After a decade of price wars, consumers are now willing to pay 20% more for an improved network and digital experience, research by Bain & Company shows. With people more and more depending on connectivity and data protection, telecom operators are presented with a window of opportunity to lure in customers with premium offerings.
Global consulting firm Bain & Company recently released a new report, titled ‘Repremiumisation: The way up for Europe’s telcos’, for which it surveyed the criteria and process of consumers to select a telecom service. The results of the more than 7,000 consumers in the UK, Germany, France, Netherlands, Belgium, Spain and Poland show that telcos are faced with the opportunity to win over consumers by providing premium, secure, high-performance offerings.
In the past decade, European telecom operators have been competing for customers by cutting their prices for network services (voice, text and data) and devices, which operators subsidised to help poach customers from one another. Although, still nearly 40% of those surveyed cite prices as the as the leading criteria for selecting a telecom service (more than twice as important as other factors, such as quality or brand), other criteria are entering the competition. The consumers surveyed say they are actually willing to pay up to 20% more to providers that offer an improved network and digital experience.
The ‘digitally powered’ segment (which makes up 25% of all consumers) is even willing to pay more than double the amount they are paying now to network operators that deliver a complete digital lifestyle ecosystem (a premium service) and 10% more for only a pure network experience.
According to Bain & Company, this shift in criteria creates an unrivalled window of opportunity for telecoms to ‘repremiumise’ their market positioning and customer value proposition by offering an integrated and superior digital experience*. “Europe’s telecom operators have traditionally competed on price, but in today’s digitally-intense, data-centric world, consumers are demonstrating a willingness and even a desire to spend more for a premium experience that will simplify and safeguard their digital lifestyle and extend their capabilities,” explains Laurent-Pierre Baculard, Head of Bain & Company’s Telecommunications, Media and Technology Practice for EMEA, and author of the report. “This is a clear and encouraging signal for telecom operators to step out of traditional price-defined networks and transform themselves into the highly secure, digital lifestyle enablers that consumers demand.”
In addition, the report notes, as consumers are depending more on connectivity, consumers are not only requesting a high level of network quality but also of security, as they experience growing concerns around the safety and privacy of their data. As a result, they will select network providers they trust to protect this data. “The more that customers perceive risk, the more likely they are to focus on a limited set of trusted providers, creating a distinct advantage for those telecom operators that can effectively reduce customers’ concerns,” comments Baculard.
Telecoms should go forward by shaping their repremiumisation strategies around two parallel transitions, the report notes:
- Rather than offering one-off features and pricing, telcos should offer a premium, holistic digital offering, which consistently proves why their network offers an enhanced and more secured digital environment.
- Telcos should make more focused network investments to improve network capabilities which power outstanding digital life experiences and ensure the telcos become trusted partners to consumers.
The report concludes that “the time is right for leading telecom operators to take up the challenge and reverse the trend toward commoditisation with well-planned and seamlessly executed programmes that restore the premium value of their networks.”
* A complete digital lifestyle ecosystem could include home security, smart cars and connected roads, mobile banking, digital health systems, infotainment, and digital commerce.