"Deep Packet Inspection can play a key role within cable operator networks; e.g., for traffic engineering and network security. But it presents significant shortcomings in holistically analyzing subscriber activity, which is key for both retention and growth." —Kate Mitchell, Edge Intelligence

Cable providers are at a critical juncture.

The number of consumers abandoning TV subscriptions for over-the-top offerings continues to grow. At the end of Q1, 3.4% of households cut the cord over the prior year, the highest rate ever, leaving about 83 million households paying for cable services in the U.S. This doesn’t include the increasing numbers among new households and younger demographics that have never subscribed to a pay TV service in the first place, a.k.a., “cord-nevers.”

Currently, approximately 13.5 million households (14% of all households) don’t pay for traditional forms of TV service. By 2021, eMarketer predicts, the number of cord-cutters will nearly equal the people who never had pay TV — a total of 81 million U.S. adults.

While this may all seem like doom and gloom for cable MSOs, it’s actually an opportunity to stop the cord-cutting trend and also win over cord-nevers through innovation. For cable operators to quickly turn the tide, it will require a stronger understanding of their subscriber base, or deeper than what’s possible with Deep Packet Inspection (DPI).

Seeing the Limits of the Old

DPI has been the default method over the past decade for examining and managing network traffic; it runs in line with production traffic or sends copies of packets to a network monitoring connection to inspect packets flowing through the network. Data is extracted from within each packet.

DPI can play a key role within cable operator networks; e.g., for traffic engineering and network security. But it presents significant shortcomings in holistically analyzing subscriber activity, which is key for both retention and growth.

What are those obstacles? First, it’s very challenging and costly to scale a DPI offering since it relies on inspecting at the packet level, on every port, at increasingly high network speeds. In addition, it can be difficult and immensely time-consuming and labor-intensive to gain customer insight from DPI systems since the hardware can be siloed and spread across many locations deep inside the network.

So how can cable MSOs obtain the subscriber insight they need to positively impact their business?

New Analytical Architectures

Big data analytics — the process of examining large and diverse data sets — can enable MSOs to discover hidden patterns, previously unknown correlations, customer preferences and other highly useful information to help them make more informed business decisions. And network data for cable operators is big, with hundreds of billions of records added daily, generated from millions of subscribers, and the need to retain trillions of records for analysis and compliance purposes. 

So the collection, real-time correlation, analysis and retention requirements placed on the analytical architecture are demanding — and many big data architectures are unable to keep pace. Analytics should provide the granular insight into and throughout the entire customer lifecycle that cable providers need to effectively support things such as usage-based billing, support-related inquires, proactive upgrades to bigger plans and anticipating those likely to churn. That knowledge can help inform activities directly geared to current and prospective subscribers.

For example, with the knowledge of subscriber behaviors garnered from big data analytics, cable providers can grow revenues through initiatives such as targeted promotions and customized product offerings. For those predicted to churn, better customer service and incentive offers may help in maintaining their business.

And for consumers who no longer subscribe to cable services but do still have data plans, providers can use big data analytics to determine their OTT viewing, web content and download data so they can figure out how best to monetize this use of their network. With this deep level of knowledge, cable providers can have accurate insight on data consumption to make sure usage-based billing and capped data tiers can capture revenue to offset what they’re losing from paid TV.

Going Deeper

While DPI still has an important role in supporting cable MSOs, it’s not cutting it in this time of cord-cutting. What’s needed is a way to understand subscribers on a deeper level than DPI can provide. By being able to better analyze the immense amount of data that’s available, cable providers can be well positioned to provide customers with personalized offers that resonate, incentives that motivate and service that delights — helping providers to retain and grow their business.

Kate Mitchell is CEO of Edge Intelligence, a distributed analytics platform.

If you’re a cable subscriber, you’ve been a participant in the slow but steady transformation of a complex and multifaceted industry. While most consumers may think that turning on the television to watch CNN or stream Netflix is a simple process, making these processes work seamlessly has been years in the making.

