Mobile Loyalty Audit 2014:

Transcription

1 Mobile Loyalty Audit 2014: How mobile customers really feel. The changing face of loyalty. Industry briefing Just how loyal are today s mobile customers? The Mobile Loyalty Audit cuts through industry data, talking to over 4000 customers to understand how they really feel about their mobile operator and smartphone brand. What s creating loyalty, and what s breaking it in today s hyper-competitive market? Technology Services Consulting

2 Contents Introduction 4 30 mobile operators in 4 countries The Device 6 Device satisfaction 7 Brand retention 8 Retail Choices 9 The importance of price 10 Upgrading to 4G mobile device brands Is recommendation important? 11 The Mobile Operator 12 Brand NPS 12 Brand satisfaction mobile customers Do satisfied customers switch? 14 Customer Support 15 Does the retail channel impact support usage? 16 Customer support satisfaction 17 Frequency of support interactions and the impact on repurchase 17 Loyalty & Retention 18 Age & tenure 18 ARPU & subscription 19 Is every retained customer loyal and satisfied? 20 What happens when things go wrong? 20 Multi-channel knowledge management, care automation and analytics to help wireless brands deliver a more effective customer service experience. Competitive threats 22 Summary

3 WDS Mobile Loyalty Audit 2014 Now in its second year, the WDS Mobile Loyalty Audit aims to help mobile brands better understand how customer loyalty is won and lost. Introduction This year we ve extended our reach. In total we ve talked to over 4000 mobile customers, spanning 30 mobile networks in four countries (UK, USA, Australia and South Africa). Loyalty in the mobile industry remains fragile, with key satisfaction results (such as Net Promoter Score ) still trailing behind many other industries. It s indicative of a far more challenging and competitive environment where mobile operators no longer compete just among themselves, but with network and platform agnostic services such as WhatsApp. And it s not just mobile operators facing a more challenging environment. This year s report also covers brand loyalty across smartphone manufacturers, and unless you are Apple or Samsung, it s getting tougher by the day. For mobile operators, the days of differentiation through physical network assets are numbered. While a robust network and quality-ofservice remain high on customers wish lists, incremental improvements to coverage or network speed have become difficult for customers to put a value on. It s one of the reasons why this year s audit discovered that an operator s chance of migrating an existing subscriber onto a more expensive 4G subscription actually reduces over time, with high tenured customers the least likely to upgrade. Instead, while not top of the list when initially selecting a mobile operator, it s factors such as customer support that have emerged as being hugely influential in determining long-term brand satisfaction and retention. Understanding this is hugely important for mobile brands, allowing them to better predict customer loyalty based on their interactions with the network rather than lagging indicators such as monthly churn. If we relied on historical churn data as a future predictor, we certainly wouldn t be aware that at any one time, 34% of mobile customers are thinking about switching provider. Unfortunately, inertia is still the principal driver for today s customer retention. Only 44% of retained customers are highly satisfied with the service they receive and over a quarter (26%) admit that the only reason they wouldn t leave is that switching is just too inconvenient. The problem for mobile brands is that price, coverage and convenience (while high on the wish list when choosing a brand) are relatively weak loyalty drivers. The minute a cheaper, more convenient alternative is presented to the customer, retention cannot be guaranteed. For this reason, brands must look to shift the focus of their customer relationships from price-based to value-based. This year s audit highlights that customer satisfaction is no longer enough; it s far from a guarantee of loyalty. Instead, brands must better understand their customers expectations, meet those expectations and build trust into the relationship. Key learnings: 34% of customers are thinking about switching mobile operator When it comes to upgrading their device 58% will switch device brand 35% of customers are highly satisfied with their mobile operator A dissatisfied customer is x8 more likely to churn The average NPS for mobile operators is +5 An NPS detractor is x7 more likely to churn Customer retention is driven largely by inertia 4 5

