Managing Customer Experience of the Network: Strategies for Success

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1 White Paper Managing Customer Experience of the Network: Strategies for Success Prepared by Caroline Chappell Senior Analyst, Heavy Reading on behalf of May 2014

2 Executive Summary Customer experience management (CEM) can be defined as a management discipline that uses the most relevant insights about the customer to drive the right actions across appropriate domains of the business and measures the outcomes of those actions to refine both insights and actions in the future. Mobile operators increasingly need to extract insights and recommended actions from their organizations in order to manage and enhance customer experience. CEM represents a major opportunity for operators to differentiate themselves competitively in crowded markets and to prioritize capital and operational investment in the business according to customer value. CEM depends on understanding multiple aspects of a customer's experience as s/he interacts with the operator organization in many different ways. But in a telco context, the network, the customer's primary touchpoint, is the most important source of insights. Customer experience insights from the network should carry the most weight when operators measure and aggregate key performance indicators (KPIs) from multiple organizational domains to create a single, holistic customer experience index (CEI) for each customer. Studies show that customer experience of the network has the highest influence on decisions to churn. Creating a CEI as a high-level, visual way of summing up the customer experience for each subscriber has several benefits for the operator organization, including simplifying operational processes and providing a neutral benchmark for the entire organization to work with. To ensure the CEI reflects critical network impacts on customer experience, such as service performance, operators will need a framework for collecting and analyzing network metrics. This framework links an operational perspective on the network with the customer view, supporting customer experience assurance (CEA) functionality. Operators need to augment traditional network management with CEA because the network's view of its own behavior is not a reliable proxy for customer experience. Specifically, CEA provides a bridge between CEM and two further management disciplines: network management and service quality management (SQM). The CEA framework supports a metrics hierarchy that culminates in a highlevel per customer, per service understanding of network performance. This highlevel view makes it easier for operators to monitor and troubleshoot their networks southbound, as well as feeding into the CEI northbound to make operators aware of any customer experience remediation actions they need to take. This paper explores the relationships between CEM, the CEI and CEA, arguing that each is essential to an operator's strategy for managing customer experience successfully in the network. Section II defines CEM and discusses why it is an important discipline for operators to adopt. It points out the business benefits of CEM and the power of the CEI as a key means of aligning the operator organization behind CEM. Section III describes CEA with reference to traditional network management and the emerging discipline of SQM. Section IV presents a case study of Telecom Italia's Service Operations Center (SOC), in which the operator is linking CEM with a service-level approach to managing its mobile network. It discusses the benefits Telecom Italia is seeing as a result. HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 2

3 CEM in a Telecom Context What Is Customer Experience Management? CEM is a management discipline that uses the most relevant insights about the customer to drive the right actions across appropriate domains of the business and measures the outcomes of those actions to refine both insights and actions in the future. CEM depends on understanding multiple aspects of a customer's experience, wherever and whenever s/he "touches" a supplier organization. In a telco context, customers don't base their experience on an isolated transaction with a single business touchpoint. Instead, customer perception of a mobile operator comes from frequent, long-lived interactions with the operator's network through a range of services and devices. The network is the customer's primary touchpoint with the operator and the fundamental source of telco experience. But other organizational touchpoints also affect customer experience, such as an operator's billing and fault resolution processes and device management activities. Operators need to measure customer experience within each of these domains on a per-customer basis, aggregating individual customer experience insights to gain a holistic view. Such a view enables telcos to prioritize management actions and customer experiencedriven investment in the right areas of their organization. As a discipline, CEM understands what data is needed to generate customer insights and which touchpoints to collect it from. CEM systems use various methods and tools to collect this data. CEM datasets are expanding as telcos want a finergrained and near real-time understanding of the metrics that affect customer experience. More data needs to be collected and processed faster, leading to an overlap between CEM systems and big data analytics platforms that can store high volumes and multiple types of customer experience data. It is important to recognize that a CEM system differs from a big data analytics platform in its specialist focus on customer analytics. A CEM system contains analytical models that understand critical correlations and causations between the pieces of customer-related data held in a big data platform. The CEM system creates valuable customer experience insights by analyzing these data points together. Its analytical models are based on years of observation and knowledge of the events that affect customer experience and, critically, the models weight the impact of these events (see Figure 1). The most effective analytical models link insights with recommended actions that improve both customer experience and the outcome for the operator's business. These actions may be carried out in different timescales, for example, in near real time when a rapid response to a particular customer experience situation is required. Or an action may take months to complete, as is the case when customer insights are used to drive long-term network investment decisions. Why CEM Matters to Operators CEM has emerged as a discipline as companies seek to differentiate themselves through their treatment of customers in an era of high competition. In a digital age, where rival suppliers are a click away, the ability to attract and retain HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 3

