The Telecoms’ Rubicon and Customer Loyalty

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More Revenues from Data Usage vs More Customers: Will Telecoms Find the Right Balance

Global mobile broadband traffic grew by 83% in the second half of the year with a CAGR of 234% during 2011 shows an Allot Mobile Trends report. Telecoms are struggling to pay the investment in mobile-data networks, through which valuable traffic flows only to see other web companies reaping the rewards for it. With their revenues from traditional channels such as voice calls and text messages falling they have set on a road to find ways to get extra revenues from the use of data. So what are their options and what are the implications on the customer experience and loyalty?

Put a limit on data plans

AT&T, USA’s second largest wireless carrier, recently joined the group of telecoms who put a tap on data usage. Prior to this move the carrier was slowing down the speed of the top 5% of mobile data users. That policy itself was seen by many to be a) unclear as customers couldn’t know if they are in the top 5% or not and b) unfair as customers argued they signed up for an unlimited plan and they are not getting it. With the new data plans AT&T will charge $20 for 300MB, $30 for 3GB and $50 for 5GB. While at the moment few people exceed the 3GB limit this is bound to change as wireless technology and devices get faster and people get more and more accustomed to watching videos on YouTube, movies on Netflix and even listening to radio on their smartphones and tablets.

However, limiting the data plans may result in customers walking out the door. Just like the Telecoms, banks in the USA also found themselves in a position with falling revenues at a time of low interest rates, slow economic growth and new rules limiting many types of service charges. Bank of America, USA’s second largest bank by assets seemed to be pressing ahead to charge certain customers using their debit card a fee for what used to be free service before. However as other major banks such as JP Morgan Chase and Wells Fargo dropped their similar plans and customers threatened to “vote with their feet”, the bank had to drop their plan as well. The lesson from the banks’ gamble was that charging customers new fee for service that was previously free will annoy customers and if others don’t follow the market leader than there is a high risk of losing many customers.

In AT&T’s case competitors such as Verizon Wireless, the USA’s largest carrier and T-Mobile also sell plans that limit the amount of high-speed mobile data per month. This therefore opens an opportunity for Sprint who doesn’t have a cap on data usage and is also trying to improve its image for customer service. A poll by Wall Street Journal suggests that more than 63% of AT&Ts customers say they will be more likely to switch to a competitor if the carrier caps their data usage.

In the UK limited plans are a common practice and the cap is usually at much lower level (e.g. 750MB). However, recently some telecom marketers started to focus on promoting unlimited plans trying to capitalise on the negative publicity in this area.

If this is the option a Telecom would choose going forward then customer experience will become even more important to retain the customer loyalty. Of particular importance will become the timely messages to let customers know that they are approaching their data limits. I have 25MB per day free data roaming but in each of the cases that I got a message that I have approached my data limit I had already passed it accumulating huge roaming costs. As data speed and usage could be so fast telecoms should consider optimising the way they send messages as well as scrapping charges if customers have gone just slightly overboard (e.g. 5-10MB). If there is one thing people hate that is the robot approach. We once had a client who was sending notifications to customers that they own them $0.01.

If you move from unlimited plans to limited and given that mobile data usage has increased 8.5 times over 2010, chances are that this will significantly increase the calls to your call centre as you’ll be likely to get many disputes from customers. Therefore engaged employees will be essential to make customers feel that the company actually cares about their custom. To learn how some leading Telecoms approach this task, register here go get a copy of our research.

Charge for faster mobile data traffic speed
Chinese telecom giant Huawei Technologies presented on the recent Mobile World Congress in Barcelona a technology that will allow telecoms to provide selected users with higher speed mobile internet. From a customer experience perspective this will be a much better option as it will give customers an option to pay extra for the extra speed rather than having their data usage limited or having to pay more for what they currently get. Moreover customers are already used to having different broadband speed options given by their home and office broadband provider so for them this will be like the next upgrade to the “latest and greatest” on the market.

Slice the web
A recent WSJ article reviewed how more and more Telecoms, particularly in Europe are looking to slice the web traffic. For example Orange, one of Europe’s biggest carriers introduced a plan in France were for just $14 customers could have unlimited data usage but only browsing Facebook and Twitter. Turkcell, the leading Turkish telecom, charges customers a flat fee to access Facebook, but not competing Turkish social networks. Polish wireless provider Play has offered free access to a handful of sites including Facebook but charged for the rest of the Web.

Such an option might be particularly good for pay as you go customers who look for more budget options. But again these options result in a lot of data usage disputes and drive calls.

This option also draws criticism from a lot of activist groups and competitor sites as the free and open web ideal is dismantled while at the same time some competitive websites are put in a less competitive position.
If this is the option that your company will choose to pursue then a careful consideration should be given on segmentation and researching the various groups internet usage habits. Also our experience in such cases show that often marketing see these “slices” as objects to be traded and there is a danger that people within the company see the key to retention as giving customers more slices (e.g. we’ll also give you access to Twitter and Skype for free in addition to Facebook if you stay with us) rather than the holistic customer experience.

These two options require customers to pay more for the data they use. However executives argue that there is limited capacity to get customers to pay more, so a fourth option that some telecoms are considering is to
Charge the cost of traffic back to those who create it.

AT&T rattled the internet community after it announced plans to charge the cost of data traffic back to the companies that create it. For example data from the Allot Mobile Trends Report H2 2012 shows that YouTube accounts for 24% of the total global mobile bandwidth. Google benefits from the traffic coming from mobile devices to YouTube and its search engine and telecom executives are asking that it pays “a toll fee” for using their networks.

This plan draws even more criticism as while the major players will be able to afford (but not necessarily agree to pay) the fees, small start-ups and app developers won’t.

The implication for app developers is that they are now looking to reduce the data consumption of their apps. The implication for the likes of Google, Facebook and Twitter if they agree to pay AT&T will be to create a precedent and every telecom around the world will be chasing them for a deal, which won’t particularly please their shareholders.

That makes such a deal less likely and telecoms may lose valuable time and see their share of mobile broadband traffic challenged by Cable broadband companies. In the US, cable firms Time Warner Cable, Comcast and Cablevision have all announced plans to speed up the creation of outdoor WiFi zones and so did the British Telecom in UK. O2, one of UKs biggest wireless telecoms went even further announcing plans to create the Europe’s biggest free WiFi zone in central London as a present for the Queen’s Jubilee (marking 60 years of The Queen’s reign).

Conclusion
As people become more and more reliant on their mobile devices for their day to day activities the role of the telecom providers will become even more important. Telecoms however are struggling to pay the costs for extra data-network bandwidth and are looking for ways to charge the costs back to customers. Finding the right balance however will be tricky and the intensified battle in the field will make the customer experience even more important in order to maintain customer loyalty and differentiate not just on the base of what “slices of the web” they offer. We are currently undertaking a research to see what are the problems and pitfalls that Telecoms experience when trying to improve the customer experience. Register here to learn the findings of our research.

Republished with author's permission from original post.

Zhecho Dobrev
Zhecho Dobrev is a Senior Consultant at Beyond Philosophy with 7 years of management consultancy experience and more than10,000 hours devoted to becoming an expert in customer experience management. He has worked with a wide range of sectors and countries. Some of his clients includeCaterpillar, FedEx, American Express, Heineken, Michelin etc. Zhecho's expertise includes conducting customer research on what drives customer behavior, journey mapping, customer complaints, measurement, training and more. He holds an MBA and Master's degree in International Relations.

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