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Putting it in plain English: Customer Experience Management matters

This is a guest post by Alex Hawker, Global Head of Sales, Business Solutions, Nokia Siemens Networks, summarising key points that he made at last week’s New Digital Economics Executive Brainstorm in London.

Everywhere I look in our industry, I see an amazing pace of change. It’s really a brand new world out there and in the past year, in particular, there is no doubt that quality has become king. We are getting that message from many different sources. One of them is our Nokia Siemens Networks 2010 Business Needs Study, which showed that ‘Improve customer experience’ is the top business goal of 82% of CSPs.

So providing quality is more important than ever for CSPs, because their customers see quality, or more specifically, poor quality and the resulting poor experience, as the driver behind the growing tendency to churn and decreasing levels of customer loyalty. According to another study we conducted, the 2010 Acquisition and Retention Study, 40% of high value customers, so 4 in 10, are likely to churn within a year. The result is a steady erosion of loyalty and satisfaction, which are going down at a rate of 2% year on year.

From the same study, we have seen another related change. How customers perceive quality, so how they feel about the quality of their services, is now the most important retention driver in advanced markets, taking a back set to price, for example. In markets with strong mobile broadband growth, the number of people who cite quality as the number one reason to stay with their CSP has doubled since 2009.

So, what does this mean for the CSP business? In short, there is every reason to invest in experience, at the very least to counter the growing cost of retaining customers, and especially high value customers. Our 2010 Operational Efficiency Benchmark, another regular study that we conduct, showed that the cost to retain a customer is actually growing faster than the cost to acquire one, and is now 18% higher on average per contract customer in mature markets. In absolute terms, the average handset subsidy to retain a contract customer is 163 EUR compared with a cost of 138 EUR to acquire them.

Our benchmark also highlighted the common practice of offering a smartphone to contract customers if they extend their contract for another period. One European CSP mentioned that this is how they retain 90% of their contract customers. That’s a pretty steep price to pay for loyalty.

So, is there an alternative? Well, I think there is one, and that is to create an excellent experience throughout each and every stage of the customer life cycle, differentiated for each customer or customer segment. This approach is both more sustainable and more profitable.

But it doesn’t happen by accident. It happens by design. The more deeply CSPs understand and predict their customers’ expectations, behaviour and value, the better the customer experience they can provide. But first, they need to be able to correlate data from the network, devices and customer perception with the impact on customer experience and their business. Using this insight they can take the right action to achieve the right outcome, all in an immediate and unbroken real-time feedback loop.

But is this happening today? Our Business Evolution Study shows that 66% of CSPs do not actively use the data available in their network. Identity and profile data, which are essential to gain customer insight, are not widely collected, and while the collection of network-related data is stronger, it is not necessarily used to generate actionable insight into customer behaviour.

So, there is an opportunity here for CSPs to take greater advantage of the data in their systems. Taking data from multiple sources, they can turn it into insight about the actual experience, the perceived experience, and the impact on loyalty. Then they can link this insight to concrete business actions based on real-time, automated, personalized and proactive business processes, which are the key to driving an excellent customer experience.

Which is the imperative for our industry - and what the CSPs need to address.

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