4 customers separates the successful business from the revenue-poor. In a social media-driven market, a single customer can become more influential than the largest company, so the ability to manage that influence is a key business strength. CEM is the foundation for both capabilities. Figure 1: CEM System Architecture Source: Heavy Reading Operators provide a critical service network connectivity that is increasingly inseparable from customers' daily lives. Businesses and consumers rely on applications delivered across networks to an unprecedented degree. With this level of dependence comes high expectation. Customers are far more deeply affected when the delivery of telco services is disrupted than by the failure of other types of products and services. Yet operators have a poor reputation for managing customer experience. The Temkin Group, for example, typically find telcos languishing in the bottom quartile of its Net Promoter Score (NPS) surveys. This means that only a small minority of telco customers are advocates for operator brands. Not only are dissatisfied customers more likely to churn, studies show that even when they stay, they spend less money, tie up call centers more often and are more likely to query bills. CEM matters because it's good business: Customers receiving their expected experience cost an operator less, will be more receptive to new service offers and may actively promote the operator in their social circles. Given the industry's generally low level of customer experience performance, operators that want to differentiate themselves are targeting CEM as a major business opportunity. Heavy Reading research shows that early CEM adopters HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 4

5 have made customer experience the touchstone for their brand. Incumbents in markets under attack from new entrants have been able to use customer experience-based differentiation to retain customers and justify premium pricing. Challengers entering markets with me-too networks have won market share by offering a highly distinctive customer experience not available from competitors. The Role of a Customer Experience Index CEM & the Single Measure There are many factors influencing a customer's experience of an operator's organization and network. The key to CEM is understanding what the range of customer experience factors are and weighting them according to their level of influence. These factors can be measured, correlated and driven through appropriate analytical models for use in the various domains within the operator organization with an interest in improving customer experience. But telcos also need a high-level, visual way of summing up the customer experience for each subscriber. In other words, they are looking for a single, combined metric that accurately reflects each individual customer's experience of the operator organization. A per-customer CEI is a powerful expression of the state of an individual customer's engagement with the telco, based on internal metrics from multiple touchpoints and their correlation on a per-customer basis. The CEI provides: Neutral, organization-wide visibility of the state of customer experience: The CEI can be understood and used by any individual within the operator organization. Although metrics from different telco departments may contribute to a CEI, it is not aligned with any particular department, so it is as applicable to someone from network operations as it is to employees in sales and marketing. The index is a neutral measure the whole organization can understand and buy into, so it can be used to drive employee incentives, salary reviews, etc., that align all staff with CEM goals. Support for benchmarking: A CEI can be the basis for benchmarking activities across all the operating companies in a telco group. It enables both the parent company and each operating company to understand the state of CEM in different countries and local differentiators that need to be taken into account. It can be used to identify variations in customer experience that need to be addressed, for example, differences in roaming experience between countries and roaming partners. The CEI can be exposed to partners and suppliers to help them understand and correct the impact of their services on customer experience. Customer-driven root cause analysis for poor customer experience and proactive avoidance: The CEI is the starting point for drilling down into constituent metrics to discover root causes of poor experience wherever these occur within the organization and for prioritizing remediation activities on a per-customer/per-segment basis. The CEI can be linked to preemptive ways of avoiding problems in the future, using customer analytics to trigger device management, SON or policy control systems to prevent deterioration of the user experience. The CEI can also be used to drive longer-term business cases for people, process or network improvements. HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 5

