Introducing Telcos Latest Innovation: Customer Interaction

Transcription

1 Introducing Telcos Latest Innovation: Customer Interaction In competitive telecom markets, product and price innovation is becoming very yesterday. The next frontier for strategic differentiation is customer interaction. 1

2 In today s Internet world, consumers expect service providers to do more than just offer competitively priced, reliable, and attractive products; they also expect their providers to be responsive, flexible, and know just what they need. Young people in particular assume they can have a personalized and seamless dialogue with a company across multiple channels at a time that suits them. Meeting these expectations, whereby customer interaction and service innovation become key strategic differentiators in a fast-commoditizing market, is both a challenge and an opportunity for telcos. Many digital natives lack the patience to help a call center agent find out what the company should already know. So-called digital natives have grown up with digital technologies and will soon comprise 50 percent of the population. These tech-savvy customers are gravitating toward companies that find the optimum balance between automation and direct interaction and that know the right time to reach out unsolicited (see figure 1). For instance, in many cases they prefer self-help and peer-help mechanisms over call centers. Even more consumers assume their questions will be answered instantly, that they will receive service based on their value as a customer, and that they will have access to the same offers regardless of whether they are a new or existing customer. What s more, they expect companies to have a complete view of their relationship and to personalize the dialogue accordingly. They don t have the patience to walk an agent through a standardized script so that the company can find out what it should already know. Figure 1 Future customer interaction touch points will be more digital, and live services will become advisory Customer interaction model Managed P2P Forums Peer-to-peer Open P2P Facebook Twitter Voice and video Call center Self service Web App Basic requests and transactions Peer advisory, solution-centric Personal advisory services Personal advisory services In-store guru Free for all Free or at cost by segment value, depending on strategy Source: A.T. Kearney 1

3 In other words, consumers expect interactions with their telco to be differentiating, available, digital, seamless, and simple. To meet these demands, many providers are already simplifying products, services, and processes, and that is important. But every contact with a consumer is an opportunity to stand out from the competition and add value, so the best telcos go even further: they define and manage customer interaction elements just as carefully as they define and manage product specifications. Customer interaction ceases to be a cost center and becomes instead a profit center. Every interaction is an opportunity to stand out from the competition and add value. Even if the strategic direction is clear, finding the right balance is far from easy. In the spring of 2014, the A.T. Kearney Future of Customer Interaction Study conducted a survey of nearly 300 CXOs and customer contact experts across telecom, banking, insurance,and utilities, asking them about customer interaction channels, customer experience, operations, governance, and systems. We also performed in-depth interviews with a number of executives to gain deeper insight into the survey results. Our study spanned leading subscription-based companies in Europe, the Middle East, Asia, and the Americas. The results of our study, together with our own project experience, are synthesized in six customer demands and 15 principles to meet those demands and advance customer interaction (see figure 2). Figure 2 Customer demands and 15 principles to meet those demands and advance customer interaction Demands: Customers expect... Seamless channels New domains and 24/7 service Instant answers Personalized dialogue Differentiated service Equal rewards Strategy: Customer interaction will require... Differentiation to add value Active selection of what to handle live Proactive approach and smart insights Digital and small-screencentric channels Service innovation Aligned marketing and care strategy Focus on acquisition or retention Design and influence of customer experience Operational model: Customer interaction operations will... Require new competencies Standardize basic contacts Rely on a simplified portfolio Be managed as a profit center Be seamless across fewer channels Balance cost, quality, and volume in partner contracts Drive value chain improvements Source: A.T. Kearney Future of Customer Interaction Study

4 In the following sections, we explore in greater detail several of the most important findings from the study and their implications for telcos. The Future Is Calling Customer interaction and service innovation are equally, if not more, important than product or price innovation As established telcos fend off challenges from new entrants, they increasingly recognize the importance of a compelling customer experience as a key differentiator (see figure 3). For some service providers, the customer experience is now the top priority, overshadowing the traditional drivers: product and price innovation. In our recent study, 39 percent of respondents identify innovations in customer service and interaction as the leading competitive differentiator in their markets; a further 48 percent regard them as on a par with product and price innovation. These findings are echoed in a forthcoming A.T. Kearney paper, which concludes that customer service is regarded by telcos as one of the most important of all functional areas. The new focus reflects the fact that in developed countries, markets are mature and the cost of customer acquisition is high. In this context, there is a strong business case for reducing churn and increasing the lifetime value of existing customers through up-selling and crossselling. In other words, creating a compelling experience for existing customers can be more Figure 3 Compelling customer service will be a main differentiator How important will customer service, as opposed to product and price innovation, be as a market differentiator? (% of respondents) Less important 13 Through what means will customer service be differentiated? (% of respondents) 100 More important Relationship and advice Equally important New service areas Source: A.T. Kearney Future of Customer Interaction Study

