CMT JOURNAL THE OLIVER WYMAN - VOLUME 3
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THE OLIVER WYMAN CMT JOURNAL VOLUME 3
EDITORIAL Welcome to the third edition of the Oliver Wyman CMT Journal. The eight articles in this edition represent some of our latest thinking on the opportunities and challenges in this exciting industry. The first section of the journal focuses on how telecoms operators can change to remain relevant for their customers in a digital world. We contend that most operators’ customer experience, and the business model supporting it, is rapidly becoming obsolete when compared to how people now watch movies, get a cab, catch up with friends, book a table, listen to music, pay for something, find their way around, buy a book and, in a word, live. To retain their customer relationships, operators need to become digital, and radically so. Our lead article discusses what this implies and how operators might think about the journey. The following article underlines the nature of the next-level customer experience inherent in digital, accentuating how individualising experiences will be a key success factor for the industry. In the second section we look at how operators can create a value proposition that is sufficiently differentiated to mitigate the ill effects of a commoditising market where one easily comparable service – internet access – rises high above all others. RAFA ASENSIO Our three thought pieces describe how such differentiated value propositions can rafael.asensio@oliverwyman.com be built to become the driver for investments in next-generation networks and +34 912 126 343 innovation, from the point of view of wireless as well as converged operations. In the third section of this journal, we turn our attention to the telecoms network and how it is likely to change fundamentally in the future. The article on network virtualisation points to several emerging opportunities for operators, which should place them in a position to not only increase efficiency and save costs but also introduce new functionality. The subsequent article presents a new but already proven approach to realising efficiency and margin gains: by developing lean- network target pictures, rather than running iterative cost-cutting rounds, operators can define targets in a more systematic, long-term and sustainable way. In the final section we share our views on how the ecosystem is changing, focusing on roaming this time. We explain why the present disruption to the international roaming market could well become a tsunami for the industry, potentially changing the dynamics of competition in almost every domestic market. I hope you will find the CMT Journal inspiring and thought-provoking. Please do not hesitate to contact me or my colleagues to discuss further. Best regards, Rafa Asensio Global Head of Oliver Wyman’s Communications, Media & Technology Practice
CONTENTS
TRANSFORMATION
6 THE DIGITAL TELECOM OPERATOR
An industry at the verge of a new paradigm
18 NEXT-LEVEL CUSTOMER EXPERIENCE
Avoiding hassles is not enough
VALUE PROPOSITION
30 WIRELESS VALUE PROPOSITION
Maintaining differentiation in a commoditising world
40 FIXED-MOBILE CONVERGENCE
AS A COMPETITIVE WEAPON
There will be winners and losers
52 EXPERIENCE-BASED CONVERGENCE
The ultimate customer-centred approach
OPERATIONS
62 NETWORK VIRTUALISATION
Science fiction or reality?
74 A FUTURE-PROOF APPROACH TO
SET NETWORK EFFICIENCY TARGETS
A lean-network, target-picture approach to replace
iterative cost cutting every year
ECOSYSTEM
84 THE ROAMING TSUNAMI
Disrupting the whole industry?
Digital companies are adopting a very different mindset to ride the wave.
TRANSFORMATION
THE DIGITAL
TELECOM
OPERATOR
AN INDUSTRY AT THE VERGE
OF A NEW PARADIGM
Despite the fact that telecoms companies are
providing the very fabric of the digitisation wave
currently disrupting many industries, most are
themselves standing aside from the action. One
consequence of this is that the telco customer
experience is rapidly becoming obsolete. The
same is true of the FMCG-inspired business model
that has formed the foundation of the industry
since the late 1990s – monolithic brands, massive
distribution and bold public promotion are
increasingly old hat. While some telcos continue
to wait or embark in broad, slow transformation
efforts, digital companies are adopting a very
different mindset to ride the wave.
7
CMT JOURNAL | VOLUME 3
Digitisation is a wake-up call for the telecoms Digital companies such as Airbnb, Amazon,
industry. The cards are now being dealt for a Apple, Google, Netflix, Skype, and Uber
new game – one in which competitive stability are placed well above them in the ratings.
is no longer the norm and where the most agile Telcos often come towards the bottom of
companies, those that are able to shift their the list in NPS benchmarks, for example (see
mindset, will outsmart the rest. Exhibit 1). Why? In our view, these low ratings
reflect the fact that most telcos provide an
obsolete customer experience, sell a range of
services that are needed less and less, and are
TELCOS ARE LOSING interchangeable in the eyes of consumers.
THE RIGHT TO SELL
Telcos have long been sitting pretty. This is not to decry telcos. Telecoms operators
Historically, their ownership of licenses and continue to be robust, large and strategically
access to spectrum and capital have given important companies. They provide one highly
them the right to operate. Regulation has by relevant service – internet access – which
and large matched this right with the right continues to be vital and high growth. A few,
to sell to their customers. However, the right though not many, can also afford to play the
to operate and the right to sell are not the content game, thereby gaining an edge in
same thing. terms of differentiation.
This difference becomes readily apparent All this has in fact been enough to extend the
when looking at how customers see things. life of the telco’s current business model and
Customer satisfaction surveys indicate that to provide a false sense of comfort to many
most telcos score only low to moderate marks. in the industry. Nonetheless, big questions
Exhibit 1: Industries ranked by Net Promoter Score (NPS)
RETAILING 26% 50% 73%
ONLINE/DIGITAL SERVICES 13% 46% 76%
TECHNOLOGY 6% 37% 71%
HOSPITALITY -9% 28% 66%
FINANCIAL SERVICES -15% 24% 83%
INSURANCE -15% 23% 74%
TELECOMS -21% 11% 38%
Source: SatMetrix data
8
TRANSFORMATION
Exhibit 2: Impact of voice and SMS ARPU
VOICE & SMS ARPU TELCO CUSTOMER LOYALTY
-28.5%
12.3 “1-in-3 customers
8.8
are thinking about
switching mobile
operator at any time”
Q4 Q3
2012 2015
Source: Large Western-European operator public statements. Entire base. Currency withheld Source: WDS Mobile Loyalty Audit 2014
remain. Many traditional telco services are access to the internet in the first place. With
losing their relevance for customers, and while the support of some regulators and new
they do provide one vitally important service, technical developments like eSIM, companies
this is inherently undifferentiated. such as these will get many more opportunities
to “out-retail” relatively stagnant telcos,
Added to this is that the way telcos deliver and relegating them to the status of wholesalers
sell these services is increasingly obsolete in of bandwidth.
