ers. Companies who are aware of consumer need and who make adjustments accordingly can pick up many additional customers during this time. Others may lose a significant chunk of their market. eXcellence in Telecommunications The Telco Churn Handbook ECONOMIC CHURN The most easily understood of the churn types is churn for economic reasons. Despite the best efforts of service providers to make their companies unique and interesting, the resounding number-one reason for churn mentioned by consumers is always price. Since customers are sensitive to price, you must respond to price pressure from your competitors. The Price Suicide Play During the expansion phase, churn is not a major concern. Competitors may drop prices to invite new customers, but other offers may also attract customers. When the market begins to saturate, however, and a carrier is looking at declining enrollment numbers, the knee-jerk solution to the problem tends to be to reduce prices to attract customers away from the competition. Unfortunately, the decision to use price as the main churn tool has one very large flaw. Price reductions may be easy to execute, but it is just as easy for your competition. This means that if you start to push price to gain customers the competition is likely to respond in kind. The ultimate result is obvious. A. Each company will retain the relative share of market they started with. B. Each company will be working at a lower profit margin than before. Avoiding Head-to-Head Price Competition - Price Obfuscation To get around the problems created by direct price competition, many companies create programs, promotions, and campaigns that allude to price benefits, but which obscure the nature of the savings to the point that consumers are unable to compare competitors' offers directly. For example, in one market a carrier offers customers per-second versus per-minute billing. This means that the consumer saves money on every fraction of a minute left over at the end of a call. Although this might be of obvious value to