A new approach to telecom digital marketing:

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1 A new approach to telecom digital marketing: Effectively engage, retain and monetize subscribers Publication Date: 21 Jul 2014 Product code: IT Clare McCarthy Summary Catalyst

2 Using data to create and monetize new offers or improve performance and customer engagement has been a focus for communications service providers (CSPs) in the last few years. CSPs have huge data repositories at a network, operational, service, application, and customer level, and use analytics suites to obtain actionable insights for the business. However, DNS data or Internet activity data is yet to come under the microscope, despite the benefits it can deliver. With the Internet-of-Things (IoT) integral to the digital lifestyle, leveraging Internet activity data from the DNS resonates with the needs of CSPs. It provides an immediate and complete picture of customers online activity, enabling CSPs to use relevant and realtime information to improve services, deepen engagement with existing customers, protect customers from malware, provide timely and personalized offers, and enhance customers digital lifestyles. This report looks at the benefits CSPs can derive from using analytics tools to leverage DNS data on a digital marketing platform, to provide proactive customer engagement and targeted monetization. Ovum view CSPs continue to invest in analytics solutions to improve efficiency and business decision-making, provide personalized telecoms services, and exploit B2B and B2B2C opportunities. However, these efforts may not achieve their full potential if CSPs continue to rely on historical and often static data for insights into customer behavior. Analyzing various types of data within the CSP domain is not a new activity, but using the ubiquitous DNS data is new and has several advantages over other data sources. Realtime access to customers' activities and the ability to respond is a rare but extremely powerful way of engaging with customers. As more customers activities go online, CSPs need to provide solutions that keep pace with their customers digital lifestyles, and engage with customers to protect them online and provide them with appropriate applications, services, and support in the moment that they need it. Key messages The DNS sees every Internet query made by the customer all of the time, so by using DNS or Internet activity data analytics CSPs can better understand their subscribers online preferences. This capability helps the CSP to obtain a realtime, end-to-end process view of its customers activities, and develop more relevant customer engagements with its existing customer base. This is not something that OTT players can achieve. With more of customers activities going online, CSPs need to keep pace with the digital domain and respond in session. DNS-based analytics can provide realtime insights as the basis for more secure Internet usage, higher retention, and higher conversion rates for marketing campaigns (versus those using historical data), and for more personalized and accurate interactions with care agents. As part of the ongoing customer engagement, CSPs can use the all-encompassing nature of their customers Internet (DNS) activity data to drive cross-sell and upsell opportunities to 2014 Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 2

3 niche customer segments for their own offers, as well as for the benefit of third-party advertising and other two-sided business models. Few companies are dedicated to leveraging Internet data activity data from the DNS, but Nominum has a compelling story. These activities compete with and are complementary to the more established deep packet inspection (DPI), business intelligence (BI), and Big Data analytics (BDA) activities. Market overview Market trends In today s mature telecommunications markets, retaining a loyal customer base should be a more important activity than winning new customers. However, this is rarely the case. Although CSPs customer acquisition costs can outstrip retention costs by four to one, CSPs seems to favor new customers through special offers and better treatment, while neglecting existing loyal customers. Some might argue that CSPs have made a conscious choice to rely on lethargy to keep a core customer base, but CSPs also struggle to do better because they lack the tools to identify the tipping point for loyalty and churn. CSPs are not short of information sources to help them understand their customers. However, in their attempts to collate and analyze subscriber data, they risk being a step behind their customers throughout the engagement cycle. CSPs data warehouses are full of historical data about customers and the websites they visited, but search analytics only sees the customer search data on one search engine at a time, and web analytics only sees customer activity one website at a time. There is no complete or realtime view. CSPs can achieve this by using Internet activity data sourced from the DNS. DNS is an asset that all operators have access to, but one that few have considered leveraging. The DNS sees every Internet query made by the customer, so DNS analytics give CSPs an end-to-end process view that shows the sequence of events in real time. The DNS is often referred to as the Internet phone book, as it translates host names into IP addresses, while dynamic host configuration protocol (DHCP) is the networking protocol used to administer information for IP networks, including the dynamic configuration of IP addresses. To provide some context to the ubiquity of this data, Nominum, a vendor leveraging DNS data, claims to process 1.5 trillion DNS queries each day Google+ processes 3.3 billion searches, while there are 2.7 billion Facebook "likes" and 600 million Tweets per day. By managing the flows of DNS activity data, CSPs can develop an early warning system against DNS DDoS amplification attacks, and identify propensity to churn, purchase new services, or change device. The amount of data carried over CSP networks and the devices connected to those networks is increasing exponentially, so effective consolidation and centralization of cross-domain CSP information is a prerequisite for analytic success. DNS activity data plays an increasingly important 2014 Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 3

