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  1. 1. How to generate customer loyalty infixed marketsAcquisition and Retention Study,March 2009Global Summary Report
  2. 2. Contents 3 Executive summary 4 Objectives and methodology 5 Churn damages profitability 5 The threat of customer churn: low customer lifetime value 7 Most customers would consider another service provider 8 People look to a variety of sources to inform their decisions 9 Brand “stickiness” is low 10 In mature markets most customers have churn experience 11 Churn triggered by promotional offers 12 Churn owing to dissatisfaction 13 Customer relations decline most strongly between one and three years 14 What makes a loyal customer? 16 Internet quality, costs and customer service boost customer retention 17 Service and device portfolio 18 Network and service quality 19 Cost and billing 20 Customer care 21 Challenges and opportunities for CSPs 23 Customer insight holds the key2 How to generate customer loyalty in fixed markets
  3. 3. Executive summary As a rule of thumb, decreasing the level of churn by 10 percentage points increases the EBITDA margin of communications service providers (CSPs) by 10 percentage points or more. Customer acquisition and retention is therefore fundamental to the profitability and ultimate survival of CSPs, especially since the growth of customers and subscriptions is slowing in most markets for fixed Internet and telephony services. The good news is that the existing provider is in an ideal position to influence customer loyalty by delivering an excellent performance. The Nokia Siemens Networks acquisition and retention study asks two key questions. What kind of customer experience has to be provided to manage churn? And how can CSPs build a sustainable competitive advantage, apart from running short-term promotions? Customers are pragmatic. They increasingly see different CSP offers as interchangeable and most will churn if they see an advantage. Willingness to churn increases with the maturity of the market, and a CSP’s performance is more important for most customers than brand image. Recent churners say they decided to switch because of dissatisfaction with their existing services, promotional offers from competing providers or both. They are most likely to churn at between one and three years, probably at the end of a 12 or 24-month contract. CSPs therefore need to work on satisfying their customers better. The survey identified four key areas: 1) Cost and billing as most critical area, with contract conditions and pricing structure at the top of the list of subscriber complaints. Customers want transparent, flexible contracts, combined with clear billing. 2) Network and service quality which is dominated by the perception of Internet speed. 3) The service and device portfolio, with a fast and trouble free service activation being the most critical point. People also want tailored service bundles that fit their needs more closely. 4) Customer care, where people are looking for a fast resolution of any problems and clear information about the status of any enquiries. Subscribers are looking for a “service champion”. Armed with the right customer insights, CSPs can continuously optimize the individual customer’s experience and successfully reduce churn to a minimum. How to generate customer loyalty in fixed markets 3
  4. 4. Objectives and methodology Nokia Siemens Networks carried out the acquisition and retention study to explore the customer experience in both the mobile and fixed telephony and broadband markets. This document focuses on the fixed markets. In order to get a worldwide view about the customer experience under different market conditions, the sample consists of mature markets, which have already experienced heavy shifts in the CSP’s market shares, as well as highly competitive emerging markets. The study is based on nearly 12,000 interviews and is representative for the markets in which it was carried out, which were Brazil, China, Germany, Indonesia, Pakistan, Russia, South Africa, UK and US.Figure 1. The Acquisition and Retention studyis based on nearly 12,000 interviews, coveringnine countries. United Kingdom Russia Mobile sample Mobile sample Fixed sample Germany United States Mobile sample Mobile sample Fixed sample China Fixed sample Pakistan Mobile sample Mobile sample Fixed sample Brazil Mobile sample Indonesia Fixed sample Mobile sample Field period: South Africa 12/08 to 02/09 Mobile sample 11,866 interviews The key topics are: • What are customers’ key reasons for selecting specific service providers? • What does this decision-making process look like? Who (which people) and/or what (which facts) have the biggest influence? • How likely are customers to switch CSP and what are their reasons for churning? • How satisfied are consumers with their current service providers and what influences their satisfaction? • What can CSPs do to increase customer loyalty?4 How to generate customer loyalty in fixed markets