5 rewarding financially than pursuing new customers. At the same time, there is a growing recognition that social media is amplifying the impact of both good and bad customer service on a company s reputation and market share. Indeed, in our study, 96 percent of respondents plan to take more control over customer interactions. All respondents see the need for a more relationship-based role, personalizing the customer dialogue and moving beyond simple transactional resolution to providing advice and recommendations. Furthermore, 22 percent say they also see customer interaction as a strategic differentiator in additional domains beyond their own products. For example, TeliaSonera s App Market not only offers small and medium enterprises a range of preselected apps to meet their business needs, it also provides dedicated support services for those apps so that customers never need to interact with their developers. We expect some companies to move quickly to get the basics of customer care and interaction right in select channels and customer segments. Others, typically incumbents, will pursue advanced, full-service solutions that could take up to several years to implement such as an omnichannel experience across all channels and customer segments. The first group will place its wager on reaching the market sooner than the competition, while the latter s strategy will rely on the completeness of its customer interaction offer to attract and retain customers. Telcos will want greater control over customer interactions and channels. Telcos can take inspiration, for example, from Nespresso, a seller of premium, portioned coffee and coffeemakers. Over a number of years, the company has developed three channels to build customer relationships via subscriptions and single purchases: an e-commerce website; customer relationship centers, where 1,300 coffee specialists answer questions by phone; and an evolving retail model whose latest iteration, the Nespresso Cube, is a retail booth in department stores that offers automated yet highly personalized service. Customers expect companies to see the full customer relationship and to personalize the dialogue Nearly 65 percent of respondents in our study regard a seamless omnichannel experience across their own and third-party channels as crucial for customer satisfaction. A further 22 percent consider that an omnichannel experience is crucial, but only in their own channels. (In the study, we define an omnichannel experience as a similar and comparable experience across all channels, with full integration and seamless handover among them.) Delivering an omnichannel experience across digital and physical channels is challenging it requires companies to break down organizational silos, modify targets and performance indicators, and better integrate IT systems so that all customer-facing staff have a complete view of the customer. Half of the respondents believe they will attain such a setup within two years, whereas the other half recognize they will need up to five years. In addition to creating a customer-centric organizational structure, a major challenge for telcos will be to exercise greater control over third-party channels, which will require common IT solutions, common and aligned processes, and training. 4

6 A relentless focus on prioritization and execution will be needed to successfully create an omnichannel experience as quickly as the market demands. But the prize is worth the effort. A.T. Kearney sees first movers gaining a tangible competitive advantage that could, in the best case, last for several years. Consumers expect service differentiation to match their value as a customer The greater transparency provided by the Internet and social networks means consumers are increasingly aware of their value to companies. At the same time, telcos are placing greater emphasis on retention, while paying less attention to short-term average revenue per user (ARPU) and more to addressing customer relationship value, which has been on their radar for some time. This shift in emphasis means valuable customers may require a premium service that will encourage them to remain loyal to their telco. Better, faster service to customers willing to pay a premium can increase revenues and reduce the likelihood of churn. Almost half of those we studied already differentiate customer service and interaction by customer segment, and an additional one-third plan to introduce differentiation across customer value segments. Interestingly, however, a substantial minority (35 percent) do not intend to differentiate customer interactions in traditional channels. We see a clear business case to provide better, faster service to customers who are willing to pay a premium, either because they have a high-arpu product (and a broad package of included services) that includes or justifies high service levels, or because they are willing to pay separately for service. Such an approach can increase revenues and will reduce the likelihood that these customers will turn to a competitor. Banks and airlines have done this for years. Financial institutions offer private banking and advisory services, for example. Airlines offer business class, and even low-cost companies such as easyjet offer priority boarding. Telcos can follow suit with similar concepts, such as a fast-track customer service channel for high-value customers regardless of their segment when they call the contact center. These customers will receive immediate service instead of having to navigate their way through an interactive voice response (IVR) system. A.T. Kearney believes that telcos will also offer a more dedicated, professional service experience in their retail stores, similar to that of other high-tech retailers: Best Buy s Geek Squad or Apple s Genius Bar come to mind. Live customer interaction will focus on selective value-adding differentiation, with routine contacts being handled through automated channels Established telcos face mounting competition from Internet-based newcomers who have won customers with automated self-care channels that eliminate standing in line at the store or holding for a call center agent. Nearly 90 percent of respondents plan to expand the number of customer interaction channels between now and