6 Components of the CEI In a telco context, there are four main drivers of customer experience that need to be factored into a CEI (see Figure 2): The customer's cost and billing relationship is the most important influencer of customer experience, according to Nokia's most recent customer retention study. How much customers are charged for services, the accuracy of their bill, how quickly they have access to billing data, the efficiency of the process for bill correction are contributors to the overall billing experience that need to be reflected within the CEI. The network is the customer's main touchpoint with the operator. The network is the always-on conduit for service delivery, and Nokia's customer retention studies show that customer experience of the network has the second-highest influence on decisions to churn. The network index that feeds into the CEI contains relevant metrics that influence customer experience, such as voice setup quality or average data throughput. Such metrics need to be collected on a per-customer basis within the CEM system and taken into account within individual customer CEIs as appropriate. Customer care is often the most direct opportunity to interact with the customer and influence perceptions. Nokia's most recent retention study shows that customer disaffection with care is rising as a reason to churn in more mature markets. Poor customer care can increase operator costs and lead to antagonistic encounters with customers that create "detractors" rather than advocates for an operator's brand. Factors influencing customer experience include average call wait time and first call resolution capability. As the main access point(s) to network-enabled services, devices have a smaller but still influential role in CEM. Device factors influencing customer experience include device choice and device type. Figure 2: Four Main Inputs to the CEI Source: Nokia HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 6

7 CEM & NPS As we have seen, the CEI is based on a rich set of metrics from multiple areas within the operator organization. The CEI and its component metrics are examples of "inside out" metrics that measure internal activities that have a bearing on customer experience from the practitioner's perspective. Operators also poll their customers to gain "outside in" metrics, such as Customer Satisfaction (CSAT) scores. Increasingly, operators want to assess how emotionally engaged customers are with their brands as a further measure of customer satisfaction with their overall telco experience. Operators are beginning to implement Net Promoter Score (NPS) measures to understand the effectiveness of practitioner activities from the customer perspective. When NPS and CEI are brought together, the CEI can help explain poor scores and allow operators to identify the tangible root causes that have influenced an emotional customer response. The CEM discipline involves monitoring and correlating both types of metrics, linking customer insights with operational realities and using both to drive actions that enhance or change customer experience. HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 7

8 CEM & the Mobile Network CEM & Customer Experience Assurance (CEA) Of all the drivers contributing to a CEI, mobile network coverage and performance have the largest influence on customer experience. Managing the network to give individual customers the experience they expect and have paid for is, therefore, becoming a paramount concern for mobile operators. The area of CEM that links the operational perspective on the network with the customer view is often called CEA. CEA links service assurance functions with customer analytics so that operators can understand network experience from the perspective of each subscriber and use the resulting metrics to manage the network accordingly. Operators need to augment traditional network management with CEA because the network's view of its own behavior is not a reliable proxy for customer experience. There can be a large gap between network-level metrics, which appear to show that a mobile broadband service running across the network is performing well, and the poor experience of the same service from a customer perspective. And where a single networking technology, such as 3G or Long Term Evolution (LTE), supports multiple different types of service, operators also need to factor in the impact of services on the customer experience. This is because different services can display different performance characteristics across a common network, giving rise to variable customer experience. To assure a consistent customer experience across the network for all services consumed by users, operators need to: Understand the behavior and performance of both the network and each service it carries and the interdependencies between the two that may affect service performance. Map services to customers and correlate the right metrics from the network and services to build a complete picture of the service experience each customer is receiving. Use customer insights to drive management actions at service and network management levels that maintain the contracted quality of the customer's service experience. Bringing CEM Together With Service Quality Management CEA links CEM with two further management disciplines in operator organizations: Network management, which is typically well established within a mobile operator's network operations centers (NOCs). Network management refers to the monitoring and management of telco and IT networks. SQM, an emerging discipline that operators are locating in SOC(s), typically collocated with their NOCs. SQM focuses on the proactive monitoring and management of services that run across networks, including traditional and next-generation voice and messaging services, over-the-top (OTT) applications and mobile broadband services (LTE, 3G). HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 8