the eyes of customers, as the gap between
their experience of the telcos and that seen These threats have not gone unrecognised by
elsewhere grows ever larger. This threat is the telco industry. A few players (notably but
compounded by the introduction of regulation not exclusively MVNOs that have no legacy
and the advent of new technology that opens operations to worry about) are trailblazing a
avenues for increasing disintermediation. digital telco path, some are already achieving
Already some of the digital companies (the impressive results. FreedomPop, free and
companies with high user satisfaction) GiffGaff are examples of successful businesses
are starting to sell telco services to their that have characteristics distinctly different
consumers. In such conditions, how long can to the established telcos. While this success
the telcos remain relevant for their customers should not be overstated – after all, these
and retain the right to sell? companies are often seen as marginal
innovators that appeal only to specific, small
If they lose this right, others will undoubtedly segments – the question remains: is there a
take their place. Large mobile OS makers, way for mainstream players to go digital too
social media companies, messaging app and, if there is, what does this entail?
providers, search engines and other prominent
owners of phone-screen real estate already
have equivalent, if not better, brand permission
to provide internet access – in fact, they are
often the very reason why customers need
9
CMT JOURNAL | VOLUME 3
THE DIGITAL TELCO Starting with the experience, Exhibit 3
highlights the major elements of our own
CUSTOMER EXPERIENCE vision of how a digital telco can work for the
The digital question can be put another way: customer. Adopting such an approach will help
just how radical do telcos need to be when telcos regain relevance and ensure they are
going digital? This question is at the heart of competitive, both against other telcos as well
what the industry is currently wrestling with. as newer digital companies.
By now, most telecoms executives are moving
their companies towards digitisation. Online It is quite reasonable that some industry
channel offers have been around for a while. executives will be sceptical about a number of
Mobile apps for self-care are common and are the features highlighted in Exhibit 3. Releasing
improving rapidly. Lots of work is being put into control to the customer has often been viewed
streamlining customer processes. And yet – the as ARPU dilutive, for example. In addition,
actual telco customer experience has so far there are fears that making disconnection easy
changed little – certainly when compared to could increase churn.
how customers now watch movies, get a taxi,
stay in touch with friends, book a table or a Though there is some validity to such
place to stay, listen to music, pay for something, concerns, the early experience of those that
find their way around, or buy a book. are implementing such ideas shows that when
the customer experience is implemented well
With customer habits and expectations consumers can actually use their newfound
changing so quickly, merely continuing to freedom to boost their consumption:
digitise customer processes is insufficient. It customers feel more at ease, less threatened
pays to think further ahead and formulate a and less constrained than when they were sold
vision of the company’s future digital business operator packages. Also, once disconnection
model, all the way from the customer and reconnection is made easy, customers
experience up. might actually become more loyal to the
experience and less prone to disconnecting.
This highlights that going digital is as much
about a brave, radical shift in business
mindset as it is about making the experience
more digital.
If a new business mindset is needed, then,
telcos face a double challenge: not only will
tomorrow’s customer experience need to
be fundamentally different, but so will their
business model.
Merely continuing to
digitise customer
processes is insufficient.
10TRANSFORMATION
Exhibit 3: Elements of the digital telco customer experience
TYPICAL TELCO FUTURE DIGITAL TELCO
CUSTOMER EXPERIENCE CUSTOMER EXPERIENCE
Physical channels used for hardware distribution, but
Customers are sold and provisioned services
users buy and activate most services and connections
1 REAL-TIME
ACTIVATION
through a mix of physical and online channels,
often requiring paperwork and implying
(except for new physical lines that require installation)
on their device in real time, with flexible configuration
significant lead times.
and payment options and no paperwork.
All services (even third party ones) can be bought,
Customers largely subscribe to fixed tariffs
configured, suspended or cancelled at any time by the
that are structured around pricing plans
USER CONTROL & customer, in real time and without human interaction
2 FREEDOM OF CHOICE
designed by the operator. Changing these
requires human interaction and is subject
(customer app talking directly to operator systems).
Tariff plans may exist as an optional construct for
to rigidities set by operator rules.
convenience and savings.
The emphasis is on form, design and elegance, as
The emphasis is on features and price. Though much as on the proposition itself. Customers use
customers have less options and variants than simple, intuitive and beautiful graphic interfaces
in the past, those on offer are still sufficiently that allow intuitive configuration from many possible
TRANSPARENCY,
3 SIMPLICITY & BEAUTY
complex to prevent them picking the best
one for them. Nor can they be sure that
combinations. The interface provides immediate
transparency in terms of price/service trade-offs. This
this continues to be the right one as their ensures their own offer provides exactly what they want
needs evolve. (and want to pay for). The offer is modified as their
needs evolve.
Customers feel their operator remains in
Customers are – and feel – in control of their
control. There are continued rigidities in
CUSTOMER experience. They can decide to upgrade, use and spend
4 CENTRICITY
the offer design, including limitations to the
changes that can be made to plans in terms of
more, if they so choose, because the experience proves
worth it.
duration, penalties and so on.
Customers feel less need for support (given the
Customer support enquiries are directed level of transparency and user control), and the
to the operator, most of which require call majority of enquiries are responded to by others in
LOW NEED centre interaction. Operator actions (e.g. the community. In return, those offering help receive
5 FOR SUPPORT commercial campaigns) prompt users to call credit. Operator support is mainly around technical
for support more often than would otherwise issues, handled through online interactions or call-
be necessary. backs – and very rarely initiated by incoming calls,
except in emergencies.
