The short answer for most is not digital enough. From Alibaba to Uber, customers’ appreciation of simplicity, speed, convenience and the best prices has fueled the fastest-growing and most valuable businesses in history. Legacy aside, telcos are failing to meet many customers’ expectation because they misunderstand them.
This is reflected in the sector’s poor Net Promoter Scores (see graphic below).
Too often, communications service providers (CSPs) incur the highest customer care costs for the lowest spending customers. This is because telcos tend to position digital channels as a cheaper way of dealing with younger and low-spending customers, totally misjudging – and therefore failing to meet – the expectations of the high-end market.
Last year a survey by Capgemini of more than 5,700 consumers of mobile services across nine countries – Belgium, France, Germany, the Netherlands, Norway, Spain, Sweden, the UK and US – found that perceptions about CSPs using digital technologies to improve customer experience is spread remarkably evenly across the age groups (see below). Taken with the other findings, clearly they are not doing enough.
It’s also important to note that research from TM Forum’s new Digital Transformation Tracker found CSPs in North America are the most advanced with digital transformation with all respondents saying they are already deriving benefits. Western Europe was the second most, tied almost exactly with the Middle East. Hence Capgemini’s research looked at advanced markets.
According to the Capgemini survey, 62 percent of high- spenders – which it defined as spending more than $75 a month on mobile products and services – are willing to shift to a digital-only operator. That is, operators that exclusively use digital channels (online, apps, chat, etc.) to interact with consumers and offers competitive data plans.
Overall, 58 percent of respondents are willing to switch over to a digital-only operator, Capgemini found. Plus, 44 percent of respondents said they would be willing to switch to Google, Facebook or Apple, should they offer mobile services in future.
What’s in a number?
Respondents’ dissatisfaction with their communications providers is reflected in the fact that half the CSPs concerned have zero or negative NPS. “High-NPS telcos garnered an average revenue growth of 33 percent over 2012-14 whereas the low-NPS telcos suffered a revenue decline of -7 percent on average over the same period,” Capgemini’s report concludes.
“Our research shows that mobile operators enjoy a high NPS when consumers perceive that they use digital technologies – such as mobile apps, web and social media – for enhancing the customer experience.”
The positive correlation between NPS and consumers’ use of digital channels for making purchases and customer support are shown clearly in the graphic below. Nor does dissatisfaction with some types of CSPs appear to be higher, according to the new TM Forum Digital Transformation Tracker. During summer 2017, the Forum surveyed 185 executives from 93 unique CSPs operating in 64 countries and found no clear patterns for the types of CSPs that had good or bad NPS.
Operators in developed markets were no more likely to have a positive NPS than emerging market operators, and the same was true for fixed versus mobile operators and incumbents versus newer players. In other words, no type of CSP appears to be at a major advantage or disadvantage – digital channels can impact all kinds of providers’ score*.
Counting the cost
Venkat Krishnan, Competitive Strategy, Optus, published findings of his own analysis in August. He observes that although that many operators are “driving a mobile centric digital experience which is further enhanced by using historical and real-time data to make intelligent product recommendations and simplify customer help options,” some are not.
His analysis of indirect costs, such as marketing, personnel and corporate costs, suggests that low-cost operators like Amaysim and TPG Telecom in Australia, which offer fixed broadband (TPG is also planning to become that country’s fourth mobile operator), have a cost structure of 12 to 18 percent of their total sales.
This rises to mid to high 20s for ‘full customer service’ operators like Spark (formerly New Zealand Telecom, which in its 2017 results disclosed that only 10 percent of its customers use the online channel).
The operator with the lowest costs cited by Krishnan is Iliad, which among other things is parent company of Free in France. The company reported revenues grew 7.3 percent year-on-year to €2.46 billion in the first six months of 2017. Net profit shot up by 22 percent to €233 million, and Free Mobile has gained 18.7 percent of the French market since its launch in 2012, including a 0.5 percent rise in between April and June. Its success is down to innovative, simple products and low costs and prices.
Verizon’s Senior Vice President and Chief Information Officer, Shankar Arumugavelu, acknowledged, “We [telcos]are not being fast enough to capitalize on the digitization that we championed,” during his keynote at TM Forum Live! in May. He urged CSPs to simplify process and policies, digitize analog processes, and “to obsess over the customer experience.” Watch the video of that keynote below.
* This article is taken from the newly published Quick Insights report, Customer centricity: Creating the digital experience. How digital channels can improve customer centricity are explored further in Sections 3 and 4 of the report that is free for anyone to download.