9 SQM correlates network events with service performance metrics to create insights into service quality. This discipline works with service models which: Map the dependencies between each service and the specific network equipment that supports it. Define the performance expected from different types of services. As network events flow through their service models, SQM systems can detect degradations in service quality and drill down into the underlying network component(s) causing performance issues. They gain early insight into problems with service performance, enabling the SOC proactively to take remedial action to avoid service disruption. The service model approach also allows SQM systems to manage service-level agreements (SLAs) and differentiated quality of service (QoS) for different types of applications. Integrating SQM and CEM system adds the customer dimension to the service assurance process (Figure 3). It enables operators to understand which customers are affected by service quality issues and root causes in the network so that they can prioritize remediation actions. SQM systems can send alerts to or trigger processes in network management systems to fix service performance issues based on customer value, SLA, CEI index, location or any other customer insight and/or metric. Figure 3: The Relationship Between Customer, Service & Network Metrics Source: Nokia HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 9

10 Telecom Italia's SOC Marries CEM & SQM Drivers for the Service Operations Center Like other operators, Telecom Italia faces multiple challenges, not least a fiercely competitive market in which, as the incumbent, it wants to remain the leading provider of high-quality services. At the same time, Telecom Italia finds that service delivery is becoming more complex due to the proliferation of application types and volumes, as well as the rapid evolution of the company's underlying networks. It also needs to drive greater operational efficiencies and prioritize investment wisely in an adverse economic climate. During Heavy Reading's visit to Telecom Italia's Service Operation Center, Gianni Crocetti, head of global network maintenance, pointed out that the company recognized early the importance of a service-level view and SQM as a means of addressing these challenges: Its customers experience the network through the quality with which services are delivered. A service-level view is a proxy for customer experience. When linked to knowledge of specific customers/customer segments, SQM can be used for a range of customer experience-driven activities, including the appropriate allocation of network investment. Services are delivered end to end across the network, so a service-level view breaks down the silos between layers and segments of the network that are separately managed. SQM enables Telecom Italia to rationalize the number of tools and systems used for monitoring and managing service delivery, reducing opex. Services provide "early warning" signals of deteriorating quality in the form of performance degradation, while network alarms are only generated after complete element failure. SQM allows Telecom Italia to detect degradation early and to take proactive action to preserve the quality of service delivery. This strengthens its position as a high-quality service provider and reduces costs associated with fault-handling. Service alarms and KPIs are higher level than the network equipment alarms Telecom Italia NOCs traditionally uses to monitor network health. Telecom Italia estimates that the median network-to-service-alarm ratio is around 80:1. Intelligent, automated correlation between network and service-level alarms helps the operator reduce management complexity and identify root causes faster, increasing operational productivity. Telecom Italia has implemented SQM within an SOC, which went live in June "Legacy" mobile voice, messaging and data services including specialist versions of these services, such as its Broadband on Board service for high speed trains, and MVNO-specific service instances were the starting points for the SOC. This is because mobile service delivery is both a key competitive battleground for the company and the largest source of management complexity. However, Telecom Italia intends the SOC to be the single location for assuring and managing any type of service running across any network technology (mobile and fixed) in the future. HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 10

11 Combining Customer & Service-Oriented Quality Management Telecom Italia's SOC project has two goals: To improve network monitoring and troubleshooting (assurance function) by overlaying this with an end-to-end service perspective. To drive more customer-oriented quality management and trend analysis information out of the network that Telecom Italia can use to optimize its management activities and investments. Both goals required Telecom Italia to create service models that are rich enough to reflect the range of possible influences on service quality/customer experience of the network (where service quality is a proxy for customer experience) yet that can be characterized by a limited number of high-level KPIs that can costeffectively be refreshed in near real time (every 15 minutes). Creating the 11 current service models and the supporting data collection architecture was a significant effort that required Telecom Italia to assemble a multidisciplinary IT/network engineering team. The company implemented a layered architecture, at the bottom of which is a big data collection layer responsible for collecting 1.7 billion performance management counters, 1.1 billion call detail records (CDRs), 1,000 network alarms and topology updates from 30,000 mobile network elements every day. This data is collected through 20 interfaces and flows through 30 parsing modules on its way to the analytics engine. The analytics engine correlates all this data, using 700 rules to update the service models and refresh their KPIs. The service KPIs are presented in a graphical user interface (GUI) on the SOC's screens and presentation wall for an instant global view of individual service quality. The counters, alarms and topology data feed into the SOC's real-time service monitoring and troubleshooting view while the CDRs add the customer view into service alarm troubleshooting and are also used for service quality trend analysis. Service model attributes that can be used for SOC drill-down and analysis include location and customer/offer type. For example: The assurance function can identify and visualize the geographical location of network elements contributing to service alarms. The SOC can carry out trend analysis of service quality by customer/offer type (e.g., consumer, enterprise, MVNO, high value, prepaid, postpaid, public access point network [APN], corporate APN) and location (including individual high traffic areas, such as railways and airports, specific buildings where high-value customers are located). Customer Experience Improvements & Benefits CEM improvement was an important part of the business case for Telecom Italia's SOC. The operator previously had no way of correlating complex customer satisfaction KPIs with knowledge of what is happening to customers' services in the mobile network. The SOC is a big step forward in visualizing customer/service/ network correlations and the impact of mobile network behavior on customer experience. HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 11

