Customer experience in the Telecom industry

Customer experience in the Telecom industry

The Delta Perspective

Following discussions held during Barcelona MWC 2019, a group of Tier 1 Telecom operators including Verizon, Telefonica, Telia Company, Telstra, STC and GiffGaff, reunited in London in July to discuss their key Customer Experience (CX) transformation challenges.

Several pivotal questions were debated throughout the course of the day:

  • Why is customer experience so important and how does it translate into shareholder value?
  • Why are Telcos struggling to get it right? 
  • How can Telcos reconcile digitisation and CX transformation efforts?
  • How can technology transform CX and what technology is truly real, versus hype?
  • What is the role of emotions and how important (in the context of digitisation) is the human touch? 
  • What is the role of customer analytics in CX and what is the definition of ‘good’?

From the discussions, it is clear that despite much rhetoric and a seemingly endless number of CX programmes over the past two decades or so, the industry continues to struggle in its attempt to become truly customer centric. Whilst NPS is arguably imperfect as a fact-based representation of CX, it is nonetheless a useful barometer of cross-industry relative performance and it is fair to suggest the telco industry remains bottom of the class. 

Figure 1: Telcos lag behind most industries in terms of customer experience 


The reasons for such failure are multiple yet likely anchored to the lack of understanding in how CX improvements translate into hard financial outcomes and shareholder value creation. CX remains a largely amorphous topic and CFOs are yet to acknowledge its financial impact (“churn is low, so why do we need to invest in CX?”) which, in an industry that continues to obsess about quarterly results and dividend yield, is a problem. Furthermore, there is no perceived burning platform. Whilst many CEOs lament on the disintermediation by OTTs and stress the need to build propositions that drive customer engagement, the industry is not (yet) foreseeing a Kodak moment. Neither did Kodak. 

There are several other non-trivial barriers that contribute in making CX transformation a major challenge for Telecom companies, including culture, DNA / muscle memory and organization complexity coupled with the increasingly challenging tech-driven environment.  

All these barriers need to be overcome to successfully drive CX transformation and ensure long term competitive advantage.

THE SEVEN TAKEAWAYS FROM THE SESSION 

  1. Tenuous link between CX and value is dissuading Telcos from embracing CX. Despite NPS proving directional correlation, the challenge in measuring the impact of CX coupled with the limited empirical evidence of Telcos succeeding on the basis of CX are root causes behind the lack of C-level attention and CX investment. Causality does not equate to correlation and proving a relationship between CX and shareholder value (combined with a clear equity story and mid-term time horizon) is a fundamental starting point. CX teams need to demonstrate this relationship and get the CFO on board on day 1 in to order to secure capital and resources required to drive this exercise with the proper strength. 
  2. Customer centricity not being part of the telco DNA is the key challenge to overcome. Some Telcos were born state-owned monopolies, numerous have enjoyed periods of oligopolistic competition and many have operated in comparatively benign competitive environments. Telcos have never had to think about the customer. Muscle memory runs deep and changing such dynamics is incredibly difficult. Getting this right starts with evolving anatomical DNA via the infusion of CXO talent from the outside world (e.g. entertainment, leisure, retail etc.) with mechanisms to counter antibody rejection. Furthermore, CX teams need to devise a structural programme to change muscle memory, including shift in CEO involvement from faint advocacy to belligerent, unwavering and heart-felt sponsorship, creation of  internal change squads to evangelize customer-centricity, thought training and development programme to build capabilities likes customer co-creation, closed loop feedback, agile development, etc., as well as change in incentives and rewards to reinforce customer centric behaviours through formal HR mechanisms.
  3. Beyond functional superiority, operators need to build a sense of brand ‘love’. Telcos today are generally perceived, at best, as trusted and reliable and, at worst, as expensive commodity grudge buys. By in large, they are not loved. Science has proven the relationship between emotion and decision making, advocacy and value creation and companies elsewhere are starting to understand the value of ‘brand love’ (e.g. Disney, Marriott, Pret a Manger, Emirates, Apple). Leveraging the examples from other industries, Telcos CX teams need to start embedding emotion-centric interventions across the customer lifecycle, going beyond superficial adjustments. Customers are discerning and see through cosmetic gimmicks. It needs to come from the heart which means that it needs to start from changing the employee experience: employees need to love the company (and the customer) if you want customers to love the company.
  4. Digitisation in its current shape is failing to deliver on the promise - a shift is needed. The shorter term, more measurable nature of digitisation has made it the key profitability improvement initiative of Telcos in recent years. However, the industry is starting to realize that digitisation expectations have been overhyped (with a decoupling between anticipated cost savings and true value generation) and that digitisation cannot be treated in isolation to experience. Maximizing value creation requires CX teams to anchor digitisation initiatives into the broader CX agenda whilst better understanding the timescales (and short-term cost implications) of digitisation value realization. The two topics are inextricably linked and CX teams need to ensure they are being managed accordingly.
  5. Tech can be a powerful tool in improving CX – Telcos are not exploiting it yet: Other industries are successfully leveraging new technologies such as AI, AR/VR, and IoT to better understand and anticipate customer needs, elevate the experience, simplify interactions, sell promises instead of products and ultimately create emotional attachment. Telcos are lagging behind, arguably due to matrix-centric execution (i.e. many teams ‘owning’ AI yet no single point of accountability for how AI is used to drive experience improvement). The inevitable overlap between product, IT and CX makes for an uncomfortable turf-war and the answer lies not only in clarity of roles and responsibilities and governance but also in empowerment of the CX team by the CEO.
  6. Balancing technology (i.e. automation) and human touch is not obvious: The industry recognises the value of self-service channels and the value of human touch, but there’s deep unclarity around when and for what each option is more suitable which ultimately is translating in suboptimal CX performance. Solving this conundrum requires Telcos to build a deeper understanding of the individual customer preferences and hence where, when and to whom, automation should be pushed, while, at the same time. enable seamless handover between self-service and human support and empower agents to go beyond scripts and act in a freer manner to develop a connection with the customer.
  7. Data as a potential handbrake on Telcos CX aspirations. Telcos BI situation does not allow them to have a unified view of the customer and take full advantage of new technologies like AI/ML and hence deliver on promises like personalization and omni. The creation of a unified data layer and the capability to have a single source of true of the customer is of paramount relevance to drive CX mandates. Hence, BI relevance needs to be elevated: Telcos must invest in analytics and BI to make sure this ‘hygiene component’ does not constitute a handbrake to CX aspirations.