  5. 5. Churn damages profitability In most markets for fixed Internet and telephony services the growth of customers and subscriptions is slowing and may even be close to zero. Thus the competition for the existing customer base is becoming fierce. Retaining valuable customers is now mandatory for long-term business success. The costs of win-back in lost revenues and acquisition costs has put churn prevention and loyalty management at the top of the agenda for many CSPs.The threat of customer churn:low customer lifetime value There is a clear correlation between the level of churn and profitability because churn has a direct impact on the average customer lifetime value (CLTV). Put simply, it is expensive to recruit new customers and churn can prevent CSPs from recouping those costs and generating profit from subscribers. As a rule of thumb, decreasing the level of churn by 10 percentage points increases the EBITDA margin by 10 percentage points or more.Figure 2. EBITDA margin is adversely affectedby high rates of churn. 60% 50% 40% EBITDA margin 30% 20% 10% 0% 0% 10% 20% 30% 40% 50% 60% Blended churn rate, 2007 How to generate customer loyalty in fixed markets 5
  6. 6. High subscriber acquisition costs are especially critical for CSPs in mature markets. Acquisition costs include different types of marketing costs, retailer commissions and subsidies for equipment such as modems, routers and set-top-boxes. Churn also causes indirect costs, like the costs of promotional offers that are needed to attract new customers and pull them away from their current provider. The costs of migrating and activating a large number of new customers must also be considered, as must the costs of ending the churning customers’ services. It is obvious that cancellations lead to future revenue losses, but an additional problem is that the time for up sells might be too short. For instance, the customer might take out a short contract for basic voice and broadband and then leave. The time available to sell additional value-added services such as TV and special content is probably too short if they were not included in the initial subscription. High churn rates can endanger the required economies of scale in the network. For example, based on Ovum’s modeling of UK wholesale offerings, an LLU CSP must obtain approximately 300 customers per local exchange in order for the LLU investment to pay off. The good news is that the “incumbent” provider is in an ideal position to influence customer loyalty by delivering an excellent performance. Best practice cases such as Iliad in France show that it is possible to achieve a churn rate far below 1 percent per month.6 How to generate customer loyalty in fixed markets
  7. 7. Most customers would consideranother service provider Only one in five customers on average say that their current provider is the only one they would ever consider. This loyalty indicator is lower in mature markets than in emerging markets. In the UK is it just 7 percent. The reasons are: • Customers are becoming more demanding and are willing to change their provider to suit their personal preferences and experiences. They are very pragmatic. • Customers increasingly perceive the available offerings as interchangeable.Figure 3. Customer buying behavior – mostcustomers consider not only their current provider. Total Brazil ChinaCustomer loyalty today – the “incumbent” CSP is in % in % in % 1 11in permanent competition. 7 20 14 14 28 27n=4229 respondents 24 16 49 42 58 Germany United Kingdom United States in % in % in % 1 1 2 8 16 9 7 4 19 25 32 34 50 44 50 The only provider I would ever consider It is my preferred provider, but not the only one I would consider Just one of several providers I would consider Not a provider I will stay with in the future Don’t know How to generate customer loyalty in fixed markets 7
  8. 8. People look to a variety of sourcesto inform their decisions The experiences and recommendations of family members and friends is the most important source of information, especially in Brazil where nearly 70 percent rate it as the most important influence. This face-to-face communication is complemented by virtual information from the Internet, and roughly 70 percent of fixed Internet customers mention these two CSP-independent “neutral” information sources as the most important. This means that both the good and bad experiences of existing subscribers influence the buying behavior of potential customers.Figure 4. People actively inform themselvesabout the best offer from a variety of sources. Total Brazil China Germany United UnitedMost influencing information sources: Which of in % Kingdom Statesthe following information sources influencedyou the most with