 need to understand the model's weaknesses and where it fails to address the telco's churn issues. This will help us discover where we can make improvements that have the greatest impact. UNDERSTANDING THE CHALLENGE We can identify which consumer response model a telco is practicing by examining the key performance indicators that the company uses to measure the success of the organization. Under the monopoly model, success is measured in number of phone lines, volume of calls, and the number of complaints. (Recall that, under the monopoly model, the rate limits are set by law; therefore revenue, profit, and other measures are all coincidental and depend directly on calling volume.) A telco operating under the retail model will take a decidedly different perspective and will, therefore, have different measures for success. Financial Perspective In the retail model of operation, the financials are the first elements that interest upper management. In the competitive mode of operation, pricing and profits are not given, but they are part of a complex equation that must be calculated. Because of its financial impact on the corporate balance sheet, churn is an important issue. Upper management interest in churn is directly related to the amount of money that it is costing the firm. This explains why monopoly and expansion phase telcos are completely unconcerned with churn. If customers are not leaving and if rates are not being dropped to resist churn, then upper management will ignore it. Conversely, as competition increases and churn rates grow, upper managements scrutiny will increase. The revenue loss makes churn important. It is crucial that we keep this in mind throughout all of our explorations of churn management. For the retail-focused organization, churn is, first and foremost, a revenue issue. Chapter 17 Market Share View Many managers may be obsessed with watching the bottom line The Expansion Phase Market Company 1 Com pany 2 Quarters of Operation Conceptual Figure 17-1: Finance View - Revenue Line but i