The remainder of this document serves as a summary of discussion, capturing the key debates and, hopefully, serving as a stimulus to continue the conversation within each organisation or in future sessions of the CX forum. 

1. Tenuous link between CX and value is dissuading Telcos from embracing CX 

The forum made it abundantly clear that the Telecom industry cannot see the link between CX and value. NPS proves a link between customer satisfaction and revenue growth across industries, but it’s not considered enough. The Telecom correlation is only loosely proven.

Figure 2: Across industries, higher NPS companies perform – but does this apply to Telecom?


The reality is that the link between CX and value needs to happen at two levels – each with specific challenges: 

  • CEOs and Boards need proof that investing in customer experience, and hence improving customer satisfaction can lead to long-term revenue growth and shareholder value appreciation. Here the challenge is how ‘long’ is long-term given short-term pressure and dividend expectations and whether this can be proved in the Telecom space;
  • CX teams, as well the rest of the organization driving the day-to-day business, need to understand how specific CX initiatives translate in results in terms of CLTV (ARPU, churn, SAC/SRC) to able to prioritize actions and calculate their return on investment. This is the only way to ensure budget approvals and effectiveness of the CX mandate. The challenges here is obvious – this does not exist yet in its full extend, although factual, customer level metrics like QES can significantly help prioritize.

Telcos are in a catch-22 situation. Until they are able to prove the value of CX, they will not invest in CX, but if they don’t invest in CX, and do so in a relevant manner, they will not be able to improve customer satisfaction and hence generate the economic impact that CX promises. This is what we refer to as the ‘CX vicious circle’.

Figure 3: CX vicious circle needs to be broken if Telcos want to drive impact


While this might seem controversial, its rationale is based on the thesis that value of CX materializes only once you are able to bring customer satisfaction to the next level: only when major CX improvements occur, or when a repetitive set of improvements happen, the customer is able to feel the difference and hence reward the organization for its efforts.

This means that Telcos must either:

  • Find a ‘measure’ to prove that CX can drive revenue/market cap within the Telcom space but also that can help quantify the value of each CX initiative, or
  • Have faith that the Telecom industry behave as any other industry where investment in CX and radical shift on customer centricity have proven to translate in value generation.

Irrespective of the preferred option, it is critical that Telcos wake up to the value of CX and do so urgently and in the proper manner: invest in a team with the right level of seniority, size and mandate; assign a tangible budget; and build an equity story to manage short-term cash and dividends expectations for the market.

What cannot happen is maintaining the status quo - Paying lip service to CX, customer centricity as a concept without a plan, while revenues remain under pressure, price competition heats up and network differentiation diminishes.