The television was once the central component of our home entertainment experience; now, it could be a wireless phone or tablet, laptop or other screen-based device. Consumers with 4G/LTE-connected devices can get HD-quality pictures without the need for WiFi, and the wireless providers have created packages to lure them to do exactly that. Competition has cost the cable industry a large portion of younger audiences, who now use Apple TV, Google Chromecast, Roku or their wireless devices to stream online services such as Hulu, Netflix and Amazon. These new options create business headaches for the cable companies, who must either coexist, cohabitate or partner with these content providers.

Related: Millennials More Likely to Stream, Less Likely to Avoid Ads

What does this mean for cable MSOs? It means a forced hand to innovate, and likely faster than they’ve been used to. Over the past five years, we have seen investments in fiber, expansion into wireless services, higher broadband speeds and a broader service portfolio. This is all happening in areas where many U.S. consumers only have a single cable provider or ISP they can subscribe to.

However, the competitive threats from outside have also been a driving factor in forcing these changes. Together, these influences have driven providers to look further than the service-centric portfolio, into operational efficiency, customer support, workforce management and in a generic sense, greater levels of automation — and all done without causing any disruption to services.

Related: Global OTT Video Viewing Doubles, Conviva Finds

The cable and broadband industry’s focus of all this innovation must been centered on one key outcome — customer retention. The reasoning is simple: Regardless of what may be a broadband monopoly in certain markets, consumers are still cutting the cord. Research firm eMarketer states that in 2017, a total of 22.2 million U.S. adults will have cut the cord on cable, satellite or telco TV services. That is up 33% from 16.7 million in 2016. Enterprise customers are a growing portion of the total base but remain a small fraction of the overall business today. These numbers paint a somewhat dire long-term picture for the industry. That makes the customer experience one of the most, if not the most critical factor that companies must embrace, and the cable industry must take note.

Investing in the Customer Experience
Cable providers should be investing in innovation around the customer experience in both tactical and strategic ways. While some of these innovations may not be customer-focused, all are business-focused, which in turn has a direct impact on customer satisfaction, retention and churn reduction. Following are some of the more effective methods that can have a positive impact on the customer relationship.

Intelligent Use of Net Promoter Scores For Both Organization and Employee: Investment in the right tools to gathering data at every step of the customer lifecycle is one of the best real-time methods to gain access to customer expectations and sentiment. Cable providers should be gathering NPS regarding home installs, follow-ups to calls or visits designed to speed problem resolutions, and all activities concerning issue resolution.

Greater Use of AI and Analytics For Network Performance Management: The use of a broad range of tools to measure network performance, node health, enhanced correlation across a broad range of end points and workforce guidance on next best action creates process efficiencies that help eliminate customer facing problems.

Increased Use of DevOps to Speed Innovation Cycles: DevOps is gaining ground across the entire communications industry as a way to accelerate product development, increase efficiency and become more responsive to changing customer and business needs. The DevOps methodology can offer the cable MSO major advantages as they take on digital transformation and address customer expectations. These include accelerated time-to-market for new services, increased flexibility and optimized cost-efficiency.

Virtualization, Starting With vCPE/vCCAP: The move to virtualization in cable is well underway. CableLabs, in a recent Open Networking assessment, said the combined technologies will lower OpEx and CapEx and increase revenues from new services provided to consumers. MSOs also have the opportunity to leverage the newfound flexibility of virtualizing service endpoints, pushing cost at the end-point level down, and moving functionality to the cloud. Going to a virtual CCAP architecture migrates the current headend from RF to digital, allowing the MSO to provide IP centric services (video and data) from the headend to the node. This in turn removes the need for a physical CCAP/CMTS, reducing costs, complexity and still allowing for easy integration into the cable provider’s existing OSS/BSS.

vCPE lets the MSO place a low cost “dumb box” in the home and have all services and operations fed directly from the cloud. This translates into reduce costs for hardware, more “plug and play” functionality, fewer truck rolls to the home to replace out-of-date CPE, and the ability to push more innovative services more quickly, keeping the customers engaged and loyal.