4 The Device Almost 2bn mobile phones were shipped in 2013 and, for the first time, more than half of these devices were smartphones. Growth in smartphone shipments looks set to continue at pace in 2014/15 with demand being driven by customers across Africa, China and India, where lower cost devices will make the technology accessible to a wider audience. Device satisfaction Apple achieves the industry s highest level of customer satisfaction; 70% of its customers are highly satisfied. Motorola, Samsung and Sony follow, with 69%, 64% and 60% respectively. OEM/Satisfaction High Medium Low Apple 70% 24% 6% Motorola 69% 16% 14% Samsung 64% 26% 10% Sony 60% 26% 14% BlackBerry 58% 25% 16% HTC 57% 28% 15% LG 55% 30% 15% Nokia 53% 32% 15% Other 50% 30% 20% In fact, shipment forecasts for India and China alone are expected to be over 500m in In India more than 90% of those devices will be sold to new users*. Even in mature smartphone markets, growth will continue. In the US more than 3m customers a month will swap their ageing feature phone for a smartphone. So, with demand showing no sign of slowing down, how do customers really feel about their mobile devices and are manufacturers building loyalty to their brands? Device satisfaction is highest in the first six months of ownership. 65% of customers are highly satisfied during this period. This falls to 58% from month seven onwards. 9% 14% 14% 14% 14% 11% 11% 27% 28% 28% 28% 29% 25% 25% 65% 64% 58% 58% 58% 57% 63% 65% of customers are highly satisfied during the first 6 months of ownership * Source Mediacells 0-6 mths 7-12 mths High Medium Low Satisfaction by customer tenure. Source WDS,

5 Brand retention As the frequency with which customers replace their smartphones increases, brand loyalty becomes a vital measure for device manufacturers. Samsung is the single largest benefactor of migrating customers. 33% of customers who switched device brands moved to Samsung. 20% switched to Apple. Retail Choices Quality of service remains the number one consideration for customers. Network coverage and service reliability are very important to 89% and 91% of customers, respectively. Customer service also rated highly, On average, 58% of customers will switch brands when it s time to replace their device. Globally, Apple leads brand retention. 75% of its customers replace their device with another Apple device. In second place, Samsung achieves a 54% retention rate. All other brands saw retention rates under 40%. 75% 35% 28% 26% 37% 54% 23% 33% In South Africa, the BlackBerry brand remains strong. 36% of all switching customers moved to a BlackBerry device. Brand retention is not affected by age, gender or subscription type (prepay vs postpaid). 11% 6% 20% 7% 10% 6% Other 3% Brand migration 3% 33% The decision to purchase a new service plan is not a simple one. Customers are faced with a range of tariffs, speeds and data usage policies. In many markets, where service is bundled with a device, the complexity is even greater. particularly among +45yr olds where 82% rate it as very important in their decision making. In many markets, 4G services are yet to fully resonate with customers. Globally, just 51% of customers rated 4G as very important and 24% considered it not important at all in their purchasing criteria. High spend customers placed far greater importance on customer service, 89% said this was very important compared to an average of 79%. Loyalty and rewards were also of greater importance to high spenders. Attribute/Importance Very Fairly Not very Not at all Reliable service 91% 8% 1% 0% Apple HTC BlackBerry LG Nokia Sony Samsung Other Network coverage 89% 9% 2% 1% Service price 85% 12% 2% 1% Percentage of customers retained when customers upgrade. Source WDS, Percentage of migrating customers attracted to a brand. Source WDS, Mobile operator I can trust 83% 13% 2% 1% 58% of customers will switch brands when it s time to replace their device Despite ground-breaking features and high marketing spend, competing smartphones have a difficult task ahead if they are to break the Apple and Samsung duopoly. A reliable service is the most important consideration for new customers Customer service 79% 17% 3% 1% Device price 74% 19% 5% 2% Payment convenience 67% 22% 7% 4% Makes me feel valued 62% 27% 8% 3% Device range 57% 26% 11% 5% Free phone 57% 23% 12% 7% 4G/LTE availability 51% 25% 15% 9% Shared data 49% 25% 16% 10% Rewards/loyalty program 46% 27% 18% 8% Recommendation by family & friends 36% 31% 22% 11% 8 9