2. Customer centricity not being part of the telco DNA is the key challenge to overcome

Proving the value of CX and embarking into a CX transformation effort is only the starting point of the journey. Success is highly linked to the capability of creating a customer centric culture and the challenge is that Telcos are naturally not customer centric organizations.

Telcos have evolved from a monopoly background to a duopoly to a status of semi-competition where customer centricity was never a priority. This has led to the creation of a sense of entitlement as well as a strong muscle memory and inertia that are very challenging to overcome, especially for incumbent players like most of the Telcos in the room.

The lack of a perceived burning platform is aggravating the situation. While Telcos financials are worsening, they have clearly not reached the bottom: Telecom remains a very profitable business and as such they have no real urgency to jump across the line and embrace customer centricity and the investment that it requires.

Other industries had it tougher, like banking for instance. In the past decade they suffered the financial crisis and FinTech disruption, with significant impact on their financials. This has forced them to change, refocusing on CX, with the result that now they score in the mid-range of NPS with several examples of excellent CX.

Telcos don’t have this, they went survived the threats of Skype and WhatsApp. Hence the question: Is it actually possible for Telcos to overcome their inertia and shift to customer centricity? 

Giffgaff shared its story. As new Telco founded 10 years ago, they were created with the idea of customer centricity at the core. In fact, their model goes much further than that, embracing the community-based model typical of Tech players. Giffgaff involves customers (refer to as “members”) to provide marketing support (referral as the main acquisition channels), help each other on service-related queries (effectively replacing the call centre) and generate ideas on how to improve the business.

This model is based on full transparency with customers, which allows the creation of a circle of trust which incentivises members to participate in the community to create a better experience for all members.

Figure 4: GiffGaff’s bet on customer centricity is paying back


The effectiveness of this model can be seen in their NPS score (64), which is 30-50 points higher of any other Telcos in the UK and at the same level of Amazon, Netflix or Apple – considered the gold standard for CX.

This is also reflected in its market performance: Giffgaff adds about 300,000 customers each year for the past decade and its tenure is three times higher than competition in the prepaid space.

While the GiffGaff community concept might not work with the scale of a Telecom giants like Verizon or a Telefonica, the core concept behind the community – embracing customer centricity resulting in the creation of emotional attachment - can apply to any Telco. Community is just the means that GiffGaff used.

Still, Giffgaff was created 10 years ago and it’s only a team of around 200 people. Shifting a 40 or 50-year-old incumbent with tens of thousands of employees is arguably different. 

How can a customer centricity movement be created in such an environment?

T-Mobile US is probably the clearest example of an established Telco that has managed to reposition itself in the market through focus on customer centricity and emotional attachment with customers.

As a challenger brand with a new CEO on board, in 2012 T-Mobile launched the Uncarrier movement, signalling to the market that they were not the usual telco – they cared about the customer, they wanted them to speak up and tell T-Mobile what was wrong with the service, promising to address it. In John Legere words “Uncarrier was about finding and solving customer pain points in an attempt to fix a stupid, broken, arrogant industry”.

Since then T-Mobile launched 15 Uncarrier moves, addressing topics such as roaming charges, lock-in contracts, data roll-over, IVR, etc. 

The results speak for themselves - T-Mobile boosted its NPS from -7 in 2012 to 37 today and captured more than 10 percentage points of additional market share.

Making this happen requires Telcos to devise a structural cultural change management programme to shift the organizational mindset inside out and overcome the muscle memory. This must include:

  • Shift in CEO involvement from faint advocacy to belligerent, unwavering and heart-felt sponsorship,
  • Creation of internal change squads to evangelize customer-centricity, through sponsorships of willing leaders as well as sceptics across the organization,
  • Development of a thought training program to build capabilities likes customer co-creation, closed loop feedback, agile development, etc., as well as help management in behavioural shift,
  • Change in incentives and rewards to reinforce customer centric behaviours through formal HR mechanisms.


3. Beyond functional superiority, operators need to build a sense of brand ‘love’

Creating emotional connections with customers and being ‘loved’ by customers is extremely important. 

Telcos today are generally perceived, at best, as trusted and reliable and, at worst, as expensive commodity grudge buys. By in large, they are not loved. Love is the missing step of the brand admiration model which explains how customers create brand top-of-mind and recall.

