Toward a customer-centric organization
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Industry convergence is posing threats to telecom operators looking to hold on to
customers. Offering a consistently positive experience with quality service has become
increasingly difficult. Success rests heavily on the right systems, processes and
governance, and continuous improvement. A superior customer experience is the
primary factor driving loyalty.
Operators’ challenges
Today the telecommunications industry is undergoing a structural change amidst the
era of convergence. Telecom operators are changing the way they define and sell
services, and under enormous pressure from increasing internal and external threats,
they are fighting to maintain financial and operational growth. Though they have been
focusing on incorporating a wide range of services to attract new consumers and retain
existing customers, they are not paying enough attention to customer experience, which
is pivotal to customer ownership.
Losing customer ownership
The influx of adjacent market players such as Internet companies, technology
companies and media companies continue to extend their disruptive service
propositions and change user behavior in areas like social networking. With a more
premium brand value, these players are stealing away customer relationships from
telecom operators. Ernst & Young’s 2010 Business Risks studies in
telecommunications revealed that “losing ownership of the client” was ranked as the
top risk in the telecommunications industry for the last two years.
QoS deterioration alongside data growth
Data volumes are growing explosively, stimulated by smartphones and attractive
flat-rate data services. With social media and other new services gaining traction, such
as cloud computing and machine-to-machine (M2M) communication, the resulting
deluge of data traffic will pose a challenge and risk to operators in offering a
compelling customer experience unless they manage network traffic properly.
Surging data traffic is increasing both OPEX and CAPEX. While pressured to exercise
lean management, operators have to approach this management mode wisely, as cutting
costs and resources at the expense of service quality can backfire and result in reduced
customer loyalty.
Managing technology convergence
The interim pain of managing two or more networks (e.g., PSTN, fiber, mobile, TV
broadcast) is a serious issue in most markets. As networks evolve, grow and become
more versatile, their complexity increases and so does the number of support systems.
The multi-play service environment also impacts customer management in addition to
billing workflows and processes.
As they evolve to All-IP and next-generation networks, operators are moving toward
the packet-based service model over a single pipe, which facilitates the creation of
services. The increasing flexibility in service development is posing greater
for service management and will inhibit the end-to-end management of service
operation, thus jeopardizing customer experience and the corporate image.
Complexity in business model transformation
Device/network convergence, competition from over-the-top (OTT) players, maturity
of traditional services and the global economic slowdown are driving operators to
transform, often toward a more complex business model. Partnership (in terms of
service, content, networks, and devices) is seen as a key strategy for telecom operators
to embrace the Internet and IT trends. In tandem, they are stepping into new fields in
which they have little experience, such as media and entertainment, to find growth
opportunities. Operators are also increasingly turning to outsourcing and
sharing for cost savings. However, implementing a successful sharing deal is no easy
task.
The new business models enabled by this evolution, all with a common focus on the
customer, involve much more than the simple network-based operations functions that
have defined the communications industry in the past.
Lagging behind in innovation
Innovation has been driven largely by technology companies over the last ten years as
telecom operators’ priority has been to provide communications services to the
general public. Fierce competition is now forcing operators to look at service
innovation by leveraging their strong customer base to gain a competitive advantage.
The lack of a clear business case has been inhibiting telecom operators from
launching new services, though. Another issue that operators grapple with is the lack
of customer information to design these services. This is a stumbling block for
ascertaining the right mix of services for the right segments and sometimes service
rollouts follow a one-size-fits-all approach, leading to early failures. This is an even
bigger challenge in developing economies as they transition from simple voice and
SMS to more complex services.
It is all about customer experience
Service quality wins customer loyalty
As a matter of fact, all challenges facing telecom operators are customer relevant.
While telecom operators can differentiate themselves from their competitors with a
high-speed network, lower pricing and unique contents, nothing is as powerful as
what a good customer experience can bring. Customer experience is imperative to
attracting and retaining customers. Industry surveys have suggested that poor user
experience is the main reason consumers are considering switching operators.