12 Since the SOC has been operational for a relatively short time, it is just beginning to measure the quantitative benefits of an SQM approach. Already, however, it is seeing returns from segmenting and dealing proactively with high-value customers. The SOC detects when such customers experience poor service performance and prioritizes their remediation processes in the NOC. This has led to a 75 percent reduction in customer claims due to a major fault. Improved knowledge of customer usage of the network has enabled Telecom Italia to increase network availability by around 20 percent in individual cells. Telecom Italia now intends to model OTT services so that it can monitor these from the SOC and analyze OTT-related customer experience. The operator points out that 15 minutes worth of poor Facebook experience can do more to damage its customer relationships than 15 minutes of poor voice quality, so SQM and CEM for OTT applications is a top priority for the coming year. Telecom Italia will also extend SOC concepts to fixed network services and to roll out SOC tools and views to its regional NOCs. As a result, it expects further benefits in the areas of improved customer experience of bundled service offers, proactive fault prevention and faster time to resolution, leading to operational cost reductions. The network will also be ready to contribute its customer experienceoriented KPIs to broader Telecom Italia CEM programs in the future. HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 12

13 Conclusion Although CEM is a holistic concept, since multiple factors contribute to a customer's end-to-end experience of doing business with an operator, customer experience of the network remains the most significant of these factors. As the conduit for the services customers want to consume anytime, anywhere, the network is a continuous customer touchpoint compared to transactional touchpoints, such as billing, ordering and customer care. The network is therefore both a rich source of customer experience insights, if these are extracted and analyzed in the right way, and a key influencer of customer satisfaction with their service provider. In a network context, CEM analytics are being used to drive service assurance functions, giving rise to the term "customer experience assurance" (CEA). CEA links CEM, SQM and network management in a customer-oriented assurance hierarchy that ensures individual customers/customer segments receive the service experience they expect and have paid for. As the case study of Telecom Italia's implementation of such a hierarchy shows, there are many benefits to this approach. Telecom Italia now has end-to-end service-level visibility of the network, helping the operator to reduce management complexity and operational cost. Its improved understanding of the network behavior on a per-customer, per-service basis is enabling it proactively to address network issues leading to less customer dissatisfaction and better targeting of network investment. CEM's emphasis on the customer is timely in an industry that has traditionally been poor at understanding or prioritizing the customer view. But it needs to be underpinned by a formal, analytics-driven understanding of a mobile operator's key business asset its network if operators are to deliver and protect customer experience effectively. By bringing together key CEA components, operators such as Telecom Italia are making it easier to sustain strong customer relationships and improve their brand value, despite tough market conditions and relentless technology change. HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 13

14 About Nokia Nokia invests in technologies important in a world where billions of devices are connected. We are focused on three businesses: network infrastructure software, hardware and services, which we offer through Networks; location intelligence, which we provide through HERE; and advanced technology development and licensing, which we pursue through Technologies. Each of these businesses is a leader in its respective field. Through Networks, Nokia is the world's specialist in mobile broadband. From the first ever call on GSM, to the first call on LTE, we operate at the forefront of each generation of mobile technology. Our global experts invent the new capabilities our customers need in their networks. We provide the world's most efficient mobile networks, the intelligence to maximize the value of those networks, and the services to make it all work seamlessly. // company.nokia.com HEAVY READING MAY 2014 WHITE PAPER MANAGING CUSTOMER EXPERIENCE OF THE NETWORK 14

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