6 adoption is currently just 6% with 25% stating that they would upgrade at their Is recommendation important? 85% of customers considered Price very important The importance of price It s hardly surprising that price remains a key priority when choosing a new service plan. MVNO customers are no more price conscious than mobile network operator (MNO) customers. Price was considered very important by 85% of customers in both groups. Upgrading to 4G Intent to upgrade to 4G varies according to the maturity of the market, tenure and age of the customer. Will you upgrade to 4G? AUS UK US ZA Yes 22% 25% 23% 37% No 36% 53% 33% 24% I already have 4G 18% 6% 33% 7% What s 4G? 25% 16% 10% 32% In the US, 35% of customers already have next contract renewal. Customers in the first year of a new service plan are the most receptive to upgrading to 4G. 29% plan to upgrade, compared to just 23% of customers with more than six years of tenure. The cost of 4G service remains a barrier to adoption. 66% of customers with low monthly spend don t plan on upgrading. Awareness of 4G reduces with age. Globally, almost a third (29%) of +60yr olds were unfamiliar with 4G. Intent to upgrade is highest among 25-34yr olds (38% plan to upgrade). Customers in the first year of service are the most likely to upgrade to 4G Cost remains a barrier. 66% of customers with low monthly spend don t plan on upgrading We live in a recommendation economy where customer advocacy is the new currency. However, when choosing a new mobile operator, a recommendation from friends or family is largely disregarded. Globally, less than half of customers consider it very important in the decision making. The importance of recommendation was lowest in the UK and South Africa, where 25% and 29% don t consider it of any importance. The importance of recommendation declines with age. Between the ages of 16-34, just under half of customers (46%) consider it very important. This declines to 31% for over 60yr olds. 46% of 16-34yr olds consider a recommendation very important Getting the basics right is of vital importance to customer acquisition with network hygiene factors and pricing being most important to customers. Recommendations from friends and family and 4G access were of least importance to a customer s choice. The dissonance between answers for questions relating to service price and free device, highlights one of the key challenges presented to mobile operators and smartphone brands alike; device subsidies. A distortion in the customer s perception of value means that often hardware is undervalued and service prices appear inflated. The issue is further compounded by the high importance of pricing on the customer s purchase decision; the price tag is a delicate variable. a 4G subscription with a further 23% stating that they plan to upgrade at their next contract renewal. However in the UK, 10 11

7 The Mobile Operator The Apple iphone offers an NPS benefit to mobile operators. In the US, Apple customers score their mobile operators above average at +18. Satisfaction falls after the first six months of service (from 34% highly satisfied) to 28% by the end of the first year. In the UK, Australia and South Africa, it recovers in the second year. In the US, levels of high Brand satisfaction satisfaction continue to fall until the third year. Brand NPS Brand satisfaction is defined by how well 25% 29% 30% 29% 24% 23% 22% NPS MVNO avg +18 MNO avg AUS UK US ZA +16 An NPS detractor is x7more likely to be a switch risk than a promoter With a global average of +18, NPS for the mobile operator meets (and exceeds) its customers expectations. It s an important measure and mobile operators have long understood that improving customer satisfaction enhances not only retention, but the ability to upsell. Low 25% Brand satisfaction High 35% 41% 34% 0-6 mths High 43% 28% 7-12 mths 39% 31% % 32% 2-3 Medium Satisfaction by tenure: Source WDS, % 32% % 38% % 39% 6+ Low Net Promoter Score (NPS): Source WDS, Net Promoter Score (NPS) remains a fixture on many management dashboards. The methodology involves asking respondents a single question, How likely are you to recommend the service/product to a friend, relative or colleague?, and rates the response from 0 (not at all likely) to 10 (extremely likely). The score (which can range from -100 to +100) offers an indication of current satisfaction based on the level of advocacy that exists. An NPS detractor is x7 more likely to be at risk of switching than a promoter. MVNOs is considerably higher [than MNOs]. Positive NPS increases with age. The age group with the largest percentage of promoters is +60yr olds. Those aged under 24 scored an average -1. Achieving a positive NPS requires significant tenure from a customer. On average a positive NPS score isn t realised until the third year. NPS Avg Medium 40% Satisfaction is correlated to a customer s intent to repurchase. A customer with low satisfaction is x8 times more likely to switch. Customer satisfaction with mobile operator brands remains low. Just 35% of customers are highly satisfied with their mobile operator and a quarter (25%) claim low satisfaction. Satisfaction is impacted by both age and tenure. The percentage of highly satisfied customers climbs to 44% among +60yr olds. A customer is x8 more likely to consider switching if their brand satisfaction is low When compared to many other service industries, global NPS for mobile operators remains low at yr This compares to 30% for yr olds NPS and customer tenure: Source WDS,