4 Figure 1: Smartphones, tablets, and PCs by software platform provider New Methods for CSPs to Engage and Monetize Source: Ovum role in the Internet of Things. As the number of IP addresses and IP traffic grows, CSPs will need to secure and develop new services to support the digital lifestyle. As shown in Figure 1, smart devices are becoming pervasive and will increase the use of digital channels in business and social life for browsing, search, discovery, and transactions. Customers will conduct more frequent online transactions in the future, and CSPs need to be able to engage at these touchpoints to assure secure transactions. They can then collect, collate, and analyze customer data to improve their outbound service delivery to customers. Therefore, it is critical that they are able to more readily access and act on that data. Competitive vendor landscape DNS analytics crosses deep packet inspection (DPI) and Big Data analytics (BDA) competences. As a result, the vendor landscape includes DPI players Sandvine and Allot, niche players such as Arbor Networks, and BDA companies such as IBM, HP, Oracle Siebel, and Salesforce.com, who feature strongly in the areas of customer and marketing data. Compared to DPI, the DNS analytics offerings we have seen, from Nominum for example, are light, simple to deploy, and do not require heavy technical implementation. DPI is more likely to be sold in to the CTO and CIO offices, while the applications for DNS analytics can be used standalone by sales, marketing, and care teams to help with retention and loyalty programs, as well as with new service offers. These solutions do not require integration with the operator s network or systems and platforms. However, if the implementation occurs under the CTO/CIO remit, then the applications can be integrated with the operator s Big Data platforms or CEM systems. Telco pain points 2014 Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 4

5 Telcos' margins remain under pressure as revenue growth slows. Capex remains around 15 20% as telcos invest in their network and IT infrastructure to optimize existing estates and automate and improve customer experience systems. Improving customer experience management, in its widest network and IT departments, as well as customer-facing business units, and marketing and sales. Figure 2: What are your drivers for telco IT investments? Source: Ovum ICT Enterprise Insights: Global Telecoms, n= 450 sense, is a powerful corporate driver (see Figure 2), and it informs business and IT investments for To gain parity with the agility and personalized services offered by over-the-top (OTT) players, CSPs need to deploy predictive and contextually aware systems and analytics to improve the customer experience at critical digital touchpoints (see Figure 3). When one considers the digital noise that occurs in customers work and social space, CSPs need to ensure that their customers do not just pushing out relevant and personalized support and offers, at the right point in time. Figure 3: CSP customer touchpoints in the digital lifestyle Source: Ovum hear, but also listen to what they have on offer. The listening only comes when the CSP is proactively 2014 Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 5

6 When customers activities are online, the CSP needs to keep pace with their digital life and respond in session in real time. For example, when a customer is at the search and discovery phase, CSPs can direct them to new or appropriate services and offers online. If the customer then starts to navigate away from the CSP s website, they can be targeted with in-browser messaging and/or relevant propositions and promotions based on new next best offers, actions, or price plans. This could lead to a smooth acquisition, onboarding, and provisioning process, and will provide greater assurance that the customer profile will be accurate at the point of activation. Business benefits for CSPs Remain in the past or move to the moment In their attempts to collate and analyze subscriber data, CSPs risk being a step behind their customers throughout the engagement cycle. CSPs data warehouses are full of historical data about the customer and the websites they have visited, but this process does not bring together the sequence of events, nor will it do so in real time. DNS data can remedy this situation and provide CSPs with subscribers "live" Internet activities, allowing the CSP to send upgrade messages as soon a customer navigates to a "trigger." Triggers include: competitor websites or online communities network coverage and speed-test sites price comparison websites new devices reviews Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 6

