Service Lags In Telcos Lead To Customer Defections

Traditional telecommunications companies are facing increasing pressure from a variety of directions. These companies are being challenged to provide innovative offerings (to compete with those from mobile device providers) or fend off price challenges from upstart providers.

The telcos aren’t doing very well at fending off defection, according to a new study from the CMO Council’s Customer Experience Board. Only 40% list increases in churn and attrition rates as a “biggest challenge”, according to the Board’s survey of communications firm marketing executives.

What are they focusing on instead? Creating brand preference and differentiation, increasing innovation and facing down price pressure, and rapidly delivering new applications and services.

“There is massive spend on marketing new devices and new service bundles, but the inherent issue is retention of customers,” Donovan Neale-May, executive director of the Chief Marketing Office Council told Direct Newsline.

“Marketers don’t own the customer experience,” he added. “Contact centers are run independently, and the data is not shared with marketing. It’s all about how cost effectively you can process a call. It’s not about utilizing the interaction to build the relationship.”

Unfortunately, in rough economic times many companies cut costs in customer-facing areas. “As market pressures increase and margins erode, the commitment to operational excellence and back-end efficiency frequently lags, often undermining the quality and consistency of the customer experience and the level of brand advocacy and affinity,” according to the Customer Experience Board’s report.

As a result, “The first point of pain is at the point of sale, when the customer goes to the wireless dealer or the retail store and tries to understand the features and functions available,” Neale-May said. “When they do buy a plan, they aren’t necessarily well-educated, they don’t understand what they are getting, and a few months later they see the same plan for a lot less money.”

Add to that what Neale-May calls “upstart providers” such as MetroPCS, which offer “none of this game-playing around minutes and data.

“There is a convergence of new options and alternatives to how people communicate and react,” Neale-May said.

The traditional telcos see the new providers as making encroachments largely on economic terms. More than half --- 55% -- said the new providers are disturbing the marketplace by undercutting prices, while another 37% indicate the upstarts are targeting the most lucrative competitors. Only 19% believe the new providers are delivering a more compelling customer experience.

It may be that the current economic conditions, which have made new customer acquisition more difficult and expensive, will wake the traditional telcos to relationship marketing’s value. Asked about the programs or initiatives that have become more important in the current recession, 56% cited better customer retention and monetization, while another 43% indicated customer support and handling efficiencies are a major concern. But only one-third of the marketers surveyed mentioned quicker problem solving and responsiveness, reflecting the split between the marketing and service departments Neale-May mentioned.

Asked about the forces that undermined the customer experiences, more than half (54%) said their organizations are not culturally or operationally aligned around the customers. Another 41% characterized their business practices, billing policies and personnel as not being customer friendly. And just over one third said their IT, back office or operational systems subvert claims made by marketing, and fail to meet customer demands and expectations.

All this may help explain why customer retention is experiencing margin pains: 84% of the respondents said the cost of acquiring and sustaining customer relationships is increasing. And two-thirds say churn and attrition rates are rising as well.

What are marketers doing about this? There’s no overwhelming agreement on which single tactic will be most effective. Forty-three percent are improving their behavioral targeting and personalization efforts, while a similar amount are looking for ways to up-sell and cross-sell to existing customers. Another 41% are investing in customer analytics and predictive modeling. Just over one third (37%) are introducing more creative acquisition and retention programs.

Neale-May derides the one overwhelming tactic most of his respondents use: 76% said they use customer satisfaction studies to measure (and adjust) the customer experience.

“Customer satisfaction studies are a waste of resources,” he said. “They’re done annually, or maybe, if you are lucky, twice a year. The people who respond tend to be satisfied. But [if I’m a dissatisfied customer] I’ve already sent you a ripping e-mail. I’ve vented at your customer service rep, who didn’t understand me because she’s offshore.”

Customer satisfaction studies, Neale-May continued, provide historical, rather than predictive, information. Companies that don’t do them in volume can’t predict where the problems are going to be. By the time problems revealed by an annual survey come to light, the problems have escalated.

Details from the study are available at http://customerexperienceboard.org/.