IBM "Customer first" has been a slogan slavishly promoted by communications service provider (CSP) executives for at least the last five years. So as an industry how are we doing? Based on the results of a recent IBM consumer survey, not very well!
Globally, more than three times as many customers are negative or antagonistic toward their CSP than those who describe themselves as positive or advocates. Less than one in five consumers of communication services are advocates for their CSPs. So, why is "customer first" not delivering? And what should we be doing differently?
Customer attitudes and behaviors are changing faster than the CSPs' ability to adapt its analytical and customer management responses. Consumers' sources of information and experience exchange are now driven by social networks and the internet. They prefer comparison sites and internet searches, recommendations from friends and family and social media rather than traditional CSP sites and channels. In addition, key drivers of advocacy are emotive in nature, again contrasting with current CSP practices that targets rational factors, as borne out by our survey.
The survey results reveal that globally only 18% are advocates, contrasting sharply with industries as retail and banking, where the level of advocacy is twice that of the telecom industry. A majority of customers - some 60% - are antagonistic toward their CSP. In other words, three out of every five customers have negative opinions about their communications providers. These antagonists cost more to support and are prone to speak negatively about their provider through social media, but are typically not telling their CSP about their problems.
The percentage of advocates and antagonists in telecom varies by country (see figure 1). In countries such as Australia, Japan and South Korea, antagonists outnumber advocates by seven times or more. These countries, along with Brazil, have the highest number of antagonists (at 70% and higher). Japan, South Korea and China have the lowest percentage of advocates. While China is among those with the lowest percentage of advocates, it is also among those countries with the lowest number of antagonists.
So with all the emphasis on "customer first," why are advocacy levels so low?
Satisfaction vs advocacy
In the interviews we conducted for this study, many CSPs indicated they were shocked when they lost market share as new entrants came along - even though they had measured high customer satisfaction (CSAT) scores. And as their market share shrank, there was no correlation between CSAT and loyalty, repurchase patterns or willingness to promote to others.
Indeed, typical industry KPIs, based on customer satisfaction, have little to do with customer loyalty, which is critical to increase market and revenue share.
Competitive advantage takes a distinctive customer experience that goes beyond satisfaction and creates real value for the customer. CSPs should offer an experience that forms an emotional engagement with consumers, compelling them to stay, increase spending and recommend their CSP to others. CSPs could learn from Apple, whose customers have become passionate champions for the brand because of the unique experience the company provides. Research has revealed that Apple advocates generate revenues about 45% higher than their competitors' best customers.
There are no such "Apple" examples of customer experience in the communications industry. Some CSPs realize the importance of the customer experience and advocacy, such as O2 in the UK, which puts enormous emphasis on the customer experience to keep customers coming back. It calls its customers "fans" and even has a "fandom" measure to track their loyalty. And indeed, according to our CFiq metrics, O2 has a significantly higher advocacy level compared to its competition (26% vs the UK average of 19%).
CSPs losing control
In today's "always on" social media-driven environment, some CSPs feel their customers pulling away rather than getting closer. As they encounter new products, services and experiences on a daily basis, many consumers feel less loyalty toward specific brands.
At the same time, connected consumers now wield unprecedented power over how brands are perceived. A brand can be strengthened or demolished in a fraction of the time it once took due to instant, viral feedback of consumer experiences via social media. CSPs should understand that, use social media to communicate effectively with customers and respond proactively to negative chatter.
Many consumers use social networking and online tools to discuss their experiences with and opinions of different providers. The most preferred source for information relating to communications products and services is internet search. Recommendations from friends and family is next, with half of consumers in mature markets and close to two-thirds in emerging countries preferring this source (see figure 2).
The third most popular source is social media, followed by websites of communications providers. In countries such as China, South Korea, Japan and India, social media is ranked as the No. 2 source of information in the below 25 age group.
The implications are profound. Consumers are increasingly less interested in traditional advertising, emails, promotional offers, retail stores and shopping portals. Rather, they prefer to proactively exchange experiences and information about CSPs with friends and family or gather it via internet search or social media sites.
