInn
Redenplion and fuIfiInenl is via ouygues TeIecon cuslonei seivice and nov
exlended lo ceilain channeIs.
4.11 5ystcm 5uppnrt
The IdyIIo LoyaIly Iiogian conlinues lo le nanaged lhe CRLST Cuslonei
Relenlion Syslen.
5. Cnnc!usInns
Il is cIeaiIy nol possilIe in a case sludy of lhis naluie lo piovide acluaI iesuIls of
lhe piogian lul lhe foIIoving concIusions can le diavn fion lhis case sludy and
fion lhe aulhois ovn expeiience.
ouygues TeIecon LoyaIly Iiogian Case Sludy
Lnagine ConneiciaI in Confidence Iage 8
5.1 Handscts rcmaIn a kcy drIvcr nf churn
Ioi noliIe phone conpanies, handsels ienain a key diivei of cuslonei chuin
This is pailicuIaiIy lhe case in naikels vilh handsel sulsidies and aggiessive
acquisilion offeis
In ISI naikels, sone ISIs aie inlioducing sulsidised ICs vilh a 2 yeai conliacl
vilh lhe ISI. If lhis nodeI lakes off, lhe IC couId veII lecone lhe handsel of lhe
ISI naikel.
5.2 A Lnya!ty Prngram Is Idca! tn fnrma!Isc a prnactIvc handsct upgradc prngram
The ouygues TeIecon Advanlages Iiogian vas exlended fion high vaIue
cusloneis lo covei aII exisling and nev posl-paid cusloneis - piesunalIy lhe
iesuIls veie posilive enough lo vaiianl such a slialegy.
5.3 Lnya!ty Is nnt chcap.but !nsIng ynur custnmcrs cnsts mnrc
If ve assune lhal an aveiage handsel cosls US$2OO, lhen lhe cosl of lhis piogian
foi ouygues TeIecon ovei lhe nexl 2 yeais (assuning 1OO iedenplion iale) viII
le US$3OO niIIion (1.5 niIIion cusloneis ly US$2OO).
If ve fuilhei assune aveiage ievenue pei cuslonei of US$5O pei nonlh as a
lenchnaik ($12OO ovei 2 yeais), lhis neans lhal lhe ieinveslnenl in cuslonei
ielenlion is aveiage 16 of ievenue ($2OO/$12OO).
Opeialois need lo invesl noney lo ieacquiie lheii ovn cusloneis lefoie a
conpeliloi does il foi lhen.
5.4 Dnn't rcInvcnt thc whcc!
Lnagine nission is lo piovide consuIling and IT soIulions lhal enalIe
leIeconnunicalions and uliIily conpanies lo ieduce chuin, inciease aveiage
ievenue pei cuslonei and luiId Iong lein cuslonei piofilaliIily.
Lnagine is an AusliaIian lased consuIling and IT conpany lhal seIIs and
suppoils lhe CRLST Cuslonei Relenlion Syslen via a voiIdvide nelvoik of
disliilulois.
Lnagine expeiience neans dianalicaIIy ieduced lhe line lo naikel.
Ioi noie infoinalion see vvv.enagine-inl.con