7 If the customer views any of these sites, the CSP can launch its churn management or win-back examples that CSPs can address by analyzing DNS Internet activity data. Figure 4: CSP use cases for Big Data analytics, by domain Source: Ovum campaign to ensure that the customer renews or upgrades their contract. Figure 4 provides use case The current competitive environment is leading many CSPs to explore alternative revenue sources and increase their market penetration by creating and selling more services to existing users. A variety of analytics can be used to help operators monetize services that they already provide to customers. At a network level, Internet activity data can be used to optimize network and service performance, but much of the power that Internet activity data can deliver is in supporting customers and marketing use cases (B2C, B2B, and B2B2C). Network data CSPs collect data on network availability, utilization, latency, call setup times, and the inter-exchange of data at operator peering points. CSPs can see what applications a customer is using and what websites they are browsing, and can conduct clickstream analysis. By monitoring suspicious DNS activity, an analytics solution can ensure secure transactions. If it detects a botnet repeatedly contacting command and control functions in the network, or the activity originating from blacklisted sites, the CSP can use in-browser messaging to alert the customer and get them to block the attack. The CSP can then choose to route the customer to anti-virus software immediately, and provide a coupon for the software. Customer data The customer profile is built on behavioral analysis of calling and search patterns, click-through rates, billing data, presence, and support requests combined with a customer s personal information, such as demographics, socio-economic influences, and preferences for sports, music, film, and drama, as well as location data. Customer data plays a key role in managing churn and customer care. For example, in the US, Comcast was able to identify which customers in specific states were accessing 2014 Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 7

8 websites for country and western music. Comcast then used this information to identify who to target with its Country and Western music TV station. On average, it costs four times as much to acquire a new customer as it does to retain an existing customer, but with annual churn rates averaging 25% in some mature markets, clearly not enough is being done to retain customers. In a recent Ovum survey, only 27% of CSPs claimed to have fully deployed customer analytics, and only 23% of CSPs claimed to have implemented a predictive analytics capability within the business as a whole. A lack of predictive insights will curtail any attempt to move customer engagement to the next level. However, if the CSP can see immediately that a customer has visited price-comparison websites, reviewed new devices, or looked at competitor websites, and the customer has been looking at these types of websites over the last three months, the CSP can conclude that the customer is considering churning, and act to retain the customer if that is the appropriate action. Proactive customer engagement should begin at the search and discovery phase, as customers investigate the best offer, and again during the order to activate process. For example, if a customer is trying to sign up for a new service and has issues, and they have already investigated the frequently asked questions or tried the online community for help and failed, then they should be offered online chat before they call the contact center. Another perennial favorite to avoid is allowing the customer to fill in all their details online, only to find that the application cannot be processed or the service is unavailable. It is far better to have an in-browser message alerting them to any issues immediately. If service delivery and support channels are integrated, a care agent can call them to process their request when the service is available. Marketing data B2B opportunities At a marketing level, specialized teams can evaluate DNS analytics in light of customers' profiles, and assess customers propensity to buy certain products based on their online behavior. They can then proactively push a personalized offer. This could be an SMS or , but it is more interactive to use in-browser messaging via a floating watermark as they search the portal or website. In-browser messaging is a new digital channel that will give them the option to click to accept the offer and move to the next stage in real time. If they call a live agent, the customer service agent (CSA) will have "next best offer" recommendations prepared for that specific customer. However, this approach will only succeed if CSPs share, synchronize, and update customer information across all of their channels, and success will be heightened if they use realtime rather than historical data as the basis of the decision. CSPs can use the complete customer activity log to drive offers to coincide with annual events, such as birthdays, holidays, or sporting events, or by responding with specific offers for an interest, holiday destination, or sport, for example. B2B2C opportunities 2014 Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 8

9 Once customer data has been extracted and analyzed, CSPs can offer third parties similar insights. However, CSPs must manage personal and data privacy issues by aggregating and anonymizing customer data. CSPs cannot make money from reselling raw personal data. This means that third parties will be able to see data on how groups of customers displaying similar characteristics (for example socio-economic or age groups) behave in certain conditions, but they would not be able to see an individual's personal information. The differentiating feature of analytics for DNS data is that CSPs obtain access to all customer and search activity data in real time, enabling them to react in real time in a very personalized way. For and interactive response to customers. Figure 5: Effectiveness of marketing channels in customer engagement Source: Ovum example, using in-browser messaging via a floating watermark enables CSPs to provide a realtime As shown in Figure 5, using in-browser messaging represents one of the best channels to market for customer reach, realtime intervention, interactivity, high conversion rates, and low costs. In addition, as DNS Internet activity data is inherent in every CSP s domain, they do not have to buy new prospect lists, pay postage for direct mail, or buy TV airtime in order to reach their target market. Insight and responses will be based on a realtime and personalized experience rather than historical data. Ultimately, this should provide better conversion rates for marketing activities, and a rather swift return on investment for analytics suites. The key is to ensure that once this data is available, CSPs make it as simple as possible for customers to respond or sign up and start using the new service in real time. While this type of analytics suite can be deployed standalone, CSPs should ensure that these insights do not become stranded assets in one department, and that their benefit is shared with other IT platforms and systems Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 9