Customers receive operator offers and
campaigns that are designed by marketers Customers receive promotions from intelligent bots
based on off-line behavioural research that are tailored in real time. The promotions are non-
6 CONTEXTUAL
MARKETING and which are pushed out to specific user intrusive, contextually relevant, solve real problems and
segments through SMS, outgoing calls, can be accepted onto the device with a single click.
and e-channels.
Disconnection and reconnection are as easy as an
Disconnection is cumbersome and difficult.
EASY on-screen flick of a switch. Due to the combination of
7 DISCONNECTION
The process is often linked to a payment
default. Reconnection is a lengthy process.
prepayment, transparency and real-time control, large
payment defaults are relatively rare.
11CMT JOURNAL | VOLUME 3
THE DIGITAL TELCO support activities currently embedded
within other functions, such as commercial
BUSINESS MODEL administration, logistics, commercial and
While it is difficult to be definitive in support back offices. IT will change too,
prescribing what tomorrow’s digital telco will but here we expect the efficiencies from
look like, through our extensive work with simplification to be counterbalanced by
global telecoms executives on this concept we significantly increased expenditure on more
see a series of themes emerging – collectively advanced customer-facing functionality.
these themes paint a very different picture to
the one seen today.
KNOWLEDGE POWERED
Telcos will become maths houses – and
LEANER AND SIMPLER competitive advantage will be built on this
We expect tomorrow’s digital telco to capability. Data – coming from multiple
employ under half today’s headcount. Strong sources, including direct, always-on
headcount and external cost savings can tracking of client behaviour – will be an even
be expected from digital operating models more differentiating asset than network
in multiple areas, especially marketing and infrastructure for the digital telco. Significant
service development, sales and retention, investment will go into developing and
customer care, billing and collection, and exploiting this asset. Other related areas
overheads – the latter notably including for priority investment will include the
Exhibit 4: App-centric customer experience
Donuts provide immediate visually
intuitive feedback on:
• Total contracted capacities
across major services
2h00 1Gb €5
• Real-time consumption and
remaining capacity
1h18 left 952Mb left No extra credit
2h 3h Unlimited Sliders make complex trade-offs
feel simple:
VOICE Included €2 €4 • Three intuitive sliders permit
240 choices without apparent
100Mb 250Mb 1Gb 2Gb
complexity
• Customer feels fully in control
H+ DATA Included €3 €6 €10
and gets immediate feedback
on choices
€5/month
EXTRA €0/month €20/month
12TRANSFORMATION
computing power and advanced machine- REAL TIME
learning techniques needed to turn data into
knowledge. This investment will enable better Digital-age customers expect real-time
managerial decisions as well as automatic responsiveness in terms of continuous
decision making: for example, the launch transparency with regard to consumption,
of an impulse data, top-up promotion for a immediate activation, modification and
specific customer. deactivation of services, time-sensitive
promotions, and instant feedback on user
actions. Such features are key elements of
NEW TALENT MODEL the customer experience. To meet these
Besides demanding a smaller workforce, goals, systems and processes will need to be
tomorrow’s digital telcos will require very rethought wherever customers are affected,
different talent profiles. Traditionally, telcos avoiding batch processes and eliminating
have employed scores of call centre and lead times.
back office agents, shop clerks, salespeople,
marketeers, product managers, controllers, COMMUNITY SUPPORTED
and pricing specialists. All these groups and
others will shrink significantly. At the same In contrast to today’s operators, the best of
time, as the mix of operator activities changes, tomorrow’s digital telcos will nurture vibrant
demand will surge for software engineers and user communities. In such communities,
developers, data scientists, machine-learning satisfied users will support each other,
specialists, UX/UI experts, digital marketeers, reinforcing satisfaction and recommending
content and social media experts. Consistent services in exchange for benefits. The focus will
with this, we expect the average cost per not be on the telco “feeding” the community in
employee to rise. order to keep it active but, rather, on keeping
the right balance of incentives, recognition,
member-recruit-member schemes and events
CUSTOMER-FACING IT that encourage the community to work
Current operators manage IT as an important spontaneously for the telco.
enabling function, though fundamentally a
back-end one: this is widely apparent across A DIGITAL CULTURE
the organisation, not only in terms of the talent
profile but in terms of the power of the function Perhaps the biggest difference between
itself, as well as in the cultural perceptions with tomorrow’s digital telco and today’s will be
regard to IT. In tomorrow’s digital telcos, IT will in their culture. Employees will be more data
touch the customer more directly: customer driven, discussions more analytical. Digital
interfaces will speak directly to operator telcos will need to be more meritocratic
systems without human intermediaries, IT organisations in order to be better able
developers will directly shape the experience to compete for top talent in the high tech
and functionality of the digital operator marketplace. Their change programmes
front-end, and improvements in the customer will target 10X improvements rather than
services experience will derive more from their incremental ones: why reduce the back-office
digital interaction than from the connectivity load if it can be eliminated altogether? And
services themselves. In other words, IT will the focus of such innovation will shift from
become a customer-centric and customer- providing new services to enhancing the user
facing function and will need to be managed experience and improving industrial design
as such. and workflow, while the timeframe for such
initiatives will shorten significantly.
13CMT JOURNAL | VOLUME 3
HOW OLIVER WYMAN IS HELPING TELCOS TO
CREATE A FULLY DIGITAL CUSTOMER EXPERIENCE
Oliver Wyman is helping a number of help in the form of manual intermediation,
operators to incubate digital telco start-ups. thus destroying the digital experience.