Brand love is linked to the capability to create emotions and emotions are fundamental to the decision-making process. Science shows that there are three parts of the brain: rational (neocortex), intuitive (reptilian brain) and emotional (limbic brain) and all three contribute in processing external stimuli to make decisions. However, emotions account for more than 50% of the processes as they are processed fastest by the brain. Also, emotions are remembered for longer periods than facts, helping create longer term association and brand attachment.

The capability to stimulate emotions, creates empathy and brand attachment (love) which translates in a higher degree of customer satisfaction (NPS >50) that is unachievable by companies that focus only on the rational and intuitive portion of the brain and compete on functional excellency.

Companies like Emirates, Apple, or Amazon are clear example of this. Their customer satisfaction (NPS of 55,68,60 respectively) is not only driven by the quality of their product and services, the reliability they offer, but the capability to create a unique hue around the brand linked to the emotions they create in customers mind.

GiffGaff and T-Mobile examples shared before also falls here.

Figure 5: Achieving true loyalty / advocacy requires more than functional excellency


How did they achieve this? Building emotions is the result of two efforts:

Shift communication focus towards emotionally connected campaigns, stimulating feelings like gratitude, engagement, entertainment, and warmheart which associate to ‘Brand love’. Research proves that advertising campaigns with purely emotional content perform about twice as well as those with only rational content due to the faster processing time, longer rememberability of emotions mentioned beforehand;

Embed memorable and meaningful moments (aka ‘peak moments’) into customer journeys. By exceeding customer expectations in an unexpected manner across journeys, the customer accumulates positive memories and builds sense of attachment and love towards the company. 

Figure 6: Companies are embracing emotions by embedding ‘moments’ into the journeys 


While implementing these measures might seem easy, the reality is that achieving brand love requires a deep shift which starts from inside the organization: employees need to love the company (and the customer) if you want customers to love the company.


4. Digitisation in its current shape failing to deliver on the promise – a shift is needed

In the past few years every telco has embarked in a Digitisation program as a key initiative to improve company profitability and better compete in a more dynamic market environment.

While the specific objective of these programs can be different from one Telco to another, the reality is that they are generally focused on achieving efficiencies as costs are easier to measure and have a shorter-term impact than customer experience initiatives.

The group highlighted that while they are achieving cost savings, digitisation is far from yielding the expected benefits, due to a combination of unrealized potential (slower internal execution, slower customers adoption) and additional costs that were not fully estimated. 

Additionally, Telcos are coming to the realization that digitisation cannot be seen in isolation from CX: 

  • Many digitisation activities are customer facing and most of the value of the digitisation is customer related (channels, service);
  • CX transformation is not only a revenue improvement initiative, but a profitability improvement initiative. Good CX can help reduce SAC, service costs and employee’s turnover, among others.

This has led to the conclusion that CX transformation and digitisation are two faces of the same coin. They are both about customer centricity. 

CX is an enabler of digitisation - good experience drives take-up of digital channels - while digitisation is an enabler of CX - digital makes the experience good.

The forum concluded that maximizing value creation requires the two initiatives (digitisation and CX transformation) to be managed seamlessly, either merging them into a broader programme or establishing the required coordination mechanisms from an organizational and operating model point of view.

Telefonica and Verizon have already undergone this path: Telefonica expanded its digitisation efforts beyond IT and processes to embrace CX related initiatives, while Verizon created a Chief Customer Officer in charge of both digitisation and CX for the consumer business.

 

5. Tech can be a powerful tool in improving CX – Telcos are not exploiting it yet  

New Technologies such as AI/ML, AR/VR and IoT are pivotal in transforming the experience:

  • They can be used to better understand customer experience and satisfaction. For instance, IoT can help track the way a customer uses a selected product or service, while AI can help read customers emotions through facial recognition, deeply understanding customer satisfaction without asking customer;
  • AI enables to drive personalization to the next level reaching segments of one and adding the contextual element, i.e. ”responding to you in this moment”;
  • Similarly, AI can be used to anticipate customer’s needs, meaning predict customers behaviours and expectations by deeply analysing historical usage patterns and peers’ behaviours;
  • AR/VR can help augment the online experience and bridge the gap with offline – by visualizing the online experience, customers can, for instance, try on clothes or explore products in a virtual shop environment;
  • Finally, technology can used to shift the relationship with customers towards selling experiences instead of products.

Figure 7 illustrates examples of players across industries, Tech and offline, that are adopting Technology to improve their CX across these five points.

Figure 7: Tech can help improve CX in five ways


Telcos are nowhere to be found in this list as they have not yet embraced the power of Technology as a way to reimagine CX. Why is that?  Is it possible that this is due to lack of Tech savviness? Or reluctance to experiment and introduce step changes? 