your decision for your current Family or friends 40 68 39 29 38 33provider? Multiple answers.n=681 Internet 31 26 27 38 42 26Base: customers who chose their Internetprovider less than six months ago Advertisements 24 25 14 20 20 36 received Homepage of 21 9 24 41 23 14 Internet company TV/Radio 14 27 12 4 11 14 Call centre of the 13 8 26 10 16 7 Internet company Salesperson of the Internet 12 7 20 16 6 12 company store On the other hand, the influence of contact with the CSP should not be neglected. Overall, 24 percent of customers perceive advertisements as one of the most important influencers and provider homepages are mentioned by 21 percent. Other channels are less influential, but TV and radio, call centers and the sales person all have their audience. So the quality of any and all of these interaction points may be critical to the buying process.8 How to generate customer loyalty in fixed markets
  9. 9. Brand “stickiness” is low In mature markets, 20 to 25 percent of customers on average are satisfied with most of the core brand dimensions of their providers, such as reputation, innovation and customer care. Another 40 percent are merely “somewhat satisfied”. A quarter of customers claim that they identify with their provider’s brand more than with other CSPs and another 39 percent agree with this to some extent. So there is a hardcore of brand enthusiasts but the emotional link with the majority of the customers is rather weak, and fixed CSPs cannot rely on the strength of their brand as a key retention tool. Customers in mature markets demand real performance from their CSPs, not just a good image.Figure 5. Brand “stickiness” is rather low. Satisfaction with brand – developed countries (% of customers)n=2529 Has a good reputation 3 6 19 46 26 Is very innovative 8 6 22 42 23 Has a very appealing advertising 8 9 25 38 19 Is one that you like to be seen using 8 9 27 36 20 Is an Internet provider that I identify more with than with other brands 5 9 23 39 24 Is one that takes care of its customers 3 9 22 42 24 Cares a lot about environmental sustainability 39 6 20 23 12 Takes initiative in social and cultural life (charity, sponsorship) 37 7 20 25 11 On a scale from 0 20 40 60 80 100 1 = don’t agree at all to 10 = totally agree Don’t know Bottom (1–2) Middle (3–5) Middle (6–8) Top (9–10) How to generate customer loyalty in fixed markets 9
  10. 10. In mature markets most customershave churn experience In mature and extremely competitive markets such as Germany, the UK and the US, most customers have already churned in the past, with 12 percent changing their provider within the previous six months. In emerging markets such as Brazil and China, the share of churners is much lower at 1 in 10. In short, the willingness-to-churn increases with the maturity of the market.Figure 6. In mature markets most customershave churn experience. Churn behavior and its Total Brazil China 2 in % Recent in % Recent in % Recentmotivation – top two. 8 switches 37 switches 7 switchesn=4229 34 57 90 91 1 1. Dissatisfied with my former 1. Dissatisfied with my former 1. Interesting promotion offer provider provider 2. Friends/relatives recommended 2. Interesting promotion offer 2. Interesting promotion offer to change Germany United Kingdom United States in % Recent in % Recent in % Recent 12 switches 12 switches 12 switches 32 35 37 1 52 50 55 1 1 1. Dissatisfied with my former 1. Dissatisfied with my former 1. Dissatisfied with my former provider provider provider 2. Interesting promotion offer 2. Attractive bundled offer 2. Moved into another region Switched less than 6 months ago Switched more than 6 months ago Never Don’t know When asked why they churned, the recent switchers gave two main reasons: • Promotional and bundled offers from other providers. In the UK in particular, bundling led to extreme shifts in the market shares of different players (Ovum, The Future of Fixed Broadband, 2008). • Dissatisfaction with the previous provider’s performance. The two reasons are sometimes linked, because dissatisfied customers will naturally be more receptive to competing offers.10 How to generate customer loyalty in fixed markets
  11. 11. Churn triggeredby promotional offers In mature markets such as Germany, the UK and the US, between 19 and 42 percent of recent churns were motivated by the promotions of competing CSPs. Churn will not be significant if the competing offer is perceived to be only 5 percent cheaper, but if the perceived price difference is 10 percent or more then the willingness-to-churn rises dramatically. This high price elasticity is a clear indication of the increasing interchangeability of the different offerings in the eyes of customers. Churn due to promotional offer from competitor (%) Consider churn (% of all customers) 100 Germany Perceived price differences Churners* 43 of 10% or more trigger churn All customers 34 80 United Kingdom** Churners* 19 60 All customers 44 United States** 40 Churners* 26 All customers 39 Germany *Within last 6 months 20 United Kingdom **Attractive bundles of competitors is a strong churn trigger United States 0 5 10 20 30 40 50 >50 Perceived cost savings (%)Figure 7. The first half of the truth – around40 percent of churn is triggered by promotionaloffers from competitors. How to generate customer loyalty in fixed markets 11
