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What Stops Marketers Creating Solutions Customers Want?

As many of you know, we are in the middle of an ambitious research project looking to tap into a global panel of experts to forecast revenue scenarios in the Telco industry for the next 5-10 years. As well as gaze into the future and set the Telco industry to rights, we also felt it would be beneficial to consider how service providers and vendors can improve their propositions and products NOW. There is a lot of talk about ‘innovation’ in the industry at the moment, but what needs to be done to turn the words into effective action?

We have decided to undertake another (much smaller) piece of analysis to test our hypothesis about what is inhibiting innovation in marketing and product development departments today and what needs to be done to improve this situation. In this post we outline our hypothesis. At the Digital Product Innovation Summit in October (part of the Telco 2.0 event), we will feedback the results of our interviews with senior marketing executives from across the service provider and vendor community, presenting delegates with an ‘insider’s view’ of the current drivers and barriers to proposition/product innovation and a set of recommended actions to improve this.

Our Hypothesis:

You can learn a huge amount about consumer behaviour and attitude through observation and discussion - I have just experienced this first-hand looking at the french attitude to quality of life/customer service etc. on holiday in the Dordogne. Wandering around French towns and villages reminded me of the long-standing misunderstandings that exist between, for example, the English and the French.

There’s something Vichy about the French. Ivor Novello

In France it is rude to let a conversation drop; in England it is rash to keep it up. No one there will blame you for silence. When you have not opened your mouth for three years, they will think: “This Frenchman is a nice quiet fellow.” Andre Maurois

The UK and France may only be separated by 12 miles of water and be ever more closely bound together by the ties of the EU, but there are fundamental differences between the way things are done between the two countries. Some obvious examples:

  • Brits seem to buy everything from supermarkets and retail chains; the French prefer specialists, hence the survival of butchers, bakers and markets throughout France.
  • Britain has caught the ‘customer service bug’ from the US, France has not. Everything is open on Sunday in the UK and shut in France (including petrol stations). Shops close for 1-2 hours at lunch in France even in large towns - in the UK the mantra is 24×7.
  • The French embrace children, the British tolerate them. In busy French restaurants, waiters and waitresses went out of their way to have a discussion with my children (whose French is tres ropey), in the UK they can’t get away from them fast enough.

I am not making judgements here, just outlining what I experienced in two short weeks on holiday.

The point is (as every marketer knows): Customers really are different - by region, by market, by age, by gender…by segment. Different attitudes, different needs, different behaviour. And you can only build propositions that they want by REALLY, REALLY understanding them.

The Telco Industry is Poor at Learning through Customer Interaction

Currently, operators largely seek to learn about customers and their needs via quantitative research. Market research budgets for quant research are huge because it is widely used to serve many purposes: to understand customer needs; to create customer segments, to validate attitudes to products/services, to gauge customer satisfaction. Qualitative research and customer focus groups, by contrast, are usually employed sparingly to test specific product features or customer usability.

Mainstream quantitative research is relatively poor at identifying underlying segment needs and opportunities to meet those needs in new ways. It is too blunt to really probe customer attitudes and behaviour in detail. It cannot meaningfully explore responses to existing products and propositions, gaps in the current service portfolio, and what options exist to develop innovative new propositions.

Time and time again, this type of research fails to drive innovation because it asks the wrong questions and tends to validate the current business model or product offering.

If I had asked people what they wanted, they would have said faster horses. Henry Ford

Only superficial interaction is possible with customers through quant research, leading to spurious conclusions (such as customers wanting faster horses rather than cars or cheaper fixed voice rather than a phone that costs more but is personalised and they can carry around with them). Henry Ford was wrong. If he had really probed horse-riders then he would have learned that they had a whole series of needs: speed, reliability, security, storage/carrying capacity for people and luggage etc, and that his motorcar ‘concept’ fulfilled those needs better than a horse (even a faster one).

There are essentially 2 sources of research for input to the innovation process:

  • Customer behaviour data (CDRs etc. for telcos) where empirical evidence can be used to induce attitude and need which in turn gives input for enhanced or new solutions.
  • In-depth customer focus groups where customers can be engaged in discussion as well as observed testing/using products and services (the formalised approach to what I did in France)

I know from (bitter) experience working and consulting at a host of operators and vendors that neither of these are done well in the Telco industry:

  • CRM is at a very early stage and extracting customer data from systems is hugely laborious (marketers always complain that they are flying blind and need to understand the impact of product, pricing, place (channel) and promotion activities that they have instigated).
  • Most proposition and product managers do not talk directly to customers from one year to the next - research is an arm’s length process which is handed over (in the form of a written brief) to the market research department who, in turn, farm it out to an agency.

This is one critical reason why innovation is limited amongst operators (and their suppliers)- management is just too distant from customers compared with innovative start-ups that seek to create solutions for themselves/people like them and therefore are ‘living like their customers’.

A couple of years ago I created a global SME proposition for one operator on the back of a handful of discussions with friends who ran small companies. The proposition required a significant amount of investment from the company, but a few calls from me with potential customers was the only demand-side validation that was required of me. And this was substantially more customer research than any of my peers undertook for their segments! Another example of this insulation from real customers and customer issues is that nobody at a Telco or vendor ever sees a mobile phone bill (it’s paid for them) - they don’t fully appreciate the issue of roaming or data usage ‘sticker-shock’.

As our Voice & Messaging survey indicated, managers are not confident that they really understand what customers want in the core Telco product (voice).


(We explore this issue, and solutions to it, at length in our Telco 2.0 Strategy Report: Voice & Messaging 2.0, Telephony & Messaging meet Skype and Yahoo! which is being published in September and is full of case studies and examples of innnovative start-ups.)

