Abstract
Telecom service providers have always followed a growth trajectory over the past decade by increasing the customer base and adding sizable numbers to their annual revenue. They have kept pace with the competitors and have played the game with amazing success in the past. But in recent times, they are facing a huge challenge of adapting to mature and highly penetrated markets, coupled with the effect of global recession. Therefore, a paradigm shift is very necessary to adapt their business models to the current situation and the need of the moment is customer experience management to achieve a higher retention rate.
Challenge in the modern telecommunications industry: customer retention
In today’s telecommunications industry, which has reached a high level of penetration, acquiring a customer is becoming more and more expensive. Industry analysis states that only 25% of acquired customers remain with the company after one year and on average only 20-30% of the entire customer base are profitable/revenue generating customers. This digs a deep hole in the balance sheet of telecom service providers. Due to the turmoil effect of the customers, a large imbalance is created in the gross additions of the customers and the net addition.
Way Forward: Road to Customer Retention – Customer Experience Management
Therefore, the main challenge for telecom operators around the world is managing customer churn. It affects the company’s profitability if a customer leaves before the company can recoup the investment it made to acquire the customer. Therefore, it is very important to identify profitable customers and retain them.
Retaining profitable customers includes 2 steps:
1. Identify revenue-generating customers from the entire customer base
2. Manage customer experience and customer value for revenue-generating customers
Identification of customers who earn income
Telecom service providers need to define their business logic to identify revenue-generating customers, for example: customers with usage above ARPU are classified as high-value customers or, in the case of prepaid, customers who top up more than INR 250 per month (in the Indian scenario) are considered revenue. Depending on the business rules, the entire customer base should be segmented into revenue-generating customers and non-revenue-generating customers. Customer ARPU management Average revenue per customer. Managing customer data on a scale of 40 to 50 million is challenging. This can be achieved with the help of various business analytics tools (for example: SAS, SPSS, Teradata, etc.).
Customer Experience Management
Following the identification of valuable/revenue-generating customers, managing those identified customer groups is paramount.
Focus on customers instead of products
During the last few years, telecommunications service providers have focused on the introduction of new products. They have originated new products/services and then sought to find or create a market for them. But increasing competition among existing service providers and lowering the barrier of entry for new players has resulted in the growth of predatory activities in the telecom industry. In addition, the cost of acquiring new customers has increased considerably. Therefore, in modern times, one sees a gradual shift in focus from new product introduction to acquiring new customers to customer experience management. Today’s telco needs to focus on retaining valuable existing customers and aiming for a larger share of each customer’s portfolio by creating more value and a better customer experience.
For example: in the UK, O2 has aligned its functional silos to gain perspective from its existing customers to make product decisions and design promotional offers. They have focused on retention by giving equal weight to renewals and acquisitions. With this, the company has reduced its churn figure to half of the current one.
Nintendo has established an online community to capture customer feedback and offers incentives in exchange for customer information. With this, Nintendo has obtained valuable information about the needs and preferences of the market.
Customer-led personalization model
There is an underlying assumption that service providers will dictate the future of telecommunication products and services. But with the increasing bargaining power of customers, there is a paradigm shift and service providers must customize their model based on individual customer preferences. Now the company will follow the lead of customers in designing and promoting services aimed at meeting specific customer needs. Under this circumstance, service providers need to identify the unique needs of individual customers and then try to develop services that meet those multifaceted needs.
With this model, mass marketing will give way to personalized market research, and the survival of service providers will depend on the company’s ability to meet customer demand on an ongoing basis. In other words, customers will dictate the terms of the service they intend to receive.
Development of multiple channels.
Service providers need to develop multiple sales and support channels to improve the customer experience. Increasing the footprint by adding retail outlets is one of the options that telecom service providers have practiced for a long time. Traditional channels, such as call centers, had also been targeted. With increased competition and the economic slowdown, carriers are looking for cost-effective ways to serve their customers while keeping quality of service intact. Eventually, service providers would like to move most of their online sales and services over the web for better economics. In addition to achieving a cost-effective solution by moving to web channels, operators can empower customers to perform various activities at a much cheaper price than retail channels.
Through web channels, a client can perform a series of activities such as:
– View invoices and pay online
– Online registration of a complaint for support
– Alteration of the price plan and subscriptions.
– Visualization of the product catalog and purchase of products/services online
In addition to the activities mentioned above, operators may offer promotional services and cross-selling of other products through the web. Operators can earn additional revenue by managing tickers on their websites and advertisements.
To provide customers with a consistent and connected experience, operators must integrate all existing channels. When a customer walks into a retail outlet, the customer service representative must be able to recall their previous interactions across all channels to best serve them.
The operator needs to analyze/monitor how customers use these channels. Depending on the available data on the use of these channels by customers, operators can identify the preferences of individual customers and shape their offer accordingly. In this way, operators can develop the customer experience by empowering them to perform activities and therefore increase the value of the service for them.
Conclusion
There are several ways to initiate a customer-centric, value-driven transformation. Operations can start with high visibility initiatives like balancing spending on customer acquisition and retention with a greater emphasis on improving the overall customer experience and customer empowerment. This transformation is the key for today’s telecommunications service providers to stay in the race and excel in the future. Hence the need for Telcos to reorient their business and marketing models to manage the customer experience in a better and more efficient way.