The new entities are to be launched either
as digital MVNOs, second brands or as new To address these issues, Oliver Wyman has
offers. The digital start-up helps the telco secured access to the technology assets
to gain time to market, bypass its legacy required to build the digital telco experience
and accelerate its transition to pure digital. from the ground up. The heart of this is a
Though creating such a digital customer
digital BSS that plugs straight into (rather
experience is only one part of the journey
than integrate with) the core operator assets,
towards becoming a fully digital company,
such as provisioning and IN platforms. This
creating a start-up usually proves a no-regret
move for most telcos. technology is able to handle all the relevant
aspects of the customer experience in a
The approach builds on our historical simple, elastic cloud-based solution. This
“start-up in a box” expertise, with which lets the operator’s current systems do the
we have previously launched nearly 40 heavy lifting of real-time rating, while the
operations. The new approach combines digital platform takes care of the intelligence
business, commercial and operational required to facilitate the customer experience
expertise with the technology necessary to and desired scalability.
create a new offer that provides a fully digital
customer experience. In implementing this approach, we work
with “digital native” customers to co-
We have seen first-hand how complex,
design and fine-tune the offer structure,
costly, time-consuming and risky it can be to
the experience and the look and feel of the
upgrade legacy systems in order to deliver
digital environment. This ensures that the
a digital vision. The focus of our approach
is therefore on overcoming the major customer’s digital experience is comparable
technological challenges that stand in the to that of using their favourite apps. We then
way of enabling a digital telco offering. Unless deploy the necessary resources and expertise
the technological complexity deep within the to create a process that is fully integrated
operator’s OSS/BSS is addressed adequately, into the telco’s business, prior to bringing the
customers will continue to require extensive concept to market.
14TRANSFORMATION
Rapid prototyping and trial-and-error DIGITAL TRANSFORMATION
approaches will gain ground, displacing
today’s emphasis on mega-projects that Many telcos have adopted programmes that aim
require detailed and long-term planning. to progressively install the elements required to
build a digital customer experience and business
model. These efforts include such initiatives
as launching product apps, pushing customer
GOING DIGITAL service into self-care, improving big data
The number one question for almost every capabilities, simplifying the offer, and renewing IT.
telecoms executive is, what is the best way
to go digital? While all agree that they want Such initiatives are not necessarily incremental
to digitise their companies, only a few truly in nature: for instance, a number of operators
embrace the radical nature of the required are deploying completely new IT stacks.
change. Frustration is common: today’s These programmes can prove difficult, time-
telcos are encumbered by substantial legacy consuming and expensive to implement, as they
in operations and customer base: achieving not only require retooling large and complex
the radical change required to develop a truly operations but also demand wrestling with the
digital model is a big stretch. telco’s legacy, while protecting customer pricing
and its market position and at the same time
Though there is no easy answer to such shifting the mindsets of thousands of employees
questions, companies are by and large to a completely different model. Despite these
exploring one of two change strategies: challenges, transformation programmes are
wholesale digital transformation or the vital in that they hold the promise of moving the
creation of a digital start-up (see Exhibit 5). dial by truly transforming the entire company.
Exhibit 5: Digital transformation and digital start-up combination
DIGITAL TRANSFORMATION
DIGITAL PATH Inspiration for
mainstream
operations
DIGITAL START-UP
DIGITAL PATH
15CMT JOURNAL | VOLUME 3
DIGITAL START-UP Both the transformation and start-up
approaches clearly have advantages. And,
An alternative route is to create what in effect is handled rightly, both can be compatible.
another telco – a purely digital one. This entity This has led some operators to explore both
is created “on the side”, typically as a segment- avenues simultaneously. Doing so enables
oriented flanker brand or product line, possibly them to do the groundwork required for
even mimicking the mainstream brand for making the long-term transformation towards
new customers. If successful, the “new” telco digital, while also enabling them to launch
will progressively gain weight in the P&L. The digital services relatively quickly, without
idea behind this approach is that it enables the having to wait for all their operations to
operator to immediately put in place the ideal conform to the new pure digital experience.
model for its digital operations and to then Taking this dual path approach can achieve
use the new entity either to migrate its legacy immediate impact, bypassing many of the
customers and activities towards the new problems associated with migrating legacy
operation, or to import the digital experience operations and customers.
and processes from its new operation onto
the old. The question remains, of course: how to
bridge both paths? Even accepting that a
In either of these approaches, it is crucial that digital start-up has a vital role to play, there are
the operator puts in place a clear governance numerous hurdles to overcome. Developing
setup vis-à-vis its existing operation: this needs a path that successfully migrates customers
to be endowed with sufficient empowerment from the legacy operation to the digital start-
to secure the resources and focus required for up is clearly a far from straightforward task.
the project to succeed. The logic of the start‑up The start-up will need to be grown to sufficient
approach is threefold. Firstly, it enables scale to be able to absorb the majority of
operators to go digital quickly – this can often the telco’s legacy customers and activity
be achieved in a year or even less, compared prior to the telco making the final migration
to the multi-year timeframes demanded for and switching off of its legacy operation.
a full transformation journey. Secondly, since Likewise, in the alternative approach, that of
the new entity is independent of the legacy developing a path that transfers capabilities
operation it allows the operator to take a more and activities from the digital start-up to the
radical approach to digitising. This is critical legacy operation, the digital entity will need
since, to be fully realised, “going digital” is to be capable of helping to accelerate the
much more than merely digitising existing telco’s transformation, not just of functioning
services. Thirdly, this approach enables the on its own behalf. This will include transferring
telco to manage risk better – if the venture apps, the offer structure, customer data
fails, the original operation is not dragged and knowledge, real-time promotions, and
down with it. community-based support. Both these
approaches demand that the telco’s digital
business model and its vision for its digital
customer experience tallies with those of
An alternative route is to the start-up.
create what in effect is
another telco – a purely
digital one.
16CONCLUSION
Telcos need to be clear about all their vision, chosen
business model and the route they will take prior to
any attempt to go digital. While getting these things
right might not be simple, in our view, launching a
digital start-up is likely to be a no-regret move for
many a telco. Over the next eighteen months, we
expect to witness a significant increase in activity as a
growing number of telcos launch digital operations.
