e By taking these rules and observations into account, the organization can create a churn management capability that guarantees that they Chapter 7 will be operating at the optimum level at all times. To do this they need to take the rules of churn, the customer factors, the timing issues, and the strategic objectives into account. FACTORS OF EFFECTIVE CHURN MANAGEMENT It is has been our experience that churn management efforts that do not take all of these factors into account fail to address the optimum churn management strategy for any firm. To summarize then, we need a good definition for the objectives for any churn management effort. Churn Management Objective Statement The objective of any churn management operation should be to Develop a best estimate of the likelihood that each custom- er will churn in the immediate, medium, and long term b. Identify the current and future value that those customers represent Develop treatments (campaigns, policies, programs etc.) that reduce the likelihood of churn Assure that the cost and nature of the churn prevention treatment is consistent with the associated value and churn The Churn Management Equation The key ingredients of churn management strategies then are: ( R ) Risk - Determining just how likely the customer is to leave if nothing is done (T) Time - The timeframe that the risk applies to ( V) Value - The loss of revenue that the churn event will rep- resent (I) Investment - The investment of money in treatments that will reduce that risk eXcellence in Telecommunications The Telco Churn Handbook The objective is to make the optimum investment to reduce the risk of customer churn, especially in the short term. In general, the higher the value of the customer, the lower we would like to keep the risk factor across all time periods. Conversely, the lower the value of the customer, the less concerned we are with the risk one way or another. Chapter 8 CHAPTER 8 MANAGE RELATIONSHIPS, NOT CHURN So what is the best way to manage churn? When you peel back the layers