As consumers read or contribute to online forums and discussion groups or rate and review products and services, they increasingly trust consumers like themselves - even strangers - more than providers. Clearly, some of the resources spent by CSPs on traditional channels should be redirected toward emerging channels that better address some of the emotional connections consumers seek.
Customers complain - but not to their CSPs
According to the survey, many consumers will tell their friends and family about a bad communications experience, but not contact their provider to discuss the problem. For example, when disconnected, more than three-fourths of consumers surveyed are likely to tell their network about the experience and/or avoid providers associated with poor experiences. Only 60% would potentially call customer service (see figure 3). In emerging countries, this trend is more pronounced, with 85% indicating they would tell friends and families and 87% avoiding providers associated with poor experiences.
This unwillingness to report dissatisfaction is very troubling for CSPs -- problems cannot be solved without source data. One solution is to adopt a more proactive approach to service. For example, providers can seek ways to make it easier for consumers to interact with their call centers and investigate sources (such as social networking sites) that might provide consumer feedback relating to ser-vice issues. Providers also have the ability to understand dropped calls and other disconnections through pattern recognition and redial habits. These insights should be used to proactively reach out to customers who have these issues - the same customers who never call.
Driving customer advocacy
How can CSPs better connect with their customers? Our research suggests that CSPs should focus on building new nontraditional capabilities, as well as a deeper understanding of customer preferences and attitudes. Key recommendations are:
- Improve customer experience insight by focusing on attributes that drive customer advocacy. The focus on customer experience insight is a top priority to enhance customer loyalty. In this context CSPs should analyze both rational and emotive drivers of customer behavior patterns.
- Apply a social behavior-driven "outside-in" perspective. CSPs should listen to, and become part of, the digital dialogue and use this media to their advantage. They should find the influencers in social groups, and target them with appropriate messaging.
- Profile and target customer advocacy segments with the appropriate measures. CSPs have to find innovative ways to leverage advocates and to move apathetics and antagonists in the advocacy scale. Focus on the relationship rather than transactions.
- Build multilevel capabilities to support the new approach to customer advocacy. Consider a new set of KPIs and metrics that have a more direct linkage with customer advocacy and experience and through which revenue and profit outcomes are visible.
We recommend CSPs to invest in understanding and measuring what matters most to customers in changing their behaviors. To build capabilities to capture and analyze customers' rational and emotive perspectives on key interactions across all contact channels and to invest in advanced analytics to mine digital channels, such as blogs, tweets, social networks, peer reviews and consumer-generated content to access customers' honest, unmediated views, values and expectations.
One clear message from this survey is that despite investments in customer experience and customer relationship management initiatives, the industry has not achieved its customer-related goals. New and more analytical approaches are required to combat competition and the threat of the over-the-top operators gaining the upper hand in customer relationships.
Advocate or antagonist
To help gauge differences in customer attitudes according to advocacy levels, we asked consumers to rate a series of statements about their primary CSP. We discovered that the attributes most highly correlated with advocacy are emotive rather than rational.
In other words, they are those less tangible, less measurable aspects - those more closely associated with feelings or opinions. According to our research, the three statements most highly correlated with advocacy are "My CSP offers me relevant products and services," "My CSP values me as a customer" and "My CSP provides advice to improve my user experience."
The consumers surveyed did not respond positively on how the CSPs perform on these emotive attributes. The gap in emotive delivery is indicative of CSPs' traditionally investing in more rational operational environments, such as improving the efficiency of front- and back-office operations. However, from a customers' perspective, factors that contribute to building meaningful relationships (e.g. emotive attributes such as listening and providing advice) have been less of a focus, resulting in the current gap. To increase advocacy, CSPs should consider how to improve on the emotive side of the equation.
Nick Gurney is communications sector leader for IBM Global Business Services in growth markets; Rob van den Dam is the telecommunications leader for the IBM Institute for Business Value.
More information can be found at www.ibm.com/iibv