Cogeco 2003 Annual Report Download - page 9

Customer retention and increased
penetration of higher margin digital
and HSI services
Minimizing customer churn(1) reduces installation and
acquisition costs to win back customers. Our market research
reveals that customers are overwhelmed by the product offerings
available in the market place and that comparison between
competing services is difficult. Customers change service
providers primarily based on their value perceptions of competing
services. Therefore, efforts planned for fiscal 2004 to improve
our brand credentials include: more targeted and simplified
advertising campaigns, an enhanced customer retention strategy,
a heightened focus on superior execution at all customer contact
points and a continued investment in consumer research and
segmentation activities.
Improving our brand credentials should lead to greater
customer retention and increased penetration of digital and
HSI services. Increasing average revenue per customer results
in greater profitability since a portion of operating costs per
customer is fixed. To further maximize this profitability, Cogeco
Cable focuses on selling higher margin services. The strategy
for basic cable services is to defend the customer base and
grow penetration opportunistically. The plan of action for digital
services is to grow the digital base through customer acquisitions
and migration from the basic customer base. As well, we focus
on increasing the value per digital customer by upselling services
such as VOD. The strategy for HSI is to focus on the more
profitable HSI Standard and Pro segments of the market.
Currently, HSI Lite is only offered on a retention basis.
New and value added bundles
In line with its objective of offering customers more
choices at affordable prices, Cogeco Cable is in the process of
launching new services including:
• Smaller and more affordable digital theme packs in Québec
to better respond to the French language market demand.
• Increased flexibility in combining digital pick packs with
theme packs in Ontario. This change provides increased
choice as the customer selects his preferred channels
when ordering a pick pack.
• Additional enhancements to residential and commercial
HSI services.
• Digital terminals with PVR functionality and HDTV
tuning capability. The transmission of HDTV programming
is also planned for the Fall.
Retail rate increases
While broadcasting distribution and HSI services remain
fiercely competitive, management anticipates that the trend
towards rising and more consistent retail pricing will continue
in years to come as distribution undertakings are usually focusing
on fully recovering costs and improving balance sheets as opposed
to buying market share. Management believes this will provide
further opportunities for rate increases while keeping service
pricing competitive and reasonably affordable to customers.
Greater productivity through
continued process improvement
and cost control measures
Cogeco Cable intends to pursue process improvement
initiatives and tight expense control. We are continuously striving
to negotiate new sub-contractor, network affiliation, Internet
Protocol (IP) transport and other supplier agreements at lower
prices. We are constantly reviewing our processes to deliver a
higher quality service while achieving cost savings. The sections
“Operating Costs and Management Fees” and “Fiscal 2004
Financial Guidelines” discuss key initiatives implemented
by Cogeco Cable.
Targeted reductions in capital and
operating expenditures based on market
and consumer segment priorities
A capital committee, which includes the President and
CEO as well as certain Vice-Presidents, was established to review
investment strategy and capital allocation. Projects aligned with
our strategy and providing acceptable return on investment are
generally prioritized. Return on investment is assessed giving
consideration to expected incremental costs and revenue as well
as cost savings. Those analyses are completed on a case by
case basis and per system where applicable.
External growth through
attractively priced acquisitions
Cogeco Cable continues to seek out attractively priced
acquisitions of cable systems adjacent to its current geographical
coverage.
Successful implementation of the above strategic
imperatives will lead to improved profitability and reduced
Indebtedness as measured by the following financial metrics.
These metrics are discussed in more detail in the “Fiscal 2004
Financial Guidelines” section:
Cogeco Cable Inc. 2003 7
(1) Customer churn is defined as basic service disconnects during a period divided
by basic service customers at the beginning of the period.