While there are probably many factors behind this, arguably organizational complexity and matrix-centric execution is the key challenge: i.e. many teams ‘owning’ AI yet no single point of accountability for how AI is used to drive experience improvement. The inevitable overlap between product, IT and CX makes for an uncomfortable turf-war and the answer lies not only in clarity of roles and responsibilities and governance model but also in empowerment of the CX team by the CEO.

 

6. Balancing technology (i.e. automation) and human touch is not obvious

While in the previous point we highlight the relevance of technology to improve CX, it’s clear that digital customer interactions are not enough. Customers need personal touch and tangible experiences.

Technology and human complement each other:

  • Technology is good at completing rule-based processes fast and error-free, being available 24/7, Processing large amounts of data to identify patterns;
  • Humans are good at understanding and resolving complex/non-linear situations, judging what is fair/right in a specific situation, building personal connections, identifying priorities and setting objectives.

Figure 8: Balancing automation and human is key to a better CX


While this is clear, and everybody agrees with it, the question is how to balance the two – not in absolute terms but in a practical, operational manner: how to balance automation and human within a specific journey like a SIM sale or a customer support interaction.

While the initial answer might be linked to value - i.e. low value customers served through automation, higher value customers are served through human interactions – it’s clear that this is not a very customer centric way to approach the problem.

Approaching this in the right manner requires a combination of actions:

  • Improve the level of personalization, developing a deeper understanding of where, when and to whom, automation should be pushed
  • Enable seamless handover between self-service and human support, minimizing customer frustration with technology, likely to happen at beginning of the adoption curve
  • Elevate the role of human interactions. Agents move from addressing customer issues following a series of scripts, to free acting to maximize customer satisfaction and develop human connection

 

7. Data as a potential handbrake on Telcos CX aspirations

The relevance of data and analytics in the whole CX equation is obvious. Data is key not only in terms of understanding the customer CX performance (factual or VoC), but in terms of executing on the CX mandate, helping CX teams translate vision into a reality, i.e. operationalize, personalize, optimize.

However, Telco data is problematic - lots of datapoints tracked across systems, and owned by different departments that are not reconciled, leading to no unified view of the customers.

This is due to a variety of limitations:

  • Fragmented technology landscape – multi-vendor environment with little attention to data harmonization. Lots of external vendors, managed services model leading to loss of data ownership and control;
  • Monolithic data architectures that are difficult to maintain and with long change management cycles
  • Lack of agile methodologies to deal with above point;
  • Lack of proper data management capabilities (tools, processes and people) to capture internal data especially from NW systems, customer touchpoints and external sources;
  • No defined governance model to rationalize data management activities across the organization leading to multiple versions of truth and lack of synergies. 

This put Telcos in a situation that does not allow them deliver on CX promises - omni channel experience or personalization, for instance, requires a unified view of the customer, as well as the capability to proper exploit AI/ML.

This means that Telcos must invest in analytics and BI to make sure this ‘hygiene component’ does not constitute a handbrake to CX aspirations. The creation of a unified data layer and the capability to have a single source of true of the customer is of paramount relevance to drive CX mandates.

This might require elevating BI to a strategic initiative.

Telefonica is an example of an organization that got this right. They adopted a data first strategy in the journey towards digitisation and CX transformation.  The creation of Telefonica Aura, or the 4th platform as they commonly refer to, was meant to create a Big Data & Artificial Intelligence layer that could serve as starting point to drive digital and customer centric experiences.


CONCLUSIONS 

Many questions and challenges were raised during the day, but only a few answers were provided.

Although this is the natural effect of the relative ‘newness’ of the topic in the Telecom space, and the intrinsic complexity of the topic, it is key that collectively we work on finding answers to the open questions.

  • How to link CX to value generation, strategically and operationally, beyond the NPS directional correlation?
  • How to create a customer centricity movement in a large, established organization like a Telco? How do you trigger the internal shift that will enable to establish emotional attachment and Brand Love?
  • How to accelerate digitisation efforts, keeping customer experience and customer centricity in mind?
  • How to better leverage new technologies while operationally, address the human vs. automation challenge? 
  • How to convince management to raise the relevance of BI, invest in building a unified source of truth of the customer and solve the organizational challenge associated to it?

Delta Partners is the leading Advisory and Investment firm specialised in Telecoms, Media and Digital with offices in the Middle East, Africa, Europe, Asia, Latin America and the United States of America. We partner with global and regional telecom providers, digital players, other TMT clients and our investors to help them address their most challenging strategic issues. 
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