Market Research and Product/Proposition Managers (in Telcos and agencies) are relatively poor at synthesising feedback from customers and responding with innovative solutions. Part of the reason is a lack of expertise - the process requires a strong understanding of technological and commercial issues and of customer needs as well as a good dollop of analytical know-how and creativity. Many marketers either come from the technical department of operators or from the marketing departments of FMCG companies: neither background tends to yield the required blend of skills.

But, perhaps more importantly, managers are not incentivised to create solutions, they are increasingly measured on their ability to either execute on existing propositions (Operational Marketing) or analyse information about past performance (supposedly Strategic Marketing): What does this mean? What went wrong? How can we increase revenue and margin on this product? What promotion should we try?

Thus, strategic marketing in the Telco industry has become too much of an accountancy-type exercise where marketers look backwards over previous performance (and justify their past decisions), rather than looking to create solutions for the future. When proposition and product concepts are created, too often they have not been tested in the crucible of customer interactions. This results in sub-optimal solutions and business cases that don’t pan out.

Make Management Responsible for Customer-Led Innovation
The STL Partners ‘Telco 2.0’ view is that CMOs and Marketing Directors need to ensure that EVERY proposition and product manager develops at least 1 product or service innovation a quarter that has been developed as a result of DEMONSTRABLE direct customer observation and interaction.

Every innovation must be created, or at least pre-screened for demand, with at least 1 focus group and tested and improved through direct customer interaction - this simply does not happen at present. Force managers out into the field - make them understand the customers in their segment or product area.

We recently came up with a proposition for a start-up client in a developing market (top secret). The proposition is radically new, highly disruptive, and based mainly on several years of deep thinking and the creative spark of our Chief Analyst Martin Geddes. I am delighted that the start-up is choosing to stress-test and refine the proposition in the field by adopting a software/internet beta launch approach in a particular region prior to a national (and ultimately multi-national) launch. This is taking customer engagement into the realms of the way Google or Yahoo! does things, and I am convinced that this will mean a.) that our inital concept is altered (in some places radically) and (b) substantially improve the chances of success.

If operators (and vendors) adopted this approach they would have a greater chance of creating a steady stream of validated incremental improvements for customers across the telco service portfolio ranging from low investment/low return ‘quick-wins’ through to bigger projects involving substantial investment and partnership (one of which just might be the next SMS/iTunes/Google-size winner). Marketing departments would be forced to focus on looking forward again on IMPROVING existing products and services and creating new ones. The new culture of innovation and ‘continual beta’ would be relatively simple to implement and, crucially, could easily be underpinned by the HR performance process (customer interactions/innovations per quarter etc.)

We look forward to discussing these views with senior executives over the next couple of months and feeding the results back to delegates at the Telco 2.0 Executive Brainstorm on 16-18 October.

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funny i was talking with someone at lunch about this very topic. when was the last time a senior executive at a telco actually went a bought a mobile phone at a real shop--online or otherwise? when was the last time an executive called the regular customer service line and not the VIP line? I rememember many years ago when i was consulting in the automotive world for a major manufacturer, not one single member of the management team (from middle management upwards) had every bought a car in a car dealership not had they ever had to have their car serviced in a traditional dealer environment? not much scope for innovation if you don't know what your customers are experiencing in real life!!

This post topic is exactly why I enjoy reading your blog -- you dare to tackle the key issues for BSPs that aren't in vogue.

Here's my story -- in support of your hypothesis. -- I worked on a project for SBC (now AT&T) where quantitative data hadn't uncovered why DSL subscribers were only marginally satisfied with their online customer care portal experience.

I came at this issue from a different perspective -- I wrote a dozen complex use case scenarios for 'digital home' support needs, and then wrote detailed consumer personas in three categories (attributes of novice, intermediate and expert users).

We then studied a cross-section of customers actually using the support portal (ethnographic research) and were able to immediately determine that conventional wisdom of designing a web UI for an "average customer" was totally invalid -- since the spread between skills/knowledge of the the least and most technical savvy customers was a vast spectrum of possibilities.

Using the same essential FAQs, Tutorials and online help files as a foundation, we defined the value-added benefit for mapping a custom UX designed for each user persona skill-set (novice was obviously very different from the expert UX).

While the outcome of our research and associated UI design suggestions was hardly what I would call profound insight, it was the first time that the customer care portal development team was armed with actionable data that demonstrated how offering a superior (customized/segmented) support experience was a strategic imperative for this telco's need to differentiate their service offering.

BTW, our research team included a variety of subject matter experts -- as the project manager, I was the only person who really needed to be multifaceted (so that I could translate between the various players, and then document our resulting recommendations for the exec summary and final report).

I would love to hear from anyone out there that has case studies they are willing to share on how they used deeper customer insight to drive innovation in product or porcess design within the telco industry.

I am currently selling this idea into my management, not that it should really need selling.

Excellent post!

I have just a bit different viewpoint on the value of focus group studies. They tend to "validate" the underlying assumptions. So for new services, which are based on the proposition/product managers insight into real customer needs, focus studies can be valuable as external validation to get internal approvals. But if "garbage" goes in, the focus group study likely will return "garbage" out.

A key tool for proposition/prodcut managers to get the insight to customer needs is to put themselves into their customer shoes. This requires those people to be part of the target segment, i.e. a 50 year old experienced manager is unlikely to create a winning proposition for teenagers.
(Interesting how many successful Internet start-ups are run by CEOs in their 20s and create services that initially fly with young people. YouTube, Facebook etc.)

For real market validation, the Internet/"beta" model has proven itself sufficiently well.

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