Business Strategy

How the telecom war is destroying the industry’s reputation, and what companies can do to change it

How the telecom war is destroying the industry’s reputation, and what companies can do to change it

In June 2015, mobile communications company T-Mobile announced a bold campaign called “Never Settle.” Aimed squarely at Verizon subscribers, the promotion offered a free phone to Verizon customers for 14 days and promised to pay early termination fees for people who switch over permanently.

“With T-Mobile, you don’t have to settle for trickery, gimmicks and carrier BS the way you do with Verizon,” said John Legere, T-Mobile’s outspoken CEO. “I’m so confident in our kick-ass network experience that we’re footing the bill so Verizon customers can give T-Mobile a try.”

The company’s aggressive campaign (coupled with its CEO’s brassy statement) captures the cutthroat state of the telecommunication market today. The telecom war is ugly—and no one seems to be winning. In Q1 of 2015, AT&T and Verizon were practically flat year-over-year, while Sprint lost 201,000 postpaid phone customers. T-Mobile had a strong quarter, but it is still behind Sprint in market share.

Telecom’s sluggish growth isn’t just because it’s a mature market. The industry has been slow to embrace the age of the empowered customer, making it a prime candidate for disruption. The company that connects best with the customer is posed to gain a competitive advantage. Here’s what telecom companies need to do in order to win.

  1. Prioritize the customer experience.

The fierce competition in the industry is resulting in bad customer experiences. A 2015 study by cloud services provider SDL found that 19 percent of people think communication services have the worst customer experience failure offenders—more than any other industry. The same study claims that companies can expect a decrease of up to 65 percent in revenue from customers that have a bad experience.

The industry needs to make swift and decisive changes in order to change customer perception. “For telecom providers, incremental efforts are unlikely to remedy the situation,” said a 2015 telecommunications trends report by the consulting firm Strategy&. “Companies must completely redefine their relationship with their customers. They must prove that they can offer high-quality, state-of-the-art and reliable communications services; popular and fresh content on mobile and desktop platforms; and consumer-friendly websites with online billing, troubleshooting, scheduling and account support.”

Rebuilding the industry’s reputation won’t happen overnight, and companies need to act quickly in order to reverse course. Companies need to identify customer pain points soon—and they need to gather insight on how to better deliver a more seamless experience.

  1. Drive customer loyalty.

Marketing strategies in the telecom business focus heavily on new customer acquisition. The T-Mobile campaign mentioned above is an example of the industry’s obsession with getting new customers. Companies aim to steal customers from competitors at the expense of almost everything.

While acquisition efforts are important, they don’t provide enough of a competitive advantage. That’s because company offers are almost identical across the top players. Sure, as a Verizon customer you might be able to score a really good deal by switching to T-Mobile, but what’s stopping you from switching back in a few years? The cutthroat environment has resulted in an industry with virtually no customer loyalty.

The benefits of keeping current customers over acquiring new ones are well documented: 70 percent of marketers agree that keeping a customer is cheaper than acquiring new ones. Telecom companies need to wake up to the fact that the smarter long-term play is to keep their current customers happy. To drive customer loyalty, telecom companies need to build trust with customers. Treating customers as partners in the business—and listening to their feedback regularly—should be a good start. By forging a genuine relationship with customers—one that isn’t built on the promise of deep discounts alone—telecom companies are in better position to build loyalty over time.

  1. Innovate on products, services and bundles.

As far as the typical customer is concerned, all telecom companies are the same. Despite the high marketing spend in the industry, companies have done a terrible job of differentiating themselves from competitors beyond pricing.

To drive innovation, companies are hoping to get an advantage by having access to more customer data. For instance, Verizon’s recent announcement that it plans to acquire AOL may be partly motivated by the latter’s trove of mobile location and behavioral data. But data alone doesn’t provide the answer as it doesn’t reveal why customers do what they do.

“Growth has faded in most developed markets in the telecommunications industry,” noted a PwC report. But gaining an innovation advantage won’t come from technology alone, which has become a basic requirement as opposed to a differentiator in the industry.

To truly drive innovation, companies need to turn to the very same people they want to attract: their customers. Co-creation, in particular, provides an opportunity for companies to tap into customer insight when developing new product features, putting together service bundles or coming up with new marketing campaigns.

Customer intelligence can also help improve the customer experience, which can lead to reduced business costs. For example, Australia-based telecommunications company Telstra introduced My Offer Summary (MOS), a document that provides customers with a concise summary of their plan on a single sheet of paper, after learning that confusion over the company’s plans resulted in customer dissatisfaction. The company engaged customers from My Telstra Experience, a proprietary Vision Critical community, to improve MOS, and within a few months after the initiative’s launch in 2013, it immediately saw a 17 percent increase in satisfied customers. In the company’s estimate, MOS helped to deliver half a million more satisfied Telstra customers. By engaging directly with customers, Telstra was able to innovate on a critical piece of the customer experience.

Conclusion

When it comes to embracing customer engagement, telecom companies have been laggards. Studies show that their reputation among customers is suffering as a result. To change customer perception, telecom companies can’t rely on marketing gimmicks anymore; empowered customers demand and deserve more than that. Instead, companies need to show that they truly care and that they’re really listening to customer feedback.

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