8 Do satisfied customers switch? Highly satisfied customers will still switch; 17% are at-risk of switching. At risk of switching? No Yes High satisfaction 83% 17% Medium satisfaction 69% 31% Low satisfaction 39% 61% Age is a determining factor. 24% of <24yr olds that said they were likely to switch are highly satisfied; in the US this increases to 38%. Both NPS and customer satisfaction scores have a positive correlation with a customer s intent to repurchase but are by no means prescriptive. Highly satisfied customers and NPS promoters are still at risk of switching. Likewise, an unsatisfied customer doesn t automatically switch. 34% of customers are at-risk of switching. Low 45% Brand satisfaction of those at-risk Medium 37% High 18% Customer Support Mobile operators are exploring many different methods of supporting their customers; from the traditional call center to on-device applications and social media. 51% Call center 34% 35% Help app 40% Online self-care 33% Web chat 46% Store Percentage of customers who have interacted with a care / support channel in the last six months Source WDS, The traditional call center was the most frequented support channel, with 51% of all customers interacting in the last six months. Customers over 45 of age are less demanding on their mobile operator s support channels. 63% of 16-24yr olds had interacted with the contact center at least once in the last six months, compared with only 40% of +45yr olds. While such satisfaction metrics are useful retention indicators, mobile operators must consider their limitations when segmenting customers (and assigning retention budget). Brand satisfaction is relative, contextual and easily influenced by factors including age and tenure. A highly satisfied customer who is under 24 of age is x3 more likely to switch than one over 24 of age 25-34yr olds are the most demanding age group. 66% have called the contact center and 60% have visited the store in the last six months yr olds are the most demanding age group, when it comes to needing support 14 15

9 Does the retail channel impact support usage? The source of a customer s device does have an impact on their support interactions. Where devices are acquired second-hand, or from a third-party, customers interact with their mobile operator less frequently than they would have had they acquired their device directly through their mobile operator. 46% of customers who acquired their device from the operator s official store had interacted with a support channel at least once in the last six months. This falls to 31% for those who acquired their device secondhand and 30% for those who acquired their device from a third-party retailer s online store. A customer who acquires their device from an operator store is x1.4 more likely to interact with a support channel than someone who acquires their device from a third-party retailer. A customer who has contacted support more than twice in a six month period is x6 more likely to be at risk of switching This isn t to suggest that devices sourced from third-parties are less troublesome than those acquired through the operator s own retail channels. Instead, we can hypothesize that when sourced through third party channels: 1. Customers become less expectant on their mobile operator for support the Customer support satisfaction Satisfaction with customer support is highly influential on the customer s overall brand perception and intent to repurchase. Delivering a poor support experience is one of the worst things a mobile brand can do. Customer satisfaction is low across all support channels. In-store support rates the highest with 35% of customers highly satisfied. Online self-care is the lowest with just 29% being highly satisfied. Customers who are highly satisfied with the support experience went on to rate their operator s overall brand highly (64% highly satisfied). They also deliver a brand NPS of +61. By contrast, those who rated the support experience poorly scored a brand NPS of -50. Frequency of support interactions and the impact on repurchase No. of support interactions NPS % High satisfaction 38% 37% 29% 18% % At-risk of switching 24% 39% 50% 64% A customer who has contacted support more than twice in a six month period is x6 more likely to be at risk of switching than someone who hasn t interacted with support at all and x3 more likely than a customer with a single support interaction. For customers with one (or less) support interactions in a six month period, brand NPS is higher than the global average at +11. This falls to -35 for customers with three (or more) interactions. The customer support provided by mobile operators presents a clear opportunity for brands looking to get ahead. Not only does customer support leave a lot of room for improvement, it s also highly influential to both customer acquisition and retention. 31% 2nd hand 30% 3rd party website 37% 3rd party store 43% Operator website 46% Operator store Percentage of customers who have interacted with support in the last six months (by retail channel) Source WDS, further down the value chain they are when purchasing. 2. Customers feel less entitled to support from their mobile operator. Only 38% of customers with devices acquired second-hand contacted the call center, compared with 56% of those purchasing through the operator store. 3. Third party retailers offer an improved walk-out-working experience to ensure new customers are introduced to key Regardless of how well a support interaction is managed, the more frequently a customer has to engage with a support channel the greater his chance of switching becomes. A single support interaction in any given six month period remains largely benign. However more than one interaction in this period sees a sharp decline in brand NPS, brand satisfaction and intent to repurchase. Findings show that mobile operators are rewarded for getting it right with higher NPS, brand satisfaction and repurchase intent. Conversely getting things wrong is very damaging for mobile operator brands, a poor customer support interaction or having to interact more than once had an adverse effect on these metrics. features and configured for services (and subsequently require less post-sale support)