RAFA ASENSIO is Global Practice Leader CMT.
rafael.asensio@oliverwyman.com
PIERRE DE MASCAREL is a Partner based in Dubai.
pierre.demascarel@oliverwyman.com
MAARTEN DE WIT is a Partner based in Dubai.
maarten.dewit@oliverwyman.com
JAD HADDAD is a Principal based in Dubai.
jad.haddad@oliverwyman.com
AHMAD MOURTADA is an Engagement Manager based in Dubai.
ahmad.mourtada@oliverwyman.com
THOMAS NACHTWEY is a Partner based in Düsseldorf.
thomas.nachtwey@oliverwyman.com
Thank you to Abdessamad Benzakour and Mathieu Horn for
their contributions.
17Will initiatives,
such as simplifying
customer communications
and the layout of bills, be
enough to win tomorrow’s
customers?TRANSFORMATION
NEXT-LEVEL
CUSTOMER
EXPERIENCE
AVOIDING HASSLES
IS NOT ENOUGH
The importance of great customer experience
is unquestioned in the telecommunications and
cable industry. However, to date the provision
of customer service has in practice been
dominated by firefighting customers’ day-to-
day frustrations and concerns – their “hassles”. A
long list of improvement opportunities has often
led traditional telecoms operators and cable
companies to follow a tried-and-tested approach.
They collect “pain points”, map customer
feedback along the customer journey and draw
“customer hassle heat-maps”. Then they put
forward initiatives, such as simplifying customer
communications and the layout of bills, reducing
the amount of small print, and improving self-
installation procedures. But will this be enough to
win tomorrow’s customers?
19CMT JOURNAL | VOLUME 3
Various customer experience-related Key
Performance Indicators (KPIs) have been
LINKING THE
developed and applied. Though focusing on CUSTOMER EXPERIENCE
measures that reduce customer effort may EQUATION TO ACTIONS
seem the right thing to do, this is unlikely to AND CUSTOMER
take telecoms operators and cable companies
to the next level of customer experience for
PREFERENCES
two reasons: The three performance (or non-price) variables
of the customer experience equation are turned
1. These efforts often get operators bogged into possible actions by relating them to the
down in fixing the existing business model
underlying dimensions of customer experience
in order to solve the problems of today’s
(see Exhibit 2). Telecoms operators and
customers. This prevents them from
reinventing themselves structurally to meet cable companies can only improve customer
the expectations of tomorrow’s customers. experience in a sustainable way if they improve
For example, the 14-year-olds of today who performance on all these dimensions. We
already spend considerable time on social should acknowledge that, in each dimension,
media will expect even more as adults. customer preferences vary. For instance, a
2. They are addressing only one driver middle-aged “offliner” might perceive a 24/7
of customer experience, namely, hotline as providing great customer service
customer effort. access, whereas a 14-year-old “digital natural”
might prefer a searchable internet community
In contrast, advanced firms are starting or WhatsApp interaction with an agent.
to apply a broader definition to customer Specialist players like GiffGaff (see Case Study
experience. To capture this trend, we 2, page 24) have tailored their business models
developed a customer experience equation to address the preferences of very specific
that provides a more comprehensive approach customer segments.
(see Exhibit 1).
Established players will have to find new
We have observed that the value perceived ways to individualise customer experience, or
by a customer cannot be increased merely risk losing out to these segment specialists.
by reducing perceived effort. In addition to In a world where we increasingly expect
focusing on the perceived price, companies individualisation, classic segmentation that
could also focus on increasing the perceived lacks data about customer preferences will no
benefits to be gained from using the product longer be sufficient. One approach is to start
and satisfying emotional needs. So far, asking (prospective) customers explicitly for
only a few companies are addressing this their preferences: “Which would you prefer: a
systematically (see Case Study 1, page 24). 24/7 hotline; or our community/app, and pay
less?” This will require flexible, streamlined, and
integrated back-end processes and systems.1
Exhibit 1: The customer experience equation
PERCEIVED PERCEIVED
PERCEIVED PERCEIVED
ACTUAL BENEFITS FROM PERCEIVED
BENEFITS FROM CUSTOMER
VALUE TO SATISFIED PRICE
PRODUCT USAGE EFFORT
CUSTOMER EMOTIONAL NEEDS
1. Read more about this in our report “90% of an iceberg is underwater. For breakthrough customer experience, start with back-end simplification”
20TRANSFORMATION
PROGRESSING TO relationship in customer experience design
does not apply here since marginal costs are
THE NEXT LEVEL OF low (see the right-hand chart in Exhibit 4).
CUSTOMER EXPERIENCE These opportunities might, for example, arise
To achieve success with tomorrow’s customers, from the creative actions of customer-facing
operators typically develop in three stages, employees. They can be easily replicated and
gradually broadening their focus and level tend to create attention in social media, but
of sophistication regarding the customer usually do not last long. The continuous search
experience equation’s drivers (see Exhibit 3). for such ideas and the creation of a climate
that incubates them presents a challenge to
companies that wish to reach Stage 2.
STAGE 1: GET THE
BASICS RIGHT
STAGE 3: INDIVIDUALISE
This stage focuses on reducing customer effort.
THE EXPERIENCE
The corresponding initiatives will have a positive
impact on effort scores while seeking to limit the At this stage, customer experience design
number of detractors. In terms of the customer needs to be able to address the preferences
experience equation, the outcome of mastering of individual customers while at the same
Stage 1 will be an actual value perceived by the time creating a win-win situation for both
customer that is greater than zero, commonly the customers and the operator (vs. today’s
called “good customer experience”. business model). While established players
can reach Stages 1 and 2 by fixing or modifying
Staying at this level typically yields a higher their current business model, Stage 3 will
return on investment than going beyond it, as
the incremental costs of increasing average
customer loyalty through better customer Exhibit 2: Dimensions in the customer experience equation
experience rise with the loyalty level (see the CRE
left-hand chart in Exhibit 4). Many companies AT
T IN
G
have achieved this stage and our experience OR BE
FF
reveals cost-reduction opportunities SOLUTION
NE
RE
SIMPLICITY
& &
FIT
ME
of up to 50% for specific areas, such as USABILITY SERVICE
S
TO
ORIENTATION
FR
complaint management.
