Telecommunications operators that invest, and embrace, digital channels enjoy a higher NPS and better performance vis a vis their peers, finds a new report. Despite the benefits that lie on the horizon, in particular incumbents are not transforming themselves digitally in the ways that meet changing consumer expectations, leaving them exposed to, potentially large, risks.
Rapid digitalisation is in part facilitated by a range of devices that connect to the internet via telecommunications operators (telcos). The facilitation is implicit in the wider transformation of consumer behaviour as new avenues are opened up for consumers, from social media to ecommerce. While digital, enabled by telcos, is disrupting a range of markets, from retailers to financial services, the telcos themselves are too finding that digital is equally important to their own market space.
In a new report from Capgemini Consulting, titled ‘Unlocking Customer Satisfaction: Why Digital Holds the Key for Telcos’, the firm considers consumers’ relationship with operators and, according to the results, what operating leaders are doing that allows them to outperform the rest of the pack. The study itself involves 5,700 mobile consumers across nine countries in the US and Europe.
The study finds that telco operators have a relatively unchanged model since the start of the mobile networks, and that they have mostly stuck to a standard playbook: lay out networks, expand cross-channel presence, offer a plethora of plans with limited differences, and when new generation technology goes mainstream, adopt it and repeat the cycle.
The survey results suggest, however, that this model is starting to buckle under consumer sentiment. The ‘net promotor score’ (NPS) averages a negative score for telcos, with dissatisfaction widespread across geographies and operators. The lowest scoring average for respective countries are the Netherlands, with an average -11, and Spain, with -8. The UK has a more positive outlook on telcos, with a NPS of 7, while the US has the highest average score, at 14.
The low NPS for operators across the board is made considerably worse when considering cross-border studies, which confirm that mobile operators lag behind other sectors in terms of customer satisfaction and experience.
According to the consultancy, one area in which operators appear to be lagging behind is providing digital propositions to customers that are increasingly expectant of such propositions. Physical channels are, according to this survey, falling out of favour among customers, with only 8% that consider the existence of stores as a must-have for mobile operators.
In a bid to better understand the relationship between digital offerings of operators and NPS score, the consultancy explored the correlation between several key characteristics. When mapping the relationship between the percentage of customers that use digital channels (web + mobile apps) for making purchases and accessing customer support, an increasing NPS was found to correlate with operators that have users using digital channels. In addition, the use of digital technologies also reduces consumer propensity to churn. Forty-six percent of consumers who rated their mobile operator “poor” in terms of the use of digital technologies plan to switch within the next year. But only 14% of consumers who rated their mobile operator “great” in the use of digital technologies plan to switch.
The study also finds that a correlation exists between NPS and the percentage of respondents that agree their operators leverages digital technologies to improve customer services experience.
Romain Delavenne, Vice President, Capgemini Consulting, says: “Consumer expectations of telco providers have changed, but many operators have failed to provide what they demand, leading to low customer satisfaction. Slow roll-out of digital services lies at the heart of the issue and this is a clarion call for operators to accelerate their digital transformation efforts or risk disruption from digital-only players.”
Falling behind the times
The research also found significant correlation between NPS scores players’ and growth over the recent period. Growth between 2012 and 2014 for low-scoring NPS firms dropped -7%, with the average age of the operator being 21 years, operating mostly a physical/hybrid digital model and using call centres and limited digital channels. For operators with high NPS scores, growth was up 33% between 2012 and 2014, the operators were mostly small, while the operation leveraged primarily digital channels for sales and customer services.
The research highlights that the risks of not meeting customer expectations are real for operators. More than half of mobile network users (58%) say not meeting the demand for a new type of customer experience will compel them to switch over to a digital-only operator that exclusively uses digital channels to interact with customers.
According to the survey results, were a cross-border tech giant provider to enter the operator market segment, a considerable number of existing customers would consider making the shift. 44% of respondents on average said they would make the shift; worrying for operators is that it are particularly the high value clients (those spending more than $50) most willing to make the potential move, with 51% of the $50 - $75 category to move while 54% of the $75 category would go.
For incumbent operators to keep up with the field, the researchers suggest one option is to launch greenfield digital operations, which have short lead times and low costs, while the longer term option is to digitalise their back- and front-end, which is forecasted to cost up to $500 million and would take five years to realise.
Romain Delavenne concludes: “It is clear that investment in digital is key to improving customer satisfaction, however many incumbent operators are saddled with legacy platforms and distribution channels that make true digital transformation difficult. The success of the newer breed of digital-only or hybrid operators in driving customer satisfaction and revenue growth provides a transition path for more established competitors. For many incumbents, realising quickly the benefits of digital could be tackled by launching greenfield, digital-only operations in the short term while continuing with core digital transformation efforts in parallel.”