10 Using DNS data as the data source Business value from realtime insights and interaction While the use cases described above are not new, using DNS data as the data source is new. We noted some interesting examples that show demonstrable business value from realtime insights and interaction, and costs are lower compared to other analytics solutions. Security Ovum sees great potential for CSPs to build customer loyalty and trust in managing secure online activity and transactions. Subscriber safety and empowerment, or parental controls, are increasingly important to users. If CSPs marketing departments promote offers that link to third-party sites, they should know whether it is a secure and protected site. Typically, this is a blind spot for CSPs marketing departments, who are not well informed on malware issues or how to avoid or treat them. With more activities occurring online via a wider array of devices, there is always a danger that malware or botnet attacks will compromise the integrity of the customers domain. As shown in Figure 6, creating a protected environment that proactively detects and resolves customer issues, before they become toxic, is extremely important. For customers that are not tech savvy, this kind of support will be key in retaining their business. The same parameters can be applied to ensure that inappropriate or harmful content does not reach children and minors, for example. For CSPs, monitoring DNS activity data will help to identify botnet activity in real time, allowing them to protect and respond in real time at a system level, as well as push out in-session browser messages to ensure customers also help to protect themselves Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 10

11 Figure 6: Protecting online users using realtime insights New Methods for CSPs to Engage and Monetize Source: Ovum Churn prediction and reduction Predicting and reducing churn is a basic concern of all CSPs, so any solution that CSPs deploy should be immediately effective and provide a swift return on investment from these applications suites. For example, Cablevision Argentina deployed Nominum s N2 digital marketing platform for engagement and monetization to allow it to track the websites that customers visited and what they did on those websites. When customers repeatedly visited websites known to be popular among those considering churning (competitor websites, domains offering internet speed tests, and so on), these individuals were sent relevant offers and marketing messages. The CSP reported an 11% improvement in customer retention and an estimated average saving of $300 per customer saved versus the cost of acquiring a new customer. Cross and upsell opportunities Once the CSP has a complete view of a customers Internet activity, coupled with their location and personal profile, a lot becomes possible. For example, Nominum claims that its N2 platform can identify the products used by Spanish-speaking football fans in a given US state, allowing CSPs to target that group with specific content offers. The benefit for the CSP is that a narrowly targeted offer is likely to return higher-than-average uptake, and the CSP has not incurred the cost of promoting the offer to its entire installed base Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 11

12 Beating OTT players at their own game CSPs are constantly looking at ways to redress the balance with OTT players, and Internet activity data may provide an opportunity to do so. Google is dominant when it comes to search data, but it does not know all of subscribers online activities. If CSPs see all of their customers Internet activity, then arguably CSPs can offer richer and broader advertising information to third parties and allow them to target their adverts at specific customer segments, as identified with insights from DNS data. Appendix Further reading Big Data Analytics and the Telco: How telcos can monetize customer data, TE (May 2013) Telcos: Leveraging Trust through Privacy Management, IT (May 2013) Ovum Decision Matrix: Business Intelligence and Analytics for Telcos, IT (January 2013) Methodology Ongoing briefings with technology vendors serving the telecoms industry. Secondary research from annual reports, government departments, trade bodies, and industry regulators. Continuous ongoing research into business and technological developments in the telecoms Author sector. Clare McCarthy, Practice Leader, Telco IT Ovum Consulting We hope that this analysis will help you make informed and imaginative business decisions. If you have further requirements, Ovum s consulting team may be able to help you. For more information about Ovum s consulting capabilities, please contact us directly at consulting@ovum.com. Copyright notice and disclaimer The contents of this product are protected by international copyright laws, database rights and other intellectual property rights. The owner of these rights is Informa Telecoms and Media Limited, our affiliates or other third party licensors. All product and company names and logos contained within or appearing on this product are the trademarks, service marks or trading names of their respective owners, including Informa Telecoms and Media Limited. This product may not be copied, reproduced, 2014 Ovum. All rights reserved. Unauthorized reproduction prohibited. Page 12

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