  12. 12. Churn owing to dissatisfaction Dissatisfaction with a CSP’s performance is the strongest motivator for churn, with around half of recent churners in mature markets citing it as their main reason for switching. The reasons for dissatisfaction varied widely, but included the costs of Internet access, customer care service, connection stability, speed and rate packages. Churn due to dissatisfaction (%) Reasons for dissatisfaction of recent churners (%) Cost of Internet 59 Germany access 45 58 Churners* 44 Customer care 62 52 All customers 49 service 41 Stability of Internet 46 54 connection 45 United Kingdom Down/upload 31 46 Churners* 52 speed 43 All customers 47 Offered rate 29 39 packages 21 15 United States Billing 25 18 Churners* 44 Contract 13 28 conditions 7 All customers 36 Quality of fixed 8 21 telephony 13 *Within last 6 months Costs of additional 15 4 (Internet) services 13 5 Germany Offered bundles 8 11 United Kingdom Quality of TV 3 4 United States services 9 0 10 20 30 40 50 60 70Figure 8. The second half of the truth –customers churn due to dissatisfaction.12 How to generate customer loyalty in fixed markets
  13. 13. Customer relations decline most stronglybetween one and three years Across all the countries in the survey, the critical period when customers churn is between one and three years. This is largely because most Internet contracts last 12 or 24 months, so it seems that customers typically churn at the end of their contract period. The promise of lower costs, better customer care and superior Internet connection performance sounds good if the customer has not been pleased with the service they have received from their current provider.Figure 9. Managing the customer lifecycle –strongest decline in the customer relationship Duration of customer relation (%)occurs between one and three years. 100Base: n=4229 respondents 80 Total 60 Brazil China Germany 40 United Kingdom United States 20 Critical time window 0 <= 1 <2 <3 <6 6 to 12 1 to 2 2 to 3 3 to 4 4 to 5 >= 5 month months months months months years years years years years Customer life-time value Positive CLTV Limited harvesting Negative CLTV Time/customer lifecycle CSPs can therefore defend themselves by creating specific offerings designed to retain customers who are coming to the end of their contract period. Because the early phase of a customer’s association with a CSP actually costs the CSP money (the customer’s payments are still offsetting the cost of acquiring the customer in the first place), it is a highly efficient use of resources to target customers whose acquisition costs have already been paid off. Understanding what drivers these customers are responding to and what their chief sources of dissatisfaction are is critical in deciding which actions to take to retain them. How to generate customer loyalty in fixed markets 13
  14. 14. What makes a loyal customer? Overall satisfaction with the provider’s performance plays the dominant role in the customer’s decision process. Other factors such as the brand image and switching barriers play minor roles. The following figure shows the contribution of each satisfaction area to determine its relative contribution to overall satisfaction, expressed as a percentage. The numbers indicate the importance of the different drivers across the entire customer base. Of course, some specific customer groups may have different priorities. Customer retention drivers – impact in % Customer care Service & device • Status info about Customer Activation portfolio inquiry care • Ease of installation • Time to solve query 16 13 • Technical support • Competence of staff TV services during activation 2 Bundling • Quality of hardware 4 and software Billing 8 Costs of TV services 1 Moments Costs of 4 of truth Quality of telephony 20 Internet Cost and billing access Network and • Contract duration, 12 service quality transparency & • Speed while browsing flexibility Costs of 3 • Download and upload Internet 1 • Personal fit of rate speed packages 16 Quality of telephony • Matching the promised • Cost of additional Quality of TV services speed services Contract conditionsFigure 10. What makes a loyal customer:a 360° experience at all touchpoints.n=252914 How to generate customer loyalty in fixed markets
