Charter to Again Court Riskier Customers
Charter said it will again court customers most prone to cancelling service and not paying bills, and put more money back into direct-response marketing, after abandoning both strategies for several quarters led to worse-than-expected subscriber results. It will approach those higher-credit-risk customers with a less-expensive and simpler version of its product bundle designed to get them to remain customers and not run up bills they can’t pay, CEO Mike Lovett said on its Q2 earnings teleconference. “The goal is really to drive connects from the high-credit-risk segments” of Charter’s addressable market, he said.
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Lovett disclosed few details of the new product for competitive reasons, he said. The packages will be designed to keep customers from accessing high-cost products until they can prove they can be trusted. In the past, about 70 percent of homes Charter identified as high credit-risk were no longer subscribers within 9 months, Lovett said. A high portion of those had their service cancelled for lack of payment, he said. With Charter Starter, “we want to make sure it limits the ability to tap into higher cost elements until they establish a credit-worthy relationship with us,” Lovett said. “We just want to make sure we're able to monitor that segment and move them into a credit-worthy status and upgrade them into other products over time."
As cable operators’ suite of products has expanded to include DVR rentals, home phone and cable modem service, so has the cost of equipment each new customer gets upon activating service, said David Howe, president of CustomerWise. The risk-management company works with cable operators and is part owned by Massillon Cable. “For a long time it was just the coax that was coming into the house, and the risk exposure was minimal,” Howe said. “Today if the same customer takes a DVR and doesn’t pay, you're looking at potentially more than $1,000 in actual losses,” including the marketing costs of acquiring a new customer, he said. So operators are looking at ways to reduce and manage that risk, he said. “That’s why you're seeing more of a move to this kind of analytics."
Charter will also change the way it spends its marketing budget, Lovett said. The cable operator moved away from direct-response marketing for a few quarters to promote its brand, he said. “You don’t see that benefit for several quarters.” Now Charter plans to put more money again into encouraging potential customers to call and sign up for service, he said.
The company is looking at less traditional ways to sell services. It plans to expand a partnership it has with Dish Network to sell broadband and phone service to homes that buy the DBS company’s satellite video service, Lovett said. The two companies have been running pilot programs and “both parties have been pleased with the results and we're expanding that relationship,” he said.
Charter lost 79,900 video subscribers during the quarter, about 11 percent more than it did a year earlier. It added 18,500 broadband customers, 16 percent less than last year, and 6,600 phone customers, 81 percent less than a year earlier. It attributed part of the drop in net customer additions, especially in phone, to its move away from direct marketing. Total sales gained 2.2 percent from a year earlier to $1.8 billion. The net loss increased 30 percent to $107 million on higher interest expenses. Shares fell 4.3 percent Tuesday.