That said, quality of service is almost always cited as a major factor for user
experience. Although successful marketing may boost customer acquisition, inferior
service quality can drive customers away much more easily. This is even worse when
negative customer experience impacts high-value customers who normally have a
greater amount of loyalty. According to an Ernst & Young enterprise service study
conducted recently, service reliability was ranked as the most important criteria for
enterprise customers in evaluating the performance of their telecom operators. This
result supported our view that while price is always an important factor, operators
have to put the highest attention to service quality if they treasure their high-value
customers.
While the cost of customer acquisition is high, the cost of losing a customer can be
devastating. Research has showed that a one-percent improvement in churn can
produce millions of dollars in additional profit while losing high-ARPU customers
has an adverse effect on profitability. Operators should extend their focus from
customer acquisition to subscriber lifetime value. Without further delay, they must
invest in customer care to reestablish the customer relationship.
The key to reestablishing ownership of customers is changing their mindset about the
value of the network through clear communication and rates. The process of changing
their mindset will take place in two stages: firstly, creating awareness and value of the
network, and secondly, innovating to capture more value from the network and ensure
that it means more to customers than just a pipe. The operators that succeed in
winning back customers will be those that provide the right combination of
differentiated customer experience and value, thus convincing customers to continue
using – and paying for – their particular network service. But this demands
investment.
The importance of customer experience is best illustrated by the following story. A
Chinese customer, Jin Na, used her smartphone to make three microblog posts while
on a business trip in Moscow. A month later when she received the monthly bill, she
was shocked to find that she had been charged over RMB3,900 (approx. USD600) for
the data roaming service. A long internal investigation by the marketing and network
departments revealed that in one instance, Jin Na used a total of 15.6 megabytes of
data that comprised 1.2 megabytes of outgoing packets and 14.4 megabytes of
incoming packets. This incident caused a heated debate across the Internet, and even
raised the eyebrows of the authorities after it was extensively covered by the media.
China’s Ministry of Industry and Information Technology, the oversight agency for
telecommunications, is looking to formulate guidelines that will mandate telecom
companies to keep their customers informed of their data usage and spending.
Though the customer blamed the operator for wrongly charging her for the data usage,
the operator itself did not make any operational mistake, and nor did it benefit from
the roaming charges. An important lesson operators should learn from this case is that
they must identify ways of improving customer experience, as poor QoE may have a
very negative social impact in addition to loss of revenue and time. The large gap
between customer perception and the telecom operation is caused by the
non-transparency of the charging mechanism for the ever-increasing use of data
service (as opposed to traditional voice) by customers. Operationally and technically,
the telecom operator failed to monitor the service and provide real-time notifications
to the customer.
Key elements of good customer experience
Good customer experience relies on the ability of operators to not only roll out and
bundle compelling services faster, but also to provision and bill the orders according
to customer expectations. In this data boom, policy management techniques are
required to continue delivering quality services to customers while maintaining and
increasing revenue.
Compelling customer experience includes not only reliable network connectivity and
coverage, simplicity and ease of use, but also consistent and responsive sales and
post-sales services such as billing, distribution channels, customer care, customer
service, and information transparency. Inadequate systems and inefficient processes
for marketing, sales, service and support lead to uneven service operations,
inconsistent customer experience across different channels, and costly workarounds.
The need for a total solution
Operators are facing the question of how their long-term investments will position
them for growth in the right areas. To improve customer experience and enhance
loyalty, the earlier approach to network transformation needs to be replaced by a
customer-centric transformation. Yet developing a positive customer experience
across all channels is no easy task.
Operators’ historical and current expertise and emphasis have been largely placed in
the area of supplier/partner relationship management. As they transform to a
customer-centric model, the market and subscribers are driving them to focus on
customer relationship management in order to provide substantially improved
customer care levels and new services. This creates a capability gap within operators
that needs to be addressed. While operators in different markets have different value
propositions, they need sophisticated solutions to fill this gap and transform their
business.