  15. 15. In our analysis, we split the drivers of customer satisfaction into four keycategories:• Service and device portfolio: From the customer perspective, ease of activation for services is far more important than the portfolio itself. The dominant drivers are the ease of installation, the quality of support provided by the CSP and the quality of the hardware and software of the delivered modems, routers and set-top-boxes. The right bundling strategy is also important, including the availability and quality of TV services.• Network and service quality: Quality is dominated by the perception of the quality of Internet access. The most important items are the browsing speed, the download and upload speed and whether the promised speed is achieved in real life. The upload speed is just as important as the download speed, thanks to changing user behavior in Web2.0, where people increasingly post their own content such as photos. The quality of telephony is less of a concern, provided certain minimum requirements regarding voice quality and features are met. TV quality is not a strong factor as yet, partly because of low penetration.• Cost and billing: Customers place a high importance on contract conditions. The contract duration, the transparency of the conditions and the ability to change the service bundle and rates are all important to their satisfaction. Furthermore the personal fit of the Internet rate package and the cost of additional items should be taken into account. It is not just about the offered price level, it is about the price structure of the provider and the ability to achieve a fit with the user’s personal preferences and usage pattern. On top of this, billing is very important, even in times of “simple” flat rates. The accuracy, understandability, delivery method and payment conditions of the bill, as well as the billing period, are all equally important.• Customer care: Customers value the provider’s ability to solve any problems in a systematic and timely way. They want transparency about the status of their inquiry as well as a prompt solution. The perceived competence of the provider’s staff is monitored closely by customers, since it is also one of the few occasions when the customer has personal contact with the CSP.Overall, cost and billing is the most crucial area for customer satisfaction,followed by network and service quality. The portfolio, including the activationprocess and the perceived performance in customer care are of nearly equalimportance. It can be seen clearly that customers are not solely focused on pricebut on the price-performance ratio. The quality of Internet access is moreimportant than the cost associated with it and the quality and price of telephonyand TV are of nearly equal importance. Overall the portfolio, quality, contractconditions and care services all massively outweigh cost alone in the customer’spriorities. How to generate customer loyalty in fixed markets 15
  16. 16. Internet quality, costs and customer serviceboost customer retention In order to enhance customer satisfaction most effectively it makes sense to act in areas that are the most important to customers and where there is the biggest perceived room for improvement. By comparing the previous results against the percentage of satisfied customers in each area, the areas of highest relevance and lowest satisfaction are: • Contract conditions • Quality of Internet access • Customer care • Costs of Internet usage • Activation process 16 19Figure 11. Internet quality, costs and customerservice are the major levers to boost customer 20%retention. Quality of Internet access 24 41Note: Impact of single items adds up to Contract100 percent. Customer care service Costs of Internet usage Activation process Impact 10% Billing Bundled services Quality of fixed telephony Type of TV services Costs of TV services Quality of TV services 0% 0% 40% 60% 100% Satisfaction % of satisfied customers Other areas may be less urgent, but they should not be ignored. Some may become more important in the future – TV is a good example here. In other areas, dropping below certain performance thresholds can attract negative attention from customers and thereby increase their impact on satisfaction, as well as the workload on the help desk. Still others vary in importance depending of the customer’s lifecycle phase. Bundling options might be of more interest as contracts come up for renewal, for example. In addition, specific customer segments have focal points that are different from those of the average customer.16 How to generate customer loyalty in fixed markets
