|How CSPs can stay competitive
|Director of EMEA Marketing
Gordon Rawling is the Director of EMEA Marketing for Oracle Communications; he joined Oracle Communications as senior marketing director for market development in the EMEA region. Prior to his role at Oracle, Mr Rawling worked for Amdocs where he held a variety of roles, from delivery to product marketing. Prior to Amdocs, Mr Rawling worked for EDS, performing management consulting, relationship management and delivery roles throughout the organisation.
Gordon Rawling graduated from Salford University with a degree in computer science.
Competition has been hard on CSPs (communications service providers). Price competition – a race to the bottom – mines their businesses; still, CSPs don’t need to fight on price. Packages tailored to the individual user, based on usage data they already have, can help CSPs offer quality services which cannot be offered at the cheap, commoditised end of the market. Skilfully tailored services, based on analytics and insight, can fight churn as well as be a key to customer acquisition.
The Internet has done much to change the way we live and how we work and entertain ourselves, but our loyalty to those companies who first got us online, or who we’ve used for many years, is still something that can never be taken for granted. Especially if those companies fail to remain competitive with new entrants flooding the communication service provider (CSP) market.
However, being competitive is no easy riddle to resolve. It would be easy to assume it is all about price but the truth is far from it, even in these straitened times. Our Internet access in particular has gone from being a nice to have to an essential in many homes.
Network infrastructure is also coming under increasing pressure from industries. While consumers have been shopping, banking, reading and connecting with friends for some time, the rise of Machine-to-machine communications (M2M) to automate processes in industries including healthcare insurance, automotive, logistics, retail and utilities is a much newer phenomenon. The increasing volume of traffic related to M2M makes it even more important for CSPs to understand usage trends if they want to improve their service offering and find a way to monetise.
But unlike other utilities where value for money relates to an intersection of price, availability and reliability, CSPs find a far greater array of customer preferences and expectations. Some customers are more motivated by speed, some by price, some by quality of service, and some by download limits or factors such as bundled content or value-added-services. However, none of those potential differentiators are mutually exclusive. Most consumers are likely to be a combination of these factors, skewed more or less towards price depending on the value they perceive their Internet service to provide them with, which is why M2M services are so crucial to CSPs.
This means that first and foremost, the CSP must understand each customer and their individual needs: from those willing to pay a premium for a better, faster service to those who just need a simple entry level service.
For example, a customer who values a choice of on-demand premium content and high, uncapped speeds for streaming or downloading media and is online for several hours every night is likely to take a view that what they’re looking for in a CSP goes far beyond simply finding the lowest price. They want a quality of service which rarely comes cheap and they are most likely prepared to pay as long as the service they receive meets their expectations.
Against such expectations, the CSPs don’t need to be fighting on price with every other company. It needs to be looking at what its tailored package for that user, based on the data they have, looks like and ensuring that it is competitively priced for the offering.
It may seem obvious, but CSPs need to delve into their customer data and provide a customer centric offering based on genuine needs and behaviours rather than focusing on the offers of their rivals, because some of those rivals will be targeting very different customer segments.
The market is becoming crowded and CSPs cannot afford to lose sight of their customers.
A crowded marketplace
Each day, millions of tablets, smartphones, smart TVs and home PCs connect to the Internet, fuelling an insatiable appetite for entertainment, online shopping, social media, news and on-demand content from film and television to music.
There is no shortage of customers who need Internet services, but there is also no shortage of service providers vying for their custom. Today, there is an unprecedented amount of competitive offers and loss-leading deals on broadband being offered by traditional CSPs and new entrants such as retailers.
The economics are fairly simple on the face of things. A supermarket, for example, which makes millions on its core groceries business can afford to subsidise Internet services in the same way it may also do so for credit cards or insurance. Such tactics are businesses’ pursuit of building a brand which touches every area of a customer’s life, finding cross-selling opportunities amid the customer data they collect.
Similarly Internet services can be a loss leader for retailers looking to shift other goods. Recently we have seen UK high street retailer John Lewis offering an initial six months free Internet service to customers buying connected devices, such as tablets, PCs or smart TVs.
But for those businesses which only sell Internet services the ability to compete on price is being squeezed. A loss-leader for them is simply a loss. And attracting new customers on a profitable basis is increasingly tricky for CSPs in such a climate if they try to compete purely on price.
However, it is worth going back to the earlier point that not all consumers want the cheapest possible broadband access. In fact, as we become more sophisticated online citizens, it is quite likely more and more consumers want more from their Internet provider than a bog-standard Internet connection.