US
OM
NG C
ACCESSIBILITY PERFORMANCE PRO
STAGE 2: CREATE &
REDUCI
DUCT USAGE
QUALITY
SMART, EMOTIONAL,
“WOW” OPPORTUNITIES
This will not only require creating a “hassle- PROACTIVITY FLEXIBILITY
free” customer experience but a “wow” factor
too. Referring to the customer experience
equation, this means an actual perceived value FAIRNESS
to the customer greater than the expected & PERSONAL
CONSISTENCY APPRECIATION
perceived value.
TRANSPARENCY
The “wow” should not come at any cost
but should be achieved in an economically
SAT
sustainable way. This means looking for “smart ISF Y
IN G E M EDS
wow opportunities”: the classic cost-benefit OTIONAL NE
21CMT JOURNAL | VOLUME 3
Exhibit 3: Three stages to the next level of customer experience
STAGE 1 STAGE 2 STAGE 3
“GET THE BASICS RIGHT” “CREATE SMART, EMOTIONAL WOWs” “INDIVIDUALISE THE EXPERIENCE”
FOCUS ON REDUCING CUSTOMER ADDITIONALLY, SATISFY INDIVIDUALISE
EFFORT AND CREATING BENEFITS EMOTIONAL NEEDS THE EXPERIENCE
FROM PRODUCT USAGE
Create positive perceived Create perceived value greater than Create perceived value greater than expected
value for most customers expected value for most customers value for each individual customer
• Avoid customer frustration • Address emotional needs by creating • Provide a customised experience; not every
benefits from product usage experience appeals to everyone
• Focus on eliminating hassles and pain
points to improve the experience • Find “smart WOW opportunities” to turn • Better understand customer preferences
customers into promoters in a cost and give them the power to choose
efficient way
TRADITIONAL APPROACH, TYPICALLY WORKS WITHIN CURRENT BUSINESS MODEL REQUIRES (RE-)INVENTION
OF BUSINESS MODEL
Experience: Entry level Advanced Customised
Exhibit 4: Cost-benefit relationships in customer experience design
CLASSIC COST-BENEFIT RELATIONSHIP... … TURNED AROUND WHEN FINDING
“SMART WOW-OPPORTUNITIES”
AVERAGE CUSTOMER LOYALTY AVERAGE CUSTOMER LOYALTY
Getting to “wow” = low ROI
Current level Current level
Disappointing less = high ROI “Smart wow-opportunity” = high ROI
Missing... Meeting... Exceeding... Missing... Meeting... Exceeding...
… expectations of average customer … expectations of average customer
CUSTOMER EXPERIENCE EFFORT/COSTS CUSTOMER EXPERIENCE EFFORT/COSTS
22TRANSFORMATION
require serious (re-)invention. As models like billing, random credits, loyalty schemes
GiffGaff’s only work for customers with very and lack of clarity. The result is more calls to
specific preferences, established operators customer service centres and long queues at
will need to emphasise customer experience retail outlets – which do not add value.
individualisation, which could lead to a
segment-of-one approach. While most of these aspects only help to
achieve an entry-level experience, there are
Let us look at a typical GiffGaff subscriber. The some wow opportunities. Many of today’s
subscriber’s increased loyalty resulting from customers can still be surprised by a zero-
GiffGaff’s extra effort in customer experience configuration experience. And even tech-savvy
(for example, longer helpline opening hours) members of Generation Y can be delighted by
is near zero, given that an online community a mobile app that, while guiding them through
is available to offer help. This implies that, a video-based troubleshooting process,
at Stage 3, operators should allow users to connects them live to a well-informed agent.
customise their experience according to their
preferences and should reflect lower customer
requirements in lower prices (for example, by BE PROACTIVE IN SOLVING
allowing a digital natural to deselect the free CUSTOMERS’ HASSLES
24/7 hotline in return for a reduced monthly Being proactive benefits both sides. For
bill). The potential complexity this results in example, telling customers about planned
could be partially offset by self-service options. maintenance means reduced effort for
If, for instance, a customer chooses the online businesses (fewer calls to help lines) and less
community, this eliminates a call to the hotline dissatisfaction for customers (less time spent
but requires flexible pricing so that part of the in call queues or troubleshooting the problem
cost benefit can be given back to the customer. themselves). A Latin American operator
decided to remotely reboot its set-top boxes
in the early morning to avoid accumulating
REDUCING errors, degrading TV video quality and
additional calls from customers.
CUSTOMER EFFORT
Progressing to an advanced experience
INTRODUCE SIMPLICITY AND requires operators to go further than
USABILITY AT EVERY STEP providing information. They need to resolve
What more can be done to reduce customer issues in ways that are convenient, friendly,
effort? Operators that have got the basics right and proactive, for instance: “We noticed
in terms of simplicity and usability have done your internet connection is down. While we
so by drastically reducing the number of tariffs fix it, please use mobile phone tethering,
and options and removing one-off fees. They which you can find in our service app. As you
have also removed one-month terms, bearing frequently use VoD, we activated our mobile
in mind that unhappy customers locked into VoD service for you, free of charge, to watch
long contracts can become detractors on your favourite series for the next 30 days.”
Twitter. Some operators have shortened their Some operators already take the first steps to
small print, rewriting it in plain language. implement such proactivity, as in the case of
Fewer have achieved a simple, consolidated, a European operator who monitors effective
fixed-mobile bill that shows a single total (e.g. broadband throughput and opens a ticket
monthly charges, plus VAT, minus discounts). internally as soon as it drops below 80% of the
Still too many customers are confused by customer promise.