10 Loyalty & Retention As tenure increases, switch risk declines. For customers with over 6 years of tenure, just 23% are at risk of switching. For those with less than two years of tenure, 44% are at risk. Customers with less than two years of The industry s reliance on churn as a measure of loyalty is misguided. Churn measures only those customers who have already left. It gives no indication of the loyalty of those that are retained. Customers under the age of 34 are x2 more likely to be at risk of switching 38% of high spenders are at risk of switching tenure are x2 more likely to be at risk of switching than those with over six years of tenure. ARPU & subscription Switch risk increases with ARPU, 38% of high spenders are at risk of switching compared to just 16% of low spenders. At the end of the second year 54% of postpay (contract) customers are at risk of switching. 12% of customers intend to stay with their Understanding how the support experience impacts brand satisfaction and how the frequency of support interactions can influence retention are just two examples of insight that current mobile operator because their family and friends are on the same network. For customers in households of three or more subscribers, this increases to 21%. can be used to build more robust indicators of loyalty. High spend 38% 62% At any one time, 34% of customers are considering switching mobile operator. Age & tenure Medium spend Low spend 37% 63% 16% 84% 0% 20% 40% 60% 80% 100% At-risk Safe The likelihood to switch mobile operator decreases with age. Customers under the age of 34 are x2 more likely to be at risk of switching than those over 34. Customer switch-risk by monthly spend Source WDS,

11 Is every retained customer loyal and satisfied? Although mobile operators might like to claim that their retained customers are loyal, many are retained simply because they face financial or technical barriers to switching. Of all customers who stated they would repurchase, only 44% are highly satisfied. Today, just 55% agreed that they stayed with their mobile operators because their service expectations were being met and 37% stay because they feel they get the best value for money. However, retention is often driven by inertia. 35% said they didn t want to risk losing coverage, 26% said that switching was just too inconvenient and 15% said that they thought all mobile operators are the same. In the same way that a retained customer might not be satisfied, not all unsatisfied customers will leave. In fact, only 61% of unsatisfied customers are likely to switch. 43% of NPS detractors will stay with their mobile operator. Of these 35% said this was because switching is too inconvenient and 22% said that this was because all operators are the same and so there is no benefit to switching. What happens when things go wrong? A truly loyal customer will resist competitive price-based offers and forgive the brand when service dips below their expected level of quality. We asked customers how they would feel if their mobile operator failed to meet their expectations. Tolerance to failure Avg High Sat Promoter A privacy breach 11% 13% 13% 10% price increase 12% 15% 15% Solving problems takes too long 12% 15% 15% Billing mistake 14% 18% 18% FCR failure 14% 19% 29% A network outage 17% 20% 21% Retail wait times too long 22% 26% 26% A Product recall 29% 36% 36% Support was required 34% 43% 44% Desired phone not available 39% 45% 45% Friends and family left the network 62% 68% 69% Percentage of customers that would tolerate a failure Source WDS, Customers were most sensitive to a breach in their privacy, only 11% would tolerate a breach. Being a highly satisfied customer (or an NPS Promoter), helps to insulate the customer from customer experience failures. In all scenarios, these customers show a higher rate of tolerance. Low spenders are more tolerant of a price increase than high spenders. 16% would leave, compared to over a quarter (28%) of high spenders. Customers acknowledge that problems occur. On average 34% are highly tolerant of the need to contact customer support. However, tolerance falls if the problem isn t solved quickly; taking too long to solve a support problem was the second least tolerated customer experience failure. Would you tolerate customer experience failures? 20 21