Many consumers prioritise quality of service, the breadth of services offered – such as premium movie and television services – and the overall bundle they are being provided with. Stripping out any frills and service niceties therefore simply to offer the cheapest possible service may represent a false economy, or certainly may only be right for an entry level product for light users of the web.
Free, a French CSP, is testament to this. A disruptive force in the telecommunications market, Free was the first tripleplay provider in the country offering broadband, landline and IPTV services. Having secured a 3G license in 2010, the company launched its mobile service in 2012 and secured 8% of the total market by the end of the year. Offering a service beyond broadband that utilised its full quadruple play product, Free was able to capture over 6 million subscribers in a year.
And this is the key – not all consumers are the same. They want choice, some want high quality, some want cheap.
CSPs therefore, must get on the front foot and review their service provision and the quality of what they are offering customers based on their customer data. They must ensure customers feel unique and that their needs are being catered for. Most importantly, CSPs need to offer the kind of quality of service which simply cannot be offered at the cheap, commoditised end of the market.
Without that differentiation they will be drawn into a downward spiral of competing purely on price.
This is something Portuguese cable operator, Zon, struggled with. Seeing an increase in competition offering cheaper services, Zon took the decision to focus on the quality of service delivered to its consumers and set about redesigning its entire user interface. What it achieved was an unrivalled user experience and quality of service that put the customer back in the centre of its service.
A focus on skillfully tailored services, based on analytics and insight, should have the effect of fighting churn but can also be a key element in customer acquisition.
It must start with understanding the full worth of a customer across all products and the full lifetime of their custom. In order to offer a service which keeps customers happy and bought in, CSPs must offer personalised deals and rewards based on the value of the customer. In an increasingly savvy marketplace customers will know their worth. CSPs cannot afford to take them for granted.
Similarly, CSPs must be prepared to predict and pre-empt complaints. If they know how important Internet access is to customers then they must pre-empt the angry reaction when it is unavailable. Customers who are proactively notified of a problem in their area are likely to bear less ill will towards a CSP – providing it is quickly fixed – than if they have to find it and report it themselves.
Fine tuning, based on understanding customer data, can start in the call centre and customer service operation with the faster, more focused resolution of customer enquiries and the more effective tailoring of packages and bundles to suit individual customers through to choice of premium content on offer. Cheap Internet access is often just that. It doesn’t come bundled with services such as cable TV. Therefore, CSPs offering bundles must ensure they are complementary. Data gleaned about Internet usage should inform the provision and promotion of such services.
No two customers are the same
Typically, the cheapest offerings at the more commoditised end of the market treat customers with a uniformity that ignores many trends in Internet usage and individual behaviour.
For example, CSPs may know that customers who most regularly take advantage of an agreement to use Wi-Fi hotspots as part of their package may be most amenable to offers such as cloud based storage and back-up or packages of services related to getting the most out of multiple mobile devices and their mobile lifestyle.
Security is another service which can be incorporated so that customers feel they are getting value on top of their basic connectivity. Similarly, content deals with music or movie studios can be brokered and tailored based on online behaviour. For example, CSPs who recognise the behaviours of families with children may be most successful in offering security packages, online safety guidelines and parental controls. Learning such things about customers must then be fed in to the overall customer service experience. Providing parental controls shouldn’t stop with parental controls. Those households with children may be a good market for packaged content such as Disney classic movies on-demand. Conversely, households with children may see higher instances of sport or more mature programming being watched on second screens or mobile devices, if the family TV is taken over by children, creating a captive audience for promoting such services.
Getting customers engaged regularly with multiple services from one CSP makes it far less likely they will churn, even if they can get a better deal on one aspect of the offering.
CSPs also have a wealth of infrastructure they can make work harder, providing cloud storage, applications and back-up services to customers where a need is identified. And for home office workers, CSPs can offer business applications and hosted email as well as helpdesk services to reduce the need for external IT support. All of these offers can be built around insights and behaviours the CSPs should be able to gain.
Much of this isn’t about cost it’s about convenience and quality. Ultimately, CSPs need to break away from the race to the bottom taking place – in terms of pricing – and realise consumers are only going to get more sophisticated in the use of the Internet, with behaviours and usage only going to get more complex.
They may lose a handful of customers to the novelty of free, no-frills Internet access, but the growth areas are going to be in providing a service which reflects the importance many people place on their Internet access at home.