Time to reward traffic terminator

Today, new telecom technologies, globalisation, increased competition, and increased customer mobility have radically changed ways people communicate. Telecom operators around the world are in a race to offer customers a multiplicity of converging services/products at equally attractive and competitive prices. Today, many operators, especially incumbents, are struggling to fight new entrants, to win new customers, to reduce customer churn, and to protect their dramatically eroded profits (declining revenues versus increasing marketing and customer management expenses). Today, operators are on average losing 8-10 per cent of their customers each year. To minimise their losses of revenue and/or explore new revenue opportunities, telecom operators have to re-think their marketing and customer retention strategies and practices.

Mohamed Jamoussi is a senior advisor for Saudi Telecom (STC)

New marketing strategies

As a matter of fact, with ever-increasing competition, the alternatives to differentiation are limited, as most operators are providing more or less the same services/products for nearly the same prices. This is the case unless an operator can manage monopolised services/products and/or market segments (for example incumbents offering fixed line services). On the other hand, the current marketing strategies and practices have always been focussed on either traffic initiators (for example voice callers, or SMS/MMS senders) or traffic type/volume (for example minutes of voice/video calls, number of SMS/MMS) – with little or no concern about the customer connected to their network that will terminate the traffic (answering a call) and converting it into revenue.

It is time today for operators to work on retaining and rewarding not only traffic initiators, but also traffic terminators; as they are part of the business value chain. They deserve to be thanked and rewarded given the value their subscriptions bring to the operator network. Operators should re-think their relationships with traffic terminators, particularly solicited subscribers (heavy call receivers), who terminate on-net traffic and/or roamed traffic. To this end, operators should formulate and propose more comprehensive marketing offers, more attractive promotions and incentives for both traffic initiators and traffic terminators. This new marketing thinking would have a significant and positive impact on retaining customers and reducing customer churn. More interestingly, it may maximise the lifetime of post-paid customers and discourage their migration to prepaid programmes – a nightmare to most telecom operators. In this regard many interesting ideas can be proposed and worked out.

Leveraging customer retention

From another standpoint, customers are becoming more price sensitive in their consumption of telecom services, since they have more than one alternative. They make selections between competing operators – with high expectations – forcing operators to adopt more evolved marketing and customer retention strategies.

Indeed, customer retention is a key driver for profitability. It has been proven through various studies and analysis that a two per cent increase in customer retention has the same effect on profits as cutting costs by 10 per cent and that a five per cent reduction in customer defection rate can increase profits by up to 25 per cent. Yet, many customers are only being retained – expressing no loyalty. Therefore, operators should further focus on understanding the evolved needs, desires and behaviour of their customers, even if they appear to be satisfied. More importantly, even satisfied customers may look for more attractive offers from rivals – with one key question in the back of their minds: “What will I gain when calling with this operator?”

Today, to leverage their customer retention and/or enlarge their customer base, telecom operators should make their current/potential customers ask two key questions: “What will I gain when calling with this operator?” And, “What will I gain when receiving with this operator?” To this end telecom operators should re-think their customer retention strategies and practices for both their traffic initiators and their traffic terminators. They should, therefore, work on raising barriers to churn to even higher levels, discouraging a subscriber, particularly a solicited one, from switching and connecting to a rival network. Operators should focus more seriously on retaining their existing customers as it may cost them up to four times more to acquire a new customer than to satisfy and retain a current one. In this regard, practices in the field of banking are worth exploring and learning from with respect to retention.

Learning from banks

Today, the banking industry is highly competitive – with institutions not only competing amongst each other, but also with other financial institutions as they offer similar services/products and at very competitive prices. Today, banks can only distinguish themselves on the basis of price and quality. A superior service alone is no longer sufficient to satisfy customers. Prices are essential, if not more important than service and relationship quality. As a result, customer retention became the most powerful tool that banks have to gain strategic advantages.

The focus, then, is to retain as many customers as possible and for as long as possible, as it is more economical to keep existing customers than to acquire new ones. More importantly, long-term customers become less sensitive to price changes. In this regard, we can state the case of some North American banks that charge their customers a decreasing monthly fee as their accounts grow older. So for example customers who opened accounts in the 1980s pay monthly account fees as low as US$1. Such pricing policies are cleverly devised as marketing strategies. Their focus is essentially to raise churn barriers to their highest possible level, discouraging customers from moving to other financial institutions and making it costly for them to switch to a competitor. Consequently, even with a relatively low level of satisfaction and/or a slightly higher pricing of some services, customers continue to partner with their banks as it is more cost effective to do so than to move to a new one.

In summary

The global telecom industry has changed dramatically and most markets have become saturated. The time has come for telecom operators in the region and worldwide to seriously re-think their marketing and customer retention strategies. They need to consider and re-engineer their business models. More specifically, they need to adopt revolutionary marketing and customer retention strategies and approaches – which not only benefit initiators, but also services terminators. This will have the effect of further encouraging consumption from both groups, resulting in the capture of as much business as possible.

Mohamed Jamoussi is a senior advisor for Saudi Telecom (STC)