12 Competitive threats Customers were asked what a competitor could do to tempt them away from their current mobile operator. Although customers with high satisfaction or a willingness to recommend their mobile operator were less susceptible to competitive offers, a significant proportion remained at risk. No. of Support Interactions Avg High Sat Promoter Better network coverage 48% 38% 39% Better data speed 43% 31% 32% Bigger data allowance 43% 32% 33% Better loyalty rewards 41% 30% 32% Better customer service 39% 26% 26% The phone I want is cheaper 39% 27% 28% Data sharing 30% 18% 19% Highly recommended 26% 17% 18% Desired phone available 24% 17% 17% Percentage of customers who would be tempted to switch Source WDS, % of <24yr olds would churn for a bigger data allowance, 47% would switch for faster data speeds. High spenders were the most susceptible to competitive threats. 55% would switch for better coverage, 52% would go for faster data speeds or a bigger data allowance and 42% would go for a better loyalty/rewards program. 44% of South African customers would switch for better customer service. Customers that have contacted customer support more than once in the last six months were more receptive to competitor offers. 50% would leave for better customer service, better data speeds or bigger data allowance. Findings show that high satisfaction and the willingness to promote indicates a slight improvement in tolerance to customer experience failures and resistance to competitive offers, however it does not indicate true loyalty. In fact, much of the retention we see in today s mobile operator communities is driven by inertia. To foster true loyalty, mobile operators must nurture their existing customer base with stickier, differentiated offerings and tailored retention messaging. We know that the drivers of acquisition and the drivers of retention are different; although service quality, reliability and pricing will bring customers onto the network, these factors are not going to keep them there. Instead an ability to trust the brand and feeling like a valued and rewarded customer were what separated loyalty from inertia throughout the study. However, the most competitive deals are often offered to new customers only in a bid to achieve acquisition targets. Although loyalty goes much deeper than price, a pricing model that discriminates against high tenure only serves to undermine the feelings that drive loyalty, eroding any sense of value and reward existing customers may have had. Customers that have contacted customer support more than once in the last 6 months were more receptive to competitor offers 22 23

13 Summary Without doubt, metrics such as satisfaction and NPS have a positive correlation to a customer s intent to repurchase and the longevity of their relationship. However, there are considerations to be mindful of. Firstly, satisfaction is no guarantee of retention. 18% of highly satisfied customers will still switch. We call these customers Mercenaries, highly satisfied customers who will happily switch if a better opportunity is presented to them. Mercenaries typically chase low prices or buy to pursue a trend. It takes effort to keep this segment but they show little, to no, loyalty in return. Likewise, we shouldn t assume that all retained customers are loyal. For the majority of brands retention is still being driven by inertia with many customers choosing not to switch because of perceived inconvenience. We call this group Captives. Captives may be prevented from switching because of a technical, social or financial barrier. Once this barrier is removed, retention cannot be guaranteed Secondly, the components of a product or service that actually drive satisfaction should be better understood. For example, what customers look for when choosing a mobile operator isn t necessarily the reason that they stay. The research suggests that while customers value price, coverage and convenience in their initial purchase, they are merely hygiene factors and aren t drivers for long-term loyalty. Most switching customers were perfectly happy with their coverage for example. Instead, customers switch because of factors not necessarily considered in the initial purchase, such as loyalty programs, a sense of trust in the relationship and the quality of customer service. This last factor proved decisive for many; satisfaction with customer service was highly influential on the customer s overall brand perception and intent to repurchase. In fact, delivering a poor support experience is one of the worst things a mobile brand can do. Customers who were highly satisfied with the support experience went on to rate their operator s overall brand highly (and scored an NPS of +61) and therefore displayed a higher intent to repurchase. The ability to identify these sub-groups is becoming increasingly important for brands looking to maximize their retention budgets. If you are a mobile operator or device manufacturer, WDS can provide you with complimentary access to the data through our interactive business intelligence tool. For access, marketing@wds.co 24 25

14 WDS, A Xerox Company is the trading name of Wireless Data Services Ltd registered in England and Wales with company number Registered address - Wireless Data Services Limited, 160 Queen Victoria Street, London EC4V 4AN. VAT number GB While every care has been taken to ensure that the information in this document is correct, WDS cannot accept (and hereby disclaims) any responsibility for loss or damage caused by errors or omissions. All rights reserved. No part of this document may be reproduced without the prior permission of WDS. Copyright: WDS, A Xerox Company 2014.