Is loyalty in telecoms dead?

Great few days spent in Cannes in the South of France at the ‘Telecoms Loyalty & Churn’ conference

I’ll be using my notes to develop my own thinking around loyalty and develop the existing WDS Customer Experience white paper. In the meantime, I wanted to document my notes and drawings and openly thank some of the excellent speakers.

Most importantly, when it comes to events such as this I have real issues with the semantics in use here. When it come to Loyalty & Churn the industry can’t help but slip into what Camille Mendler, an analyst at informa Telecoms & Media, calls Telecom-ese (the industry’s way of articulating tough realities in socially-acceptable ways). In many cases, the industry uses the word loyalty simply because it’s a softer and more acceptable way of saying retention (despite the two being worlds apart).

Many of the presentations spoke about loyalty programs when what they really meant were retention programs. They are very different things. Loyalty is about building an allegiance, faithfulness and a tolerance to a brand. Do this and reduced churn becomes a natural by-product. Retention programs are about keeping the consumer in the network as a customer – this is largely achieved through rewards programs (ie: a free phone, discount pricing) and isn’t indicative of loyalty. If the rewards stop there’s no emotional bond and there’s little left to keep the customer engaged.

Unfortunately when you talk to a lot of mobile operators they confuse the two. Their answer to loyalty is to deploy retention / rewards program. Very few actually grasped the concept that such programs are reactionary and do little to fix the problem that initially failed to develop customer loyalty in the first place. Indeed, many of these retention programs seem to do little more than reward established (un-loyal) behaviour.

Of all the presentations, my hat goes off to Graham Webster, Director of Customer Experience at O2 Telefonica. He was one of the few that correctly explained that if you get the customer experience right from Day One, you will build loyalty as a natural by-product. No amount of rewards will build loyalty – they may build satisfaction, but not loyalty and the difference between the two is huge.

Quotes, Comments and Notes:

  • Are consumers loyal to the brand or loyal to the incentive? – ie: I’ll stay in the network for the chance of a free phone, cheap tariffs etc.
  • There is an increase in ‘Butterfly Customers’ – this segment flits between the best deals, exhibiting little loyalty to anything but price.
  • Everyone within Virgin Media has NPS as part of their bonus.
  • When operators are asked why they think customers churn the top answer is network coverage and network quality. When consumers are asked, it’s always price! Why are operators so blinkered when it comes to accepting the destructive influence that a decade of price wars has had on consumers.
  • It seems operators don’t like spending / investing in longer tenure customers as the likelihood of them churning is lower anyway. I heard this from an operator and it sums-up everything that is wrong with the industry. In most other industries, tenure is rewarded – not so, it seems, for some operators.
  • Zain Sudan is 99% pre-pay. However the 1% on contract deliver 7% of revenue.
  • When measuring satisfaction / NPS etc, it must be done against the competition. A score of 90% may look great, but no so if the competition averages 95%.
  • “If a customer complains, chances are they want to stay with you!” Starbucks
  • “Value can be achieved without discounting” Starbucks
  • 48% of operators have a ‘loyalty’ program
  • Operators typically reward spend over tenure.
  • Industry must segment on value and that means ARPU and tenure (CLV)
  • Ways of segmenting / what do you reward?:
    • Billed revenue (direct impact – if they stay what will you gain?)
    • Margin  (direct impact – if they stay what will you gain?)
    • Influence (in-direct impact – if they leave what will you lose?)
    • On-net receivers – (in-direct impact – if they leave what will you lose?)
    • O2 UK identifies x3 experience types
      • Random Experience: Inconsistent
      • Predictable Experience: Consistent, intentional but not differentiated
      • Branded Experience: Consistent, intentional and differentiated.

    All in, a great conference and some great new contacts. Top presentations from O2 and also Orange (Alain Glickman the Grp Director of Customer Insight, who provided some fascinating segmentation modelling). Also Milena Konecna and Julio Pushel from Informa and Rene Tomova, Dir of Retail at Mtel Bulgaria.


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