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Cost of customer churn due to IT service failures stretches into £ millions reveals new research

London - 8th August 2005 - The latest research from service management company Tertio SMS, shows that the cost of customer churn due to technology-based service failures, such as faulty cash machines and interrupted internet access, can be as high as 6%, which corresponds to £8 million for every one million customers.

The poll, run by ICM on behalf of Tertio SMS, shows that 5% of the UK adult population would be "certain" and 28% "likely" to change service providers, such as banks, telephone and mobile phone companies or internet providers, as a direct result of technology-based service failure if problems were experienced on a regular basis. Earlier research published by Tertio SMS in June revealed that 23% of the population are already experiencing technology problems at least once a week. These combined findings highlight the real cost of poor IT based customer service.

Alan Greenberg, CEO of Tertio SMS explains: "The figures are really alarming. A company with 5 million customers could be losing up to £40 million in customer churn due to technology-based failures (even at the low end it's about £1 million per one million customers).

"These are big numbers! They're also consistent with published overall churn figures of around 20% for typical service companies. Service providers are missing a trick. Reducing customer losses due to technology-based failures can add very significantly to the bottom-line. The research also shows that the people most likely to change providers are in the AB socio-demographic grouping and have mortgages, in other words, exactly the sort of high value customers that banks, telcos and ISPs do NOT want to lose."

Greenberg continues: "Companies need to ask themselves if they understand service delivery from a customer perspective. They need to look at what they can do to improve customer service and provide service assurance. Essentially they need to start looking at how to deliver service excellence."

-ends-


Methodology

Cost of customer churn

Tertio research* identified that:

5% of the UK population say they would be "certain to change"...
(An additional) 9% of the UK population say they would be "very likely to change"...
(An additional) 14% of the UK population say they would be "likely to change"...
...their bank, telephone/mobile phone company or ISP due to the service they provide being unavailable or interrupted on a regular basis as a result of computer/technology failure.

23% of the UK population cannot use a service due to computer/technology failure on a regular basis (at least once a week)

Therefore, potential customers lost due to computer/technology failures =

Total number of customers x percentage experiencing regular problems (D) x percentage churn (A+B+C)

For every 1,000,000 customers, numbers lost ranges from =

1,000,000 x 5% x 23% = 11,500

to

1,000,000 x 28% x 23% = 64,400

So, for every 1,000,000 customers the total cost of churn due to technology-based failures ranges from approximately £1 million to £8 million

(Based on the estimated cost of winning one new customer at between £60 and £120)


* Tertio commissioned ICM Research to interview a random sample of 1014 adults aged 18+ by telephone between 15-17 July 2005. Interviews were conducted across the country and the results have been weighted to the profile of all adults. ICM is a member of the British Polling Council and abides by its rules.

Further information at www.icmresearch.co.uk


About Tertio SMS

Tertio Service Management Solutions (SMS) has been providing solutions to blue chip companies for over a decade, empowering organisations to deliver customer service excellence. It provides a comprehensive range of innovative Business Service Management, Service Management, and Network and Systems Management solutions, combining industry leading software applications with its specialist consultancy and support.

Tertio SMS de-merged from Tertio in 2002 and is headquartered in London. A financially strong company with a proven track record, and seven consecutive profitable quarters, Tertio SMS has 40 employees, serving customers across Europe including T-Mobile, The Post Office, Sainsbury's and Dixons.


For further information

Rebecca Dunstan/ Kate Hamilton at Portfolio Communications

rebecca.dunstan@portfoliocomms.com / kate.hamilton@portfoliocomms.com

020 7240 6959