Trend toward a total solution
Operators are the first point of contact for customer service. They should leverage this
advantage to differentiate their services against other OTT service providers. A
holistic approach including the following features and capabilities is needed to look at
end-to-end customer experience:
Network resource management: Intelligent monitoring and management of overall
network performance in a multiple-network domain.
QoS management: Analysis and optimization of end-to-end service performance to
enhance service quality.
Business management: End-user analytical access to enrich customer experience.
Network resource management: The integrated businesses of fixed, mobile and
wireless require a unified management and monitoring system to ensure that the
services operate seamlessly, rather than separately as different services. As it moves
to converged IP technology, a centralized platform can facilitate the rollout of new
services more effectively. A single and unified interface can also manage the
relationship between multiple businesses and customers, as well as with service
providers, more efficiently.
A good network management solution should provide a collective management
capability over multiple networks and service platforms. The ability to enable
preventive management to ensure service quality is increasingly important. Offering
remote fault management services that minimize the time and cost for telecom
operators in creating their own internal fault management and network monitoring
processes is also critical.
QoS management: Ensuring end-to-end QoS is paramount, especially as operators
are dealing with multiple access technologies, vendors and customer segments. In a
multiple-network domain, it involves optimizing customer experience based on the
screen (PC, mobile and TV) properties and requires a content strategy that will fit
multiple screens. Designing a service portfolio, therefore, involves comprehensive
service-centric management. Providing service guarantees in the form of internal and
external SLAs is necessary as the expectations of today’s customers are high.
Operational support systems are the basis for telecom operators to monitor, activate,
and optimize the infrastructure. With data volumes set to increase significantly,
billing systems will need to be capable of handling massive volumes of traffic that
ranges from email to video. The growing trend of tiered data pricing also requires
consolidated and modernized billing and support systems. Policy management
solutions enable an operator to control the experience of a customer using traffic
management techniques based on specific subscriber profiles, particularly in data
generation. It can also provide some of the differentiation they need against OTT
service providers.
Offering a high-quality service requires seamless cooperation across the entire
organization, including business units from sales & marketing, operations to the
network department. Breaking down the organization barriers can ensure that
consistent data is available across the organization at all times. This will eventually
improve the information flow between the company and the customers in a timely and
efficient way, enabling actionable responses.
Business intelligence and analytics: The increasing emphasis on end-to-end
processes and shared data means that poor customer data management practices will
stop telecom operators from making the most of their customer data and their ability
to rerate their product and service portfolio. Increasing focus on network optimization
and service assurance will also need to draw on analytical tools. On this front, a total
solution that provides flexibility, scalability and the supporting intelligence is
necessary to deliver real-time customer experience.
Precise customer segmentation is required to get the right products to the right people
at the right location and time. This requires an effective business intelligence and
analytic tool to uncover customers’ preferences. By embracing an analytical approach,
telecom operators identify their most profitable customers, accelerate product
innovation, optimize supply chains and pricing, and identify the true drivers of
financial performance.
Managed services gain traction
Demand for professional services (including managed services, consulting, systems
integration, network optimization and modernization) is growing rapidly, driven by
operators’ desire to optimize CAPEX investment, eliminate unnecessary costs and
deliver competitive end-user experience. Managed services in particular are part of
the business case for emerging market operators, as achieving cost efficiency is
crucial to success when operating in low-ARPU markets.
While their obvious business benefits lie in the ability to shift network cost from
CAPEX to OPEX, enabling operators to tap into the global scale and efficiency,
managed services generate substantial benefits from customer experience.
Encouraged by the economic models of cloud computing and spending on billing,
fulfillment, and assurance solutions, telecom operators will show increased interest in
the use of managed or hosted offers to improve operational efficiencies through IT
and network systems.
In conclusion, telecom operators are faced with rapidly evolving challenges and
opportunities, which are driving changes in the industry. To adapt to these changes
and maximize value for their customers, operators must transform into a
customer-centric organization. With the above approach and a total solution, they
look set to succeed even though the transformation may be complex and painful.
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