  17. 17. Service and device portfolio The activation process and bundling strategy call for special attention here. The service and device portfolio affects customer satisfaction at 19 percent in mature markets. Within that, the service activation process has the largest potential to enrich the customer experience. Activation is about the quality of hardware and software for customer premises equipment (CPE), installation and configuration simplicity and also about the time needed to keep everything running well. Interestingly, customers are especially dissatisfied with the technical support during activation, so providers could think about providing more personal assistance, even if this costs more. Since the impression of trouble free activation is crucial to overall satisfaction – and thus personal recommendations to potential new customers – activation support can be an effective customer touch point. Customer concerns regarding activation are understandable, since in some countries 20 percent of all phone and broadband lines are not installed correctly at the first attempt (Oliver Wyman 2007). Next come the services themselves, including the quality of the content and value-added services. TV customers want better special interest packages beside the mainstream channel packages, as well as better value-added services such as video-on-demand, games and recording functionalities. Aside from the avoidance of churn, those areas also provide good upsell opportunities and the demand is there. There is still unexploited potential in service bundling. People especially miss the value-add of a bundle beyond the price and the one-stop-shopping advantage. The fit of the bundle to their individual needs is crucial. Therefore more flexible and tailored bundling options offer possible competitive advantages for CSPs. All in all, it is more important to the majority of customers that the basic Internet and voice products are made available quickly and easily than it is getting more sophisticated services. 16 19Figure 12. Service and device portfolio –activation process and bundling strategy need 20%special attention. * Bundle customers only 24 ** TV customers only 41 ActivationNote: Impact of single items adds up to100 percent. Technical activation support Quality of hardware Need fit of setup package Quality of special interest packages** Ease of installation Delivery time of hard & software Impact 10% Time until access worked Quality of VAS (VoD, games, PVR)** Number of channels** Need fit of services in bundle* Value add of the bundle (instead of separated services)* Content quality and Value added Services 0% 0% 40% 60% 100% Satisfaction % of satisfied customers How to generate customer loyalty in fixed markets 17
  18. 18. Network and service quality Perceived Internet speed is the most crucial factor in service quality, which overall accounts for 25 percent of the customer’s quality perception in mature markets. Many users think that there is a gap between the bandwidth that was promised to them and the one they really get. Only 30 percent of the customers are satisfied with the fulfillment of the promise. In addition, satisfaction with the speed while browsing, downloading and uploading is below 40 percent. This is a clear sign that the demand for bandwidth is not saturated, even in mature markets with widespread ADSL and cable infrastructure. In contrast to previous studies, changing user behavior in the context of Web2.0 is driving the demand for higher upload speeds, which calls the long-term suitability of strongly asymmetric technologies such as ADSL into question. Security has also become a hot topic and now has a significant impact at low satisfaction ratings. Security solutions can therefore be an effective differentiator. The quality of telephony is less critical, although satisfaction values below 60 percent indicate some room for improvement. One explanation for this might be the increasing penetration of VoIP. CSPs should avoid compromising on the voice quality and stability of calls, since voice as a basic service is not negligible for customer satisfaction. 16 19Figure 13. Network and service quality –perceived Internet speed is the most crucial 20%factor. 24 41Note: Impact of single items adds up to Download speed100 percent. Browsing speed Internet quality Upload speed Matching the promised bandwidth Stability of the Internet connection Security solutions Impact 10% Availability and call setup time* Clarity and sharpness of TV** Voice quality* Stability of calls* * Bundle customers only ** TV customers only 0% 0% 40% 60% 100% Satisfaction % of satisfied customers18 How to generate customer loyalty in fixed markets
