By Zac Aghion
Why telecom operators must reimagine the customer journey
I’ve recently started working closely with several multinational mobile network operators (MNOs) in different regions across Europe, the Middle East, and Asia-Pacific that are all facing similar threats to their business.
Fierce pricing competition from new entrants and business models are eroding margins. These margin pressures have a dual effect of increasing the relative cost of traditional customer service and support channels (e.g. call centers and stores), and decreasing the lifetime value of fickle consumers ready to switch to aggressively priced new service options.
Ironically, network operators remain the largest revenue generators at the center of the tech industry’s value chain. The nature of their business also means that they have retained direct relationships with broad customer bases, and extensive proprietary data sets on customer behavior, location, and purchase history. These incumbent advantages imply that MNOs have an enormous opportunity to ‘fight back’ against industry trends, and most notably through building digitally-native customer journeys and experiences.
Telecom operators are not capturing the value of society’s digital transformation, despite their central role in the value chain that is creating it.
A 2017 study from the World Economic Forum and Accenture indicates that operators’ share of telecom industry profits have decreased from 58% in 2010 to an expected 40% this year.
The big winners have been content aggregators and distributors. This explains network-content consolidation plays like Comcast’s takeover of NBC Universal, Verizon’s acquisitive spree of AOL and Yahoo!, and AT&T’s recently approved bid for Time Warner. It also explains the surging profits and market value of content aggregation businesses like Facebook (Newsfeed), Amazon (Prime Video), Apple (iTunes), Netflix, and Google (YouTube).
New competition and business models are emerging from digitally-native tech companies.
At the same time, as industry profit share has flowed away from operators and towards content aggregation and distribution businesses, the most dominant of those same content players (i.e. the ones that managed to avoid being swallowed up by their network partners) have moved to aggressively integrate backwards up the value chain.
It may already be too late to fight back. Research from 2016 indicated that the majority of consumers were ready to switch their mobile network to one of their favorite tech companies if available, and that the proportion skews higher as you increase customer segment value. Whether it be Facebook’s Whatsapp, Google’s Hangouts, Microsoft’s Skype, or Apple’s Facetime, tech giants that have come to be trusted by consumers with delivering innovative, convenient digital experiences are eating up OTT voice and data services and commoditizing the networks which power them from below.
Reimagining the customer experience along a digital paradigm is the largest opportunity for operators to re-capture profit growth.
The convenience and cost of digital experiences has translated into a tight correlation between the prevalence and usage of digital channels, and higher levels of customer satisfaction, loyalty, and lifetime value. This relationship has been observed across industries from financial services (e.g. PayPal vs. wire transfer) to travel (e.g. Priceline vs. travel agent).
Telecom is no exception. 2016 studies by Cap …read more
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