It's The Customer, Stupid
When President Clinton signed into law the Telecommunications Act of 1996, observers expected a dramatically different industry to emerge. It may not have been a smooth evolution, but that's exactly what happened.
There's a whole new breed of telecom providers. They range from the new AT&T (T) to eBay (EBAY) to Disney's ESPN (DIS). There are new must-have services to compete with, as revenue declines from voice services. Many providers offer what are called triple and quadruple plays, which are bundles of voice, video, data, and wireless services. And they will attempt to offer dozens, if not hundreds, of new digital services.
This is a new era, and success won't depend only on which companies can get to market fastest with the holy grail of content. In good old-fashioned style, it will also ride on who can treat the customer best.
Here are three tips to help service providers navigate this evolving market.
First, providers need to create a differentiated customer experience. Each interaction between a customer and the provider is part of that customer's experience. Yet a customer can be turned off in so many ways: being passed around from one service rep to another, receiving an erroneous or hard-to-understand bill, ordering a service and not knowing when it will start. I could go on. At the very least, the customer experience should be positive, but that takes an act of will on the part of service providers.
As telecom companies look to sell bundles of services to customers, the following story should be taken as a warning. A friend of mine recently switched service providers to get the latest bundle of voice and data services at a lower price. Instead of a seamless transition to the new provider, my friend went through a three-week nightmare of trying to get all of his services working properly. This was more than an inconvenience -- it translated into 21 interactions with the provider, four technician visits, six hours on the phone with customer support, and seven separate letters welcoming him as a new customer. Yes, it all worked out eventually, but the episode left a bad taste and has prejudiced him against future offers from this company.
My friend's experience is not unique. Given such encounters, it's easy to understand why a recent Amdocs (DOX) survey found that consumers in the U.S. and the U.K. said they would even pay $5 extra per month just to avoid being put on hold or talking to multiple service representatives.
A positive experience is only the first step. If Telecom A and its toughest competitor, Telecom B, offer the same service, where's the advantage? The key for each provider will be to figure out how to create a customer experience that isn't the same as the next guy's and is in line with that provider's business model.
Which brings me to my second point. Service providers need to sell customers services based on who they are. New digital, or IP-based, services are the latest "must-haves" for many phone companies. For example, both Verizon (VZ) and AT&T are spending billions of dollars to deliver TV via the Internet (IPTV), to get into the competitive pay-TV business.
The question is, how will service providers determine which services to sell, and to which segment of their customer base? The answer lies in understanding the demographics, buying patterns, and interests of customers. This is precisely what other companies in other industries are trying to do. Telecom providers need to play catch-up to smart companies such as Amazon.com (AMZN), which focuses enormous resources on customizing products, offers, and promotions for each customer. Yes, that's easier when you are an e-business, but it is what telecom providers must do.
However, if companies do not roll these services out with the intention of meeting the needs of specific customers, then they become indistinguishable from other providers in the market. In the past week, I have received six advertisements via text message. They were all from my own provider and all about changing to a plan that is suitable for a chatty teenager or a plan that assumes I make three phone calls a month -- and all on weekends. The fact is -- and my service provider should know this -- none of these plans would suit my needs as a businessman who spends a significant part of his life out of the country. Please understand me as a customer. Make it easy to do business with you, and I will be yours forever.
A third point that telecom providers would do well to bear in mind: Understand that you are the middleman in a content-hungry world. Hand in hand with new digital services goes the idea that if you are a telecom company, you are now a middleman in the entertainment business. The content that forms entertainment may come from another company -- music, ringtones, video-on-demand, and more -- and a telecom provider must take that content, package it, and move it out to their customers.
If that sounds like a description of supply chain management, it should. And telecom suppliers need to be models of it: buying raw material, packaging it in different ways and selling it to the right audiences. At the other end of the supply chain, telecom companies must be able to promote and then deliver to customers all these new services. If you want more customers to buy more services, then assurances about those services -- the quality, the time of delivery -- must be made. Another key finding in our recent survey: 64 percent of consumer respondents didn't know they could get competitive phone service from new market entrants like cable operators and VoIP providers. Eventually they will find out. So telecom companies truly have to transform themselves -- and they don't have a lot of time to waste.