7 Recognizing customers shifting expectations, most telcos are embracing digital technologies 96 percent of participants in the Future of Customer Interaction Study believe digital channels will be equally or more important than traditional interaction channels by 2017 (see figure 4). At the same time, telcos anticipate that more customers will want a direct relationship, including more face-to-face interactions. Our respondents foresee that the importance of the inbound customer contact center and third-party channels will wane over the next three years, with a corresponding rise in the importance of their own retail and digital channels, including handset and tablet applications. Figure 4 Customer interaction channels in 2017 How important will digital versus retail channels be in customer interactions in 2017? (% of respondents) 54% 42% 4% Similar to today Customers will not shift to digital Both digital and retail Customer care will be mostly digital Primarily automated and digital Only 20 30% of today s volume will remain live Source: A.T. Kearney Future of Customer Interaction Study 2014 To keep costs in check and invest in what really makes a difference, many telcos are looking to deflect or avoid routine interactions by providing customers with the tools to help themselves or one another. Nearly 80 percent of respondents say they will actively support or promote peer-to-peer services, and the vast majority will do so both in their own channels and on wellestablished third-party platforms (such as Twitter and Facebook). We believe the latter to be a risk: bad experiences get amplified in social media, and it remains to be seen whether the benefits of using social media for customer care will outweigh the dangers. The majority of transactional and subscription-management customer interactions, then, will likely be avoided altogether or handled in self-help environments. Personalized live interaction will take the shape of advisory discussions revolving not around the core access service, but rather around the broader service environment, including over-the-top offerings. Operators may choose different strategies to provide the premium live interaction, but we expect to see fee-based models, as well as services provided for free to high-value customer segments. 6

8 As human interactions provide the best opportunity to differentiate and to up-sell and crosssell, telcos will need to carefully select which interactions should be automated and which need to involve direct contact and a value-added experience. Another aspect that requires close attention is the need to ensure a unified, consistent customer experience as new channels are created. Selective investment in data analytics will help focus outreach where it can offer the greatest return in terms of customer satisfaction and value Data analytics can help telcos decide when to actively reach out to customers. Specific events or patterns of behavior could be triggers. For example, a service breakdown could prompt a call to an affected customer to help contain or reverse the negative impact of the disruption. Similarly, calls to customers nearing the end of a contract could help to resolve any issues they have before they consider switching to an alternative supplier. Most telcos are already adopting such tactics. In our study, only one-quarter of respondents have not yet added outbound proactive customer interaction, but they plan to do so in the future. Most transactional and subscriptionmanagement interactions will likely be avoided altogether or handled in self-help environments. A.T. Kearney s analysis suggests that if outbound calls to customers are sufficiently selective, they can generate a significant return on investment. A carefully targeted call could not only reduce the customer s propensity to churn but also result in an up-sell instead. Recasting Customer Interaction Although most telcos know where customer interaction is heading, many are struggling with how to get there. There are new competencies to add or develop, partners to choose, and execution and time to market to improve. In many cases, hands-on operational issues, such as systems integration, recruitment, and training, still need to be addressed. And not one of our study participants is entirely satisfied with current competence levels or management metrics for customer experience and satisfaction. Improvements to customer interaction will be led by customer care and supported by marketing One of the key challenges facing telcos is breaking down long-standing silos and creating an organizational structure that can deliver a compelling customer experience. An effective structure will allocate responsibilities appropriately and ensure that the right incentives are in place. 7

