Technology advances and service innovation will drive changes in how consumers use telecoms products and services. The monetisation of these services requires communications service providers (CSPs) to provide more flexible offers and manage each interaction in the customer lifecycle to optimise the customer experience. CSPs in developed and emerging markets must focus on extending the customer lifecycle and creating a positive experience in order to differentiate themselves from other CSPs that are focused on price, device offerings and network coverage.
The importance of extending the customer lifecycle
Figure 1 represents the customer lifecycle and illustrates why CSPs need to pay more attention to their processes and measure the interactions at each stage of the customer lifecycle to keep customers longer and sell more products and services with the overall goal of improving profitability. Our research shows that in the first year after acquiring a customer, a CSP spends between 12% and 20% of revenue in acquisition costs, which include marketing, selling, on-boarding and equipment subsidies. With such high costs in the first year, how do CSPs measure and manage their operational activities against the perceptions of how well they are doing according to their customers?
Figure 1: The customer lifecycle and its impact on profitability [Source: Analysys Mason, 2014]
CSPs can improve customer retention and drive revenue growth if they focus on three critical areas of their business.
- Simplifying the pricing, packaging and purchasing process. Understand the usage and consumer behaviour patterns to promote relevant offers that customers value.
- Streamlining the on-boarding process in order to avoid customer frustration and high support costs.
- Understanding what drives customer requests. This reduces contact care cost and raises net promoter scores (NPS) for customers who prefer self-care.
Value-based service differentiation in the customer experience
After getting the basics right, CSPs should aim to ensure a consistent customer experience across all customer touch points. Figure 2 looks at each phase in the customer lifecycle and contact points between the customer and CSP employees. This contact could be either online or a live interaction. We have identified some areas based on our consulting and research work with CSPs to highlight where most of the value-based service differentiation can be achieved to raise NPS and customer satisfaction.
Figure 2: Value-based service differentiation in the customer experience [Source: Analysys Mason, 2014] – Click to enlarge
Figure 2 illustrates some data collected from a CSP that we consulted with on a project to improve customer loyalty and operational processes. It segments the customer base according to historical spending and internal measurements collected by the CSP on interactions with the customer. The data reveals that 50% of this CSPs' customer interactions occur in the billing phase. The analysis concluded that a large number of enquiries resulted from customers failing to understand how services were billed. This drives up support cost and creates frustration with the customer. The obvious conclusion is to redesign the bill and use other tools such as customised video billing, which we have covered in our research into customer experience management.
Requests for technical support also generate high levels of customer contact activity. Figure 2 reveals that almost one third of customer contact occurs in this area. It is in this phase that the CSP may want to focus on only the top 6% of its customer base to provide exceptional support. This model is used in other industries such as airlines, but outside the business market segment, most CSPs have not actively developed any meaningful strategies to date. In many developed markets, high-value postpaid subscribers do not receive any special perks until they contemplate leaving at the end of their contract.
Source: Analysys Mason