  19. 19. Cost and billing With a contribution of around 40 percent, cost and billing has the biggest impact of all on customer satisfaction. A certain dissatisfaction with having to pay for things is natural, so the point for the CSP is to increase satisfaction and differentiate in the market without compromising price levels and margins. The various relevant parameters can be grouped into contract conditions, pricing structure and billing. About 30 percent of customers are satisfied with contract conditions such as duration, transparency and flexibility. Customers do not like tying themselves into something they might not find appropriate after a while, so there is an opportunity for more commitment-free contracts. The pricing structure by nature is complex, but there are two key points where providers could match their offering more closely with their customers’ preferences. First, customers complain about the cost of hardware and technical assistance, which they rather take for granted. Second, they don’t like paying extra for additional items, such as value-added services, additional TV services and special content packages. As a consequence CSPs can gain competitive advantages with a revised bundling and upselling strategy. Billing is very important to customers, even in times of flat rates, and around half of customers are satisfied. Therefore billing is not a critical issue, but providers might think about improvements, especially in making their bills easier to understand. 16 19Figure 14. Cost and billing – customers valueimprovements in contract conditions and pricing 20%structures the most. * Bundle customers only 24 ** TV customers only 41Note: Impact of single items adds up to100 percent. Voice: Line rental Contract conditions One time Internet activation costs Period of contract Monthly Internet costs cancellation Pricing structure Contract Voice: Rate package in general Impact 10% Costs of technical duration Personal fit of Internet rate package assistance Transparency Single bill Flexibility within contract period of conditions Understandability of bill Costs of HW Billing Promotional offers Payment conditions Costs of additional VAS Accuracy of bill Costs of additional TV services Delivery method of bill Costs of special Monthly costs for TV Price of bundled services content packages Costs of HW (set-top box) 0% 0% 20% 40% 60% 100% Satisfaction % of satisfied customers How to generate customer loyalty in fixed markets 19
  20. 20. Customer care Customer care achieves low overall scores, and customers want faster problem solving and greater transparency regarding the status of their queries. The single most promising area for improvement is help line waiting times, which effectively means improving call center efficiency. If providers can speed up customer care processes by providing the necessary information and tools for their agents, they can differentiate in competition as a service champion. Friendliness is less important than a speedy resolution. CSPs can also improve their Web sites, including customer self service facilities. For one in five customers the provider’s homepage is the most important source of information. Improving the quality of contact here and keeping customers up to date is a promising option to lower churn and stimulate upsells. 16 19Figure 15. Customer care – improvements insolving time and status transparency are key. 20% 24Note: Impact of single items adds up to 41100 percent. Status info Time to solve query about inquiry Competence of staff Achieved outcome Customer Impact self service Friendliness of staff 10% Waiting Managing trouble with any times at Easy info of the bundled services helpline access on website * Bundle customers only 0% 0% 40% 60% 100% Satisfaction % of satisfied customers20 How to generate customer loyalty in fixed markets
  21. 21. Challenges and opportunitiesfor CSPs Customers are in search of a better experience when they churn. Any strategy that aims to improve the customer experience should therefore target resources at those areas that are most important to subscribers. CSPs supply intangible products and they have low levels of personal interaction with their customers. Therefore the performance during the “moments of truth“ (Booz, Allen & Hamilton) is crucial. These are the moments in which the customer really experiences the quality of the service, such as activation, usage, billing and care. These points determine the quality of the relationship with the customer. Providing a superior and differentiated service that is adapted to specific customer needs is a competitive advantage that is hard for competitors to copy. CSPs have lots of opportunities to reduce churn by focusing their resources on managing these “moments of truth“. 1. Service and device portfolio Greater flexibility and tailored service bundles can better match individual customer needs. Additional bundling options should include options that might previously have been perceived as add-ons, such as special interest content, video-on-demand, games, convenience features for TV usage, premium support and security. Automating and simplifying the activation process, including device management, ensures timely and right delivery. Since trouble-free activation is of outstanding importance, high-quality technical assistance and proactive care is an option that ensures that this moment of truth does not lead to disappointment. 