• December 3, 2015

The Telco Challenge I: Eroding Loyalties, Demanding Consumers

The telecommunications (telco) market is notoriously competitive and saturated in the developed economies. Providers encumbered with flat per customer revenues and increasing demand for data are compelled to continuously offer better services at lower rates just to keep existing customers let alone win new ones.

Smartphones and tablets further disrupt the industry by increasing pressure on telcos to provide services that will satisfy consumers hungry for new experiences afforded by larger screens and an increasing array of sensors that enable these devices to interact with their environment.

A current example of this trend is Apple’s new iPhone 6 and 6 Plus, both of which incorporate a barometer that is capable of determining when its owner has changed floors in a building.

Earlier this year, a study by analyst firm Ovum revealed that a third (38 percent) of all consumers cite poor quality customer care as the important reason for changing their mobile service provider, and over half (53 percent) state it as one of the key reasons.

It’s one of the key reasons that many telcos are adopting the Net Promoter Score (NPS) that measures the difference between the number of customer (current and potential) promoters versus the number of detractors as the central Key Performance Indicators (KPIs) for running their organizations from the boardroom to the retail store.

It’s also a key driver for the adoption of analytics within Telcos to better understand what their customers are doing — better understanding a customer increases the opportunities to upsell them on new services in addition to just keeping them satisfied with their current ones.

These push and pull factors for customers and providers constitute a finely balanced yet dynamic minefield for governing the telco industry. A company could stand to potentially gain millions or lose its brand entirely in a quarter on the basis of exceptional services or major network outage — all this in spite of saturated markets and purely because of decreasing customer loyalties and increasing expectations.

The New Style of IT

Dr. Roger Kermode, Chief Technologist at Hewlett Packard Enterprise, knows just how much the squeeze has been felt over the past few years. He works closely with telcos, media and entertainment clients, and has spent a lot of time looking at where the industry’s going within the next 3 to 5 years. In his role as a thought leader and an advisor, Dr. Kermode has observed that the most successful transition is made by telcos that adopt the “New Style of IT”. According to Dr. Kermode, this is about “giving people the means to move faster and is driven by the integration of four underlying core technologies – cloud, mobility, and security.”

“Engagement becomes important beyond just conducting a transaction, so you’ve got to be able to connect your mobile to the resources that make it work every time. That’s where cloud comes into play. And you’ll be using a lot of data. So enterprises now need to analyze what’s going on with who is doing what, where, and dare I say it with whom, and to then use the insights to ensure that the overall experience is awesome. This is what delights people and turns them into advocates.”

“The new style of IT is shifting what’s happening within the industry as a result of automation and falling costs. Everything’s now connected and the devices people use are getting cheaper and cheaper so that they’ve now become ubiquitous. Customers have smarter phones, they’ve got tablets and they’re using them for apps thereby creating expectations which their employers and the enterprises they transact with must meet.”
—Dr. Roger Kermode, Chief Technologist and Strategist, Communications, Media & Entertainment (South Pacific), Hewlett Packard Enterprise

The Challenge: Understanding the Customer

“The telcos have a particularly interesting set of challenges that they have to deal with,” Dr. Kermode comments. “The principal one is that because everybody’s got these mobile devices, they are consuming more and more data. And this requires more and more upgrades — constant upgrades in fact — to the telcos’ networks.”

The challenge, of course, is that consumers don’t want to pay as much or more for the data. They want to continue to pay roughly the same each month and expect to get more and more data.

“So telcos are in a bit of a difficult position. Their revenues aren’t increasing that much, it’s extremely competitive and they’ve got all these extra costs hitting their books on an unending basis.”

To illustrate just how competitive and saturated the telco market is, Dr. Kermode cites the Australian context, where 75% of the population owns a smartphone (in excess of 120 phones per 100 people) behind Hong Kong (87%), Singapore (87%) and Malaysia (80%) and only slightly ahead of China (71%).*

“So basically, if you’re over 12 and you can afford to, you’ve got at least one phone. It’s such a highly competitive market, and it really does come down to little differences in brand expectations and brand satisfaction.” In order to maintain their competitive edge, telcos need to retain their existing
customers by ensuring customer satisfaction. This means understanding why existing customers are dissatisfied, or if they might switch to another service.

“You need to be able to say, ‘This person’s observed behavior means that they are likely to upsell to an improved or new offering’, or ‘They’re likely to leave.’ This is becoming a core competence for telcos.”

Eroding Loyalties

Dr. Kermode explains that to get better as a telco, a company needs to have a deep look at why people are leaving their organization and signing up with a competitor.

“Is it because they’ve had three dropped calls in a row? Or they had a bad experience when they rang up, or had to wait a long time to speak with someone to get the issue fixed?

And so, you’re seeing increasing investment from telcos around understanding whether people are happy or whether they’re going to move on. Some of these reasons are quite subtle — it’s not always obvious. You’ve got to look into the analytics; not just into whether calls are being dropped, but also at people’s commentary on social media, branding, and understanding how public data matches the private data that’s previously been collected. Getting the customer experience right is essential.” According to Dr. Kermode, most regional telcos are now relying on a number of metrics, including the Net Promoter Score, to assess how they fare in engaging existing and potential customers.

“It’s such a competitive world, so this is really about maximizing the number of people saying nice things about you and minimizing the number of people saying nasty things about you or are dissatisfied with you.”
—Dr. Roger Kermode, Chief Technologist and Strategist, Communications, Media & Entertainment (South Pacific), Hewlett Packard Enterprise

“The smartphone or the tablet is becoming the most intimate device that we have. When it works, everything’s fine, but when something goes wrong, it has a major impact. You can’t connect to your loved ones, you can’t communicate with your colleagues at work and you cannot surf the net for entertainment! So little things that go wrong in terms of delays or broken connections do get magnified significantly.”