Top execs must make analytics, privacy decisions

This article was authored by Jouko Ahvenainen, and was originally posted on telecomasia.net.

Carriers want to use data analytics to understand their customers better. Is it a good idea to track their browsing and use that for churn management and marketing? Or would it be a better idea to guarantee good privacy and even protected communications services for your customers? This is not a theoretical choice; this is something carriers must decide now.  And top management must understand the situation, not only leave it to experts.

Data analytics offer solutions, for example, scoring customers based on demographics and calling behavior and predicting their churn propensity. There are basically three models for how to do this: 1) anonymize all customer data, make analysis, and only link the final propensity score to a customer, 2) have triggers, like certain behavior, to warn about higher churn likelihood, and 3) analyze customers especially regarding certain activities that typically indicate higher churn likelihood.

The data has typically included a customer’s age, gender, address, average monthly bill, services used, roaming, international calls etc. In some cases social network information (who you typically call or text) has also been used. Then, for example, when usage changes radically, people in social network churn, or a monthly bill goes up or down, it makes sense to contact the customer in question. Most of these things have been done using anonymized data. Often this has also involved quite heavy computing, so it hasn’t even been possible to track things in real time. Rather operators have had to calculate scores from historical data or use simple triggers like the monthly bill.

Now some analytics vendors are willing to take one further step. They offer solutions to, for example, track a customer’s web browsing. For example, if your customer browses your competitor’s web site or starts to use VoIP services, you can conclude that the customer has higher churn likelihood or will use your services less. This could be done from anonymized data too, and you would only get a churn score, without knowing anything about their browsing.

Even more worrying, is that some vendors seem to have technology that enables tracking or triggers based on real time actions of the customer, and the vendors offer this for churn management and marketing. For example, you can list web sites that can give a warning or increase a score, i.e. you can immediately see if your customer is in your competitor’s site.

So, this is much like technology used by security agencies. But now it is sold to customer analytics for customer retention and marketing activities. Is it right to track web browsing in order to make better marketing and churn management? And what if data miners want to track and score some other browsing habits than competitor’s sites? You could probably easily predict, for example, a customer’s hobbies, work, religious and sexual orientation, as well as income level. Would it also be ok for marketing purposes? At the same time many companies now talk about better privacy, secured data and communications as a business opportunity, when people have realized privacy threats.

This is important now that these decisions are not only left to the data mining, marketing and sales departments. Top management must also understand and decide the direction in which a carrier wants to go. Most probably more and more technology that has been created for security agencies is coming to commercial use too. A carrier can be tempted to use this technology and it is easy to take the first small step into use, for example, a little bit of browsing tracking. And then more tracking and analysis can be added. These are also issues regulators should give some up to date guidelines on.

I believe customers expect transparency and good privacy. They must be able to trust their carriers. There are many other areas to make customers happier and keep them (read The best churn-management solution). Carriers should not get caught in the same trap security agencies already did. Carriers can also increase loyalty by telling what they really do with data and offer better privacy and secured tools for customers. If the management just closes its eyes and let things to happen, they will be leaked sooner or later, and damages can be priceless.

Jouko Ahvenainen is serial-entrepreneur and co-founder of Grow VC Group (growvc.com), a new funding solution. In the 1990s Jouko worked for Nokia in Europe and Asia, and then lead the 3G practice at Capgemini globally. The last 12 years Jouko has been an entrepreneur and investor.

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