When It Comes to Strategy, Don’t Take a Page From Telecoms

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As global telecoms prices tumble, churn has become the scourge of the entire mobile and fixed line industry. But instead of sponsoring and justifying a focused effort to retain customers, it has led to a feeding frenzy of price reductions to steal customers from competitors. I asked one executive where he thought the new customers were going to come from, given that everyone who needed a phone already had one. He said, "We’ll win their good customers and damage their P&L, which means we can afford to launch new products and they won’t."

"And what do you think the competitors will be saying at this very moment?" I asked. He thought for a long time and then looked a little shocked as the realization sunk in that they would probably be attempting to do just the same thing to their customer base.

Now it isn’t just telecoms companies who make this mistake. Banks, insurance companies, utilities suppliers all believe, or behave as though they believe, that they are different; even though the evidence to the contrary is overwhelming. Given the desire to control their destiny, executives first look to that which they can control: prices and products. They cannot control customers, although they try. When you ask them to put themselves in the role of customers of other companies, they are the first to say, "I don’t want to be managed. I am a valuable customer and I deserved to be treated accordingly."

"So why is it any different for your customers?" I gently ask. Another pause for thought, and then the most frequently heard and most disastrous statement: "Then we need to get some CRM software to make it happen!"

Now, as a consultant working in the customer management field and a former customer care director of a mobile network and CEO of two telecoms software companies, I can’t be accused of being biased against the software industry. But every time I hear intelligent executives saying that buying CRM software will make their customers more loyal and more valuable, I wonder which planet I arrived at.

The trouble is, the story is so enticing: enhanced insight about customers drawn from analyzing transactions; knowing the propensity to spend more and on what; and, now, optimization of targeted marketing activities to make sure we don’t irritate the customer and maximize the likelihood of signing up for the promoted product or service—and spend less doing it! Who could refuse?

Do you train your customers to watch for price changes?
But every analysis of customer churn shows the same result: Fifteen percent leave because of lower prices, 15 percent because of better products and a staggering 70 percent because of poor service. We are innately conservative when it comes to our own facilities. It’s a lot of trouble to change our bank, our gas and electric supplier. And telecoms fall into this same category. So why don’t telecom companies focus more on customer service as a route to customer retention? Don’t they realize that repeated price offers or deals to stay only simulate more churn? Apparently not.

The following appeared in the March 31, 2005, edition of The Economist:

“I am constantly amazed at the confidence level and sophistication of the average consumer,” says Mike George, Dell’s chief marketing officer and general manager of its consumer business in the United States. Dell soared to the top of the personal-computer business by cutting out retailers and selling directly to consumers. If Dell changes prices on its web site, its customers’ buying patterns change literally within a minute. “That tells you people are well-researched and knowledgeable,” adds Mr. George.

It may also suggest that Dell has trained its customers to watch for price changes as they drive their quarterly performance targets.

I believe telecoms companies have gone one stage further. By focusing on price and products and giving better deals to new customers, they have trained their existing customers to become promiscuous. They are, in effect, architects of their own condition. In the United Kingdom yesterday, I saw two advertisements: one from Telewest, a CATV, broadband Internet and fixed-line supplier. It was trumpeting a "three for 30" message: all three services for just £30 per month. But it’s available only to new customers. As an existing customer who pays £130 per month, I am now absolutely determined to leave and then rejoin, incurring costs to Telewest and forever damaging my loyalty, such that it was. The other ad was from Orange (a mobile supplier) and showed an executive visiting a wise man in China and asking how he could improve profitability. The message was: Look after customers before acquiring new ones. WOW! Is this really new news?

Does your organization have conflicting goals and measurement metrics?
Looking after existing customers is just common sense. Using technology to help in this process also makes sense—but only if it is part of an overall customer management strategy that involves everyone who deals with customers, makes decisions about customers or influences the customer experience in some way. This means almost everyone in the organization, not just sales, marketing and customer service.

The step is to define a customer strategy. Most organizations don’t have one. They have sales strategies, marketing strategies, customer service strategies and even collections strategies, but they seldom join up. As a result, the customer experience is disjointed, with internal tensions running high as one part of the organization develops a capability that another part cannot operationalize because the performance measures are in conflict.

For example, marketing may identify opportunities to up-sell a customer and send out direct mail, email or even SMS messages to selected customers. Marketing then asks customer service to identify these customers when they call in and spend time explaining the offer. But customer service is measured on reducing call handling time to reduce the costs. Collections may analyze the risk profile for customers and want marketing to avoid simulating additional sales, but marketing is measured on increased revenue—not debt—so the marketers politely ignore the request. And then there’s the eternal conflict between maximizing customer acquisition numbers (the testosterone of market analysts) and investing in retaining customers to maximize profitability and value.

A real case on Turkcell, a leading mobile operator in Turkey
Turkcell is an example of a telecoms company that has got it just about right. Turkcell is the leading mobile operator in Turkey and one of the few Turkish companies quoted on the New York Stock Exchange. Following a review of their customer centricity three years ago by my colleagues, Turkcell identified that they did not have a clear customer strategy and were executing their operations in a typically fractured manner. We discovered more than 150 projects all trying to change the business, many conflicting with each other.

The result of the customer centricity assessment was a complete rationalization of their customer management. First they decided, with the imminent deregulation of the mobile market in Turkey, to focus on retaining their high-value customers by providing an excellent customer experience for each customer segment.

They made a bold decision to move the customer-affecting parts of marketing into the customer service outsourcer to create a holistic customer management organization. The outsourcer is rewarded for developing customer value, not reducing the cost to serve. All processes are based on customer events, not internal functional tasks. As a result, performance measures reflect the customer experience, not internal productivity. Every engagement with a customer is seen as an opportunity to learn and improve the customer experience, engaging the customer in the process of identifying the need for change.

When was the last time that you, Dear Reader, were not only asked for feedback from customer service agents (not marketing surveys) to improve the service for you but also told what the change would be and when it would be implemented? And what about those conflicting projects? These were quickly rationalized to less that 30, saving millions on capital and operating expenses, as well as increasing the focus and ROI.

Turkcell’s results speak for themselves. As the market has deregulated and competition increased forcing prices on their normal downward spiral, Turkcell’s results have improved. Consider this report from Mobile@Telecoms in December 2004:

Turkish operator Turkcell today announced that net income for the quarter to end-September rose 56 percent to $151 million from $117 million in the same period last year. Revenue for 3Q04 stood at $969, up 60 percent from $765 million in 3Q03, while EBITDA for the quarter was $481 million, compared to $351.

Turkcell is not doing anything overly clever. The company is clear about its customer strategy, and company executives are executing it consistently across the organization. It uses the same CRM technology as everyone else. But its ROI is higher because it supports the customer strategy and is in complete harmony with the rest of the business.

Sound like common sense? I think so. And it’s good to see common sense finally paying off.

© 2005 GCCRM

David Rance
David Rance, CEO of Round, is a former customer care director for a national telco. Round is a leader in capability management models and software tools that enable organizations to align at their chosen level of customer centricity.

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