9 Despite broad alignment around the importance of defining service specifications, only one-quarter of companies studied have explicitly assigned responsibility for customer experience to a role or department. This ambiguity could undermine the aspirations of many telcos to create an excellent experience. We know from multiple telco examples that when someone takes overall responsibility, customer care becomes one of the largest sales channels by percentage of sales. For some of our clients, customer service has become the dominant sales channel. In general, A.T. Kearney believes the customer care team, which owns the majority of databases that provide insight into customers issues, is in the best position to lead improvement of customer interaction and experience, with support from marketing. The customer care team will benefit the most from improvements, so it will have a strong incentive to pursue them. Product managers need to take responsibility not just for the product, but also for the service elements and the related experience. Looking more deeply, A.T. Kearney believes product managers can best be responsible for the product as well as the service elements and experience associated with them it is crucial for all companies to ensure that the joint service and experience dimension is a core element of new product or service development. However, product managers hold this responsibility in only 40 percent of our respondents companies. Outsourcing will be less about efficient service provisioning and more about partnering to acquire competencies and support the customer experience Our study indicates that telcos will partner more than they do today, with customer contactcenter and interaction activities increasingly outsourced. However, just 5 percent of respondents expect these operations to be fully outsourced. Without careful management, greater use of outsourcing could undermine telcos efforts to exert more control over the customer experience. To mitigate this risk, we expect operators to seek closer integration with partners, adopting common processes, training, and IT, with the goal of creating an omnichannel experience for customers and optimizing up-selling and cross-selling during customer interactions. The rationale for outsourcing and partnerships varies significantly across respondents and is a multifaceted decision. However, in broad terms, cost is no longer the primary driver for outsourcing, and we expect most companies to balance unit cost with quality and customer experience. Our study confirms that customer service is no longer under intense pressure to cut costs providing customer service as inexpensively as possible is increasingly regarded as a shortsighted and outdated notion. In some cases, skill shortages are driving outsourcing. Most incumbent telcos do not yet have all the competencies required to deliver the interactions that customers increasingly expect. There is a sense that customer-interaction competencies need to improve dramatically across the board in the next three years, especially with respect to digital channels, omnichannel 8

10 experiences, and the provision of a holistic customer view (see figure 5). No single respondent is entirely satisfied with their company s current competency level. Addressing this will be a key challenge for telcos, which often rely on young, part-time workers to interact with customers. Attracting and retaining talented senior executives leaders that will motivate staff to put the customer first and go the extra mile will be important, too. Figure 5 Contact centers present significant competence gaps Current performance level versus expected importance in 2017 (scale of 1 to 5) First contact resolution Sales Call handling Holistic customer view Providing advice Service quality differentiation Service innovation Integrated marketing and care strategy Outbound care Loyalty focus Current performance Expected importance in 2017 Source: A.T. Kearney Future of Customer Interaction Study 2014 We believe telcos may also face skill shortages in IT and partnership management. By conducting a skills assessment for current and future needs now, telcos can develop an HR strategy that highlights existing skill gaps and ways to fill those gaps, either by working with partners or by targeted recruitment. Customer interaction will be managed as a profit center rather than a cost center Many companies now recognize that investing in good customer service can be more costeffective than traditional advertising and marketing, as social media amplifies the role of wordof-mouth recommendations and disparagements. In fact, our study reveals that a substantial minority of telcos and other subscription-based companies plan to increase spending in this area, even as digital channels promise to increase efficiency. Some 40 percent of respondents expect the cost of customer care to rise as a proportion of revenues during the next three years, while 40 percent expect to lower the share of revenues spent on customer care by enabling digital channels and improving channel integration. This divergence of views reflects the ongoing uncertainty about how much to automate. In particular, balancing cost control with quality will be vital for contact centers. Agents who are incentivized to handle a specific number of calls per hour may not have enough time to up-sell, cross-sell, or resolve a problem that could prompt a customer to switch companies. 9

11 Tough Decisions Lie Ahead In summary, telcos have a clear sense of the general direction customer engagement needs to take, although many have yet to articulate a concrete view of where they want to go or how they intend to get there. Along the journey, some tough decisions will need to be made: How to expand the number of customer interaction channels while ensuring a seamless experience across all of them? How to harness external partners expertise without relinquishing control? How to differentiate pricing and propositions if at all between new and existing customers? How to decide whether to risk providing a premium service to customers based on likely lifetime value or willingness to pay? Should a single leader be made responsibility for customer interaction and care, or should it be the responsibility of every manager in the organization? Is it more important to fix the basics quickly, or would efforts be better focused on developing a full-fledged omnichannel experience? There are no absolute answers to these questions. There is no single silver bullet. How a company responds will depend upon the dynamics in its specific market, how it wants to position itself, and what its customer interaction agenda is. But the questions need to be asked and answered sooner rather than later. Authors Jan-Piet Nelissen, partner, Amsterdam jan-piet.nelissen@atkearney.com Jonatan Matsson, principal, Stockholm jonatan.matsson@atkearney.com Hans Boezel, consultant, Amsterdam hans.boezel@atkearney.com 10

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