2. Network and service quality The aim should be to improve the perceived Internet speed in a cost-efficient way. As the demand for bandwidth is not saturated, it is essential to bring the fiber closer to the curb or the building. The increasing need for upload speed calls for mass deployments of VDSL as symmetric technology. In addition, competitive access providers fuel their growth by boosting their share of unbundled lines, rather than just taking wholesale capacity, in order to remain in full control of the quality provided to their customers. Security solutions are key differentiators and this should be pointed out in marketing messages. In telephony, further improvements could be made in voice quality and call set up time, especially if VoIP services are provided. How to generate customer loyalty in fixed markets 21
  22. 22. 3. Cost and billing CSPs have an opportunity to free up customers to enable easier migration between tariffs and bundles. One option is to let customers choose between monthly, bi-annual or annual subscriptions, for example. Despite the business risks associated with lowering the commitments placed on customers, there are already successful examples in the market, including German CSP Hansenet, which has successfully pursued this strategy. Another chance to improve customer experience is to provide personalized top up management for content and value-added functionality. The challenge for CSPs is to offer choices of chargeable items for a wide target audience on top of static, all-inclusive, flat rate bundles. Charging on a flexible à la carte basis is therefore an option. Customers can for example choose single channels they would like to subscribe to and pay per channel. The customers’ perception is that they only pay for what they are actually using. 4. Customer care CSPs can adapt customer care to different target segments and query types. This includes enhanced self-care options. It also provides an excellent means to boost efficiency using seamless information flow through an integrated systems infrastructure. This will reduce waiting times and solve queries “right first time”. This requires the arming of customer support personnel with all relevant customer and network information. Care can be proactive, with end-to-end automation of customer care processes. CSPs can position themselves as a “service champion“ in marketing communications, taking into account that fast problem resolution is often more important for the relationship with the customer than zero failure.22 How to generate customer loyalty in fixed markets
  23. 23. Customer insight holds the key The ultimate goal is the “mass individualization” of CSP offerings – from service definition to customer care – as if they are designed for each customer individually. This requires great insight into individual behavior and preferences. This approach also allows early churn prediction so that appropriate retention measures can be taken in good time. Successful customer-centric CSPs liberate their customer information from data silos and bring it together so it can be accessed by all systems and different organizational units. In this way the individual customer’s experience can be continuously optimized and they are unlikely to churn. How to generate customer loyalty in fixed markets 23
  24. 24. Nokia Siemens Networks CorporationP.O. Box 1FI-02022 NOKIA SIEMENS NETWORKSFinlandVisiting address:Karaportti 3, ESPOO, FinlandSwitchboard +358 71 400 4000Product code B301-00420-B-200906-1-ENIndivisualCopyright © 2009 Nokia Siemens Networks.All rights reserved.A license is hereby granted to download andprint a copy of this document for personal useonly. No other license to any other intellectualproperty rights is granted herein. Unlessexpressly permitted herein, reproduction,transfer, distribution or storage of part or all ofthe contents in any form without the prior writtenpermission of Nokia Siemens Networks isprohibited.The content of this document is provided “AS IS”,without warranties of any kind with regards itsaccuracy or reliability, and specifically excludingall implied warranties, for example ofmerchantability, fitness for purpose, title andnon-infringement. In no event shall NokiaSiemens Networks be liable for any special,indirect or consequential damages, or anydamages whatsoever resulting form loss of use,data or profits, arising out of or in connectionwith the use of the document. Nokia SiemensNetworks reserves the right to revise thedocument or withdraw it at any time without priornotice.Nokia is a registered trademark ofNokia Corporation, Siemens is a registeredtrademark of Siemens AG.The wave logo is a trademark ofNokia Siemens Networks Oy.Other company and product names mentionedin this document may be trademarks of theirrespective owners, and they are mentioned foridentification purposes