23CASE STUDY 1: CASE STUDY 2: CASE STUDY 3:
NETFLIX CREATES A CROWDSOURCED CABLE COMPANY
EMOTIONAL BONDS MOBILE PROVIDER AND VISION FOR CUSTOMER
WITH CUSTOMERS “TRADITIONAL RADICAL” EXPERIENCE
Some business-to-consumer GiffGaff in the UK is known as the Based on the conviction that a pain-
companies have mastered the art of first Mobile Virtual Network Operator point-by-pain-point elimination
addressing basic emotional needs, (MVNO) that not only relies fully on initiative would not generate the
like personal appreciation, to create an online community for customer required customer experience
exceptional customer delight and service but that has also established uplift, Oliver Wyman worked with
emotional bonding in interactions the community as a central part of the a US client to develop a customer
customers would otherwise regard company, being “the mobile network experience vision that can serve as a
as commonplace. run by you”. “target corridor” for all ongoing and
upcoming efforts.
Customer experience leader Netflix is To incentivise community
a good example: with a Net Promoter participation, GiffGaff credits Key themes such as “relationships
Score (NPS) of +54 and a history of members with points if they make within the household”, “multi-device
“engaging with people like people”, valuable contributions. Points can be self-installation”, and “proactive
it builds strong relationships, as the converted into Airtime Credit (for calls content recommendations” have been
following anecdote illustrates. When and texts), cash, or charity donations. underpinned by target processes
a Netflix subscriber, Norm, used GiffGaff also crowdsources marketing, and illustrated to convey the vision
the online chat to contact customer PR, sales, and product development. across the organisation. Based on
service about his problem with a As the company has no distribution this, the underlying enablers, such
video, the service rep responded by channels or significant advertising as a modular product catalogue,
introducing himself as “Captain Mike budget, it relies on community users and a flexible customer data model
of the good ship Netflix”. to promote its products. It discusses have been derived and planned
product ideas from the community in for realisation.
“Lieutenant Norm” got into the role, weekly management meetings and
replying as an officer from sci-fi series gives feedback to the community. To deliver the desired future customer
Star Trek. The ensuing conversation Community members engage in experience requires a range of inputs
continued in Star Trek style as they (and get points for) viral marketing, that span a broad range of domains,
solved the technical issues. Norm then advertising video production, and from system enhancements (such as
shared a screenshot on social media, app development. revised customer or household data
which created considerable buzz and models) to product and offer design
certainly did no harm to Netflix’s NPS. GiffGaff consistently achieves (such as invitation-only product
customer satisfaction ratings of trial offers).
85-90% and an NPS in the mid-70s,
on par with Apple (albeit limited to a
smaller customer segment).
24TRANSFORMATION
Another strategy might include predicting ensuring proactive follow-up when promised
forthcoming customer questions (for response times are exceeded. Information
example, when the customer is likely to should flow effortlessly between the physical
face an abnormally high bill), preparing and digital world: for example, allowing
agents to reach out directly to customers. customers to scan a QR code on a device or on
A revolutionary approach would be to offer printed communication.
automatic migration to the latest tariffs,
eliminating customer hassle (switching) while A key to wowing customers, while also
reducing operator effort (maintaining legacy delivering differentiated service levels according
portfolios). This is an ambitious objective to Customer Lifetime Value (CLV), is to identify
that would require regulatory compliance, the customer and their context (for example,
especially in markets where the regulator through voice recognition). The family of a
closely monitors pricing evolution. high-value business customer may have high
expectations, so it is also important to recognise
the customer as having a high household
IMPROVE ACCESSIBILITY lifetime value. A customised experience in
THROUGH SEAMLESS accessibility requires all of this but in an even
INTERACTION ACROSS more flexible way. Operators should guide
PREFERRED CHANNELS customers real-time into channels, based both
Accessibility has great potential to offer on their preferences and the current usage
advanced and personalised customer of each channel. This could be achieved, for
experiences, using a model based on seamless, example, by using a service app that displays
omnichannel customer interaction. Operators the expected waiting times and, after a certain
who want to coax a wow out of tomorrow’s time, recommends either a chat or a call back.
customers need to make switching between
channels trouble-free. The customer’s entire Furthermore, operators need to prepare for a
interaction history should be available at more diverse and changing channel landscape,
every touch point (thereby enabling, for as social media platforms first gain and then
example, an in-store sales rep to see what a lose popularity. Some advanced operators
call centre agent has promised). The continuity use Twitter (with about 300 million active
of interaction is also important: for instance, users in July 2015) as an inbound service
allowing a customer to talk to the same agent channel. However, WhatsApp is still relatively
after a dropped call to a hotline. untouched2 even though it has more active
users (about 800 million in April 2015) who use
Omnichannel experience not only means the service more frequently (70% return daily).
seamless switching but also smart channel Future interactions with customers could be
integration, such as using interactive voice managed by identifying those who are in effect
response in a mobile app to support customers subject-matter experts responding to service
when they are unable to solve a problem and requests on the operator’s behalf.
2. The Dutch airline KLM started a trial to use WhatsApp for customer service in March 2015
25CMT JOURNAL | VOLUME 3
CREATING BENEFITS current assets but also sell comprehensive
services and solutions, including hardware
FROM PRODUCT USAGE and connectivity.
START WITH THE CUSTOMER
EXPERIENCE AND WORK BACK FOCUS ON QUALITY AND
TO THE TECHNOLOGY PERFORMANCE MORE THAN
TECHNICAL SPECIFICATIONS
In the words of Steve Jobs, “You’ve got to
start with the customer experience and work Advanced operators already focus on customer
back to the technology – not the other way service performance and quality. They closely
around.” However, most telecoms operators monitor and manage possible degradations in
are still making technology offers, for example, customer experience (such as dropped calls
providing 2GB of mobile data over a 4G/LTE and poor video or sound quality) by using
connection at up to 50Mbit/s for €20 a month. Quality of Experience (QoE) features in their
This approach is problematic for two reasons. networks, Operational and Business Support
Systems (OSS/BSS), and customer devices.