Winning the Retention Game
While each of these innovations is more or less invisible to most cable customers, the investment in each provides a tangible benefit to the customer journey and experience. The rising expectations of the customer will continue to drive innovation and created disruption across the IT landscape. Opportunities to serve the customer have never been more significant, and the biggest changes are yet to come. If innovation still has a predominant focus on customer outcome, then the cost of that innovation will ultimately be “priceless.” In today’s competitive market, that’s a cost worth investing in.

What should pay TV or wireless providers do when subscribers call to cancel? The obvious answer is to respond with an offer that will entice them to stay.

Retention offers are the most basic line of defense against churn, and communication service providers (CSPs) are becoming increasingly creative with such offers. Today, with advanced analytics technologies at their fingertips, service providers can even pre-empt cancellations by leveraging data to inform their retention strategies.

Retention offers cannot be one size fits all, and if providers want to truly stem churn rates and avoid giving money away to customers who don’t change their behavior, they must customize their responses. But with so many different levers to pull, how does one know which offers will be most effective with which customers? For many organizations, it is difficult to ensure the right callers get reached with the right offers and messaging, at the right times.

That’s why many leading service providers are taking a test vs. control approach to refine their outreach and offers to customers who are at risk of churning. By first testing various offers in subsets of the subscriber pool and comparing the response of those customers to responses from other, similar customers that did not receive a given offer, they can measure the offer’s direct, incremental impact. This method enables executives to establish a cause-and-effect relationship between new programs and any resulting changes, and to use these insights to better target high-risk subscribers and combat churn.

Even service providers who are already trialing various approaches are upping their game with sophisticated analytics software that enables them to truly test and better understand the impact of customer retention strategies.

For providers, rapidly testing programs to combat customer churn will be critical as they seek to refine personalized retention offers and responses based on caller profiles. Based on APT’s work with leading providers, key characteristics to consider when crafting custom offers include:

● Average revenue per user (ARPU);
● Home ownership;
● Tenure;
● Usage data, such as viewing hours, text message send and receive rates, data usage and more;
● Past customer interactions with the brand, including times they have issued complaints, requested service upgrades and more.

‘Right-Sizing’ Promotions
Using findings from test vs. control analysis, CSPs can take into account the characteristics of different customer segments to answer many key questions, such as: How do I offer this customer the right promotion without overinvesting in too large of a discount, or offering one that is too small to be enticing?

When trying to prevent customer churn, it can be easy to extend offers that are too generous — that is, an offer greater than what the customer would have been willing to accept. By testing different offers to learn which promotional threshold is best received by each customer segment, organizations can ensure they “right size” their promotions.

Another strategy that many providers turn to when customers call to cancel is offering free products or services, rather than a discount or promotion. These products or services can range from device giveaways like new phones to distinct offerings like home security services and free premium TV channels, and providers will need to determine which product and service giveaways will resonate with which customers.

Pre-empting Customer Churn
Some churn is inevitable due to outside factors, such as customers moving apartments, while churn due to factors such as expiring promotions is often preventable. Organizations have an opportunity to test many facets of an outbound offer, including the platform of communication, be it a call, text or email; its timing, in relation to the expiration of the customer’s contract; and the pairing of the promotion with add-on offers.

Testing also has the power to help pre-empt cancellation calls altogether by identifying which customers are most likely to respond positively to proactive outreach. For example, one effective way providers can reach customers likely to churn is through the common industry approach of trigger campaigns — outreach catalyzed by a customer hitting a certain threshold, such as calling three times to complain about service.

To inform elements of its retention strategy, a provider could test different versions of trigger campaigns — via different platforms, like mobile and direct mail, or with different offers — to identify which will lead to the highest retention rates among different customer segments.

As residential and wireless providers continue grappling with churn, many are experimenting with innovative new strategies. By taking a sophisticated test-vs.-control approach, CSPs can scientifically craft targeted retention strategies to maximize both customer satisfaction and long-term growth.

Jarred Brown is senior vice president at Arlington, Va.-based analytics software company Applied Predictive Technologies (APT).