Mobile-telephony subscribers give many reasons for switching operators—prices, brands, friends’ recommendations—but very few cite highly volatile monthly bills. Yet when we analyzed data on subscriber behavior, we found an interesting pattern that was consistent for both heavy and light users: subscribers whose monthly bills fluctuate substantially tend to churn much more than people with more consistent bills.1
Operators should conduct market research on the 20 to 40 percent of subscribers with highly volatile bills—those varying by more than 23 percent from month to month—to assess whether reducing their volatility would affect churn. To "smooth" them out, companies should consider introducing pricing plans solely for subscribers with volatile bills. Low- and medium-income people in this category could, for example, purchase a yearlong package that would involve a fixed monthly charge based on the average of their previous bills. They would receive notification of any large "overdraft" and balance their accounts at the end of the term.
About the Authors
Robin Bienenstock is an associate principal in McKinsey’s London office, Paola Bonomo is a principal in the Milan office, and Richard Hunter is a consultant in the Tel Aviv office.
Notes