Firstly, it does not reflect what customers
consciously want or unconsciously need, Most operators, however, need to do
namely, such things as, “to be online on more to show they care about customers’
Facebook and WhatsApp 24/7” or “to watch perceptions. One example would be to develop
YouTube videos uninterrupted while I’m on a mechanism to automatically compensate
the train”. Technical specifications may seem customers for poor experiences even before
important to operators but do they satisfy the they complain, turning potential dissatisfaction
wants and needs of customers? into a wow. Operators could also change their
business model to selling a customer-specific
Secondly, it limits the operators’ ability to use QoE, instead of data volume and bandwidth.
key assets such as their fixed and mobile access
network to improve customer experience. For As network capacity is constrained and
example, since most operators take steps to customer usage (and consequently network
provide for the predicted maximum load in congestion) is hard to predict, QoE-based
order to avoid local congestion at peak times, pricing needs to be dynamic to achieve better
their networks are often underused during use of the network and market equilibrium
off-peak periods. Though some operators within it. The latest research proposes various
limit data volumes or block applications (like pricing methods, such as real-time congestion-
file sharing) at times of heavy usage, most based pricing, automatic auction mechanisms,
typically focus on data volume as their main and lottery-based fixed rewards for users who
differentiator, regardless of when the data is are willing to shift their usage times. Day-
used. Better use could be made of networks ahead, time-dependent pricing has already
by tailoring the offer: for instance, “Watch as been applied in electricity markets.
many videos as you like, we set the optimal
resolution.” This approach may also provide
opportunities to offer a superior experience
at minimal cost at times when there is spare
network capacity, for example: “Make free
mobile HD video calls for the next two hours.”
In order to offer a customised experience,
operators should not only make good use of
26TRANSFORMATION
PROVIDE FLEXIBLE SERVICES Mobile offers a slider configurator that gives
THAT DO NOT LOCK customers flexibility when choosing voice and
IN CUSTOMERS data volumes (see Exhibit 5). Yatango Mobile
also recommends beneficial changes that
Customers increasingly expect the services customers can make to their plan, based on
they purchase to be adjustable, flexible and actual usage, with no fixed term.
individualised. Cloud or Software-as-a-Service
providers, such as Amazon Web Services, Allowing customers to configure their product
Google, and Rackspace, allow customers to or service means no legacy tariffs or marked-up
change service features in real time without the out-of-bundle charges. By adjusting service
worry of fixed-term contracts, out-of-bundle unit prices for all (not just new) customers,
costs, or unused quotas. Some companies operators could minimise reconnections of
offer products with greater flexibility than the existing customers, saving on Subscriber
usual tiered bundles. For example, Virgin USA Acquisition Cost (SAC). In this scenario, in
(in cooperation with Walmart) launched Data order to limit the dilution of the base Average
Done Right: this plan allows customers to Revenue Per Unit (ARPU), operators need to
share data volume on multiple lines. It offers put in place a compensatory upsell strategy.
“one-touch” options that extend voice and One example would be to adjust all sliders for
data volumes quickly and flexibly and that can existing customers to keep them on the same
exempt apps like Facebook or Spotify from ARPU, then let them choose to “pay less” or
data charges. The Australian provider Yatango “get more”.
Exhibit 5: A service offer based on slider and checkbox options optimises network usage
“CUSTOMISE ME” PORTFOLIO
VOICE DATA MUSIC SOCIAL SERVICE
Allnet Flat 5G Offline YouTube Concierge
Library
3G WhatsApp Inbound
Allnet 200min Personal
1G Library
Yes Flickr Callback ...
500MB
On-net Flat Streaming
Facebook Agent Chat
300MB
€0.x/min 100MB Radio Twitter Community
YOUR E
MOBIL E
4G LTE 3G HiFi Normal SERVIC
FLEXIBILITY
FAVOURED? Order Now
PORTFOLIO OF “STANDARD PACKAGES”
Voice Data Music Social Service
Package 3 (extra large)
No
Package 2 (medium) ...
Package 1 (small)
27CMT JOURNAL | VOLUME 3
SATISFYING PERSONAL APPRECIATION
EMOTIONAL NEEDS IS THE ULTIMATE
CUSTOMER EMOTION
FAIRNESS AND CONSISTENCY Netflix established a customer-centric culture
ARE CRUCIAL HYGIENE FACTORS and empowered its agents to interact with
customers in an appreciative and individual
Customers who feel they have been treated
way. This has led to wow experiences that have
unequally are likely to leave: looking after
helped to deepen its customer relationship.
such “hygiene” factors helps reduce customer
churn. Ensuring that there are identical offers
Operators need to connect with and learn
for existing and new customers, eliminating
about their customers. For instance, by
small print, and adhering to service promises
connecting with its customers on Facebook,
should be undertaken as a matter of course.
an operator might enrich its own CRM data
An advanced experience, increasing the
and enable its agents to relate to a customer’s
perception of fairness during the sales process,
personal life (where appropriate) more
might include cash-back guarantees or a one-
accurately (with knowledge about hobbies
click “try before you buy” offer.
and interests, reference to recent holiday
photos, etc.). Both the hotel chain Starwood
Being consistent need not mean being narrow-
and the German curated shopping service
minded. Service agents, for instance, should be
Outfittery have specially trained agents who
able to take the initiative and make exceptions.
build relationships with their customers and
gradually create full personal profiles.
TRANSPARENCY SATISFIES THE
BASIC NEED FOR SAFETY AND To offer a customised experience, operators
BUILDS TRUST should be able to participate at any level
on the personal appreciation scale – from
Customer service divisions of leading telecoms
0% in anonymous web communities run by
operators and cable companies provide full
customers to 100% in personal service models
transparency about the current state and
for high-value customers.
expected processing time of service cases.
A leading European operator, for instance,
developed a mobile app to display the status of
a customer’s enquiry, greatly reducing inbound
calls. BT, Google, and Skype all display the
technical status of services on their websites.
Where an offer or service is highly customised,
it is important for customers to see their own
CLV-based status, the service level they can
expect and the features or services they might
have to pay for.
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