Few industries suffer from greater customer loyalty problems than telecom providers. There are many reasons for this reality; telecoms are essentially utility providers largely running in the background, with few opportunities to build direct relationships with their customers outside of monthly billing interactions and the inevitable customer service issues. When most of your customer interactions tend to be negative ones, you may be forgiven for focusing, as the telecoms have historically done, on acquiring new customers rather than building stronger relationships with existing ones. With the US cellular market now saturated, however, carriers will soon have no choice – they’ll need to focus more on keeping the customers they have.
By Rick Ferguson
A new Business Intelligence report reveals the bad news for telecoms: even the carrier best at cementing customer loyalty can only count on that loyalty from around 25 percent of its customers. That top spot goes to T-Moble; AT&T and Verizon can count on only 16 and 15 percent of its customers to not switch, while poor Sprint, seemingly on the verge of imploding for a decade now, can only count on 7 percent of its customers to stay loyal.
When 75 percent of your customers would switch if they could, you have a problem that no loyalty program can solve. BI points out the obvious reasons for why telecom loyalty is more important than ever:
“US smartphone penetration is approaching saturation, causing mobile carriers to fight over each other’s subscribers. About 95% of Americans own a cell phone and 77% own a smartphone, according to Pew Research, making new subscribers a rare commodity.”
“To win that fight, mobile carriers are engaging in a price war, which is compressing margins — and making customer volume more important than ever. Average revenue per user across the Big Four dropped to $45 in Q1 2017, from $49 in Q1 2014. To remain profitable, carriers need to maintain or grow their customer base.”
“The end of the two-year contract has made it easier for consumers to switch providers. Consumers have long been tethered to their carriers via contracts — being able to switch carriers quickly and without penalty makes loyal customers especially valuable for telecoms.”
The very definition of an industry ripe for loyalty marketing is a mature industry with relative levels of parity; that makes telecom prime loyalty real estate. The problem: very few customers think fondly of their wireless carrier. Customers may love their devices – their iPhones and their Galaxies – but they don’t love ATT&T or Verizon.
The good news: loyalty marketing can help. While telecoms don’t have a great track record for operating loyalty programs – all four of the major carriers have launched and ended multiple programs over the years – a new wave of program best practices built around engagement and experiential rewards. That’s why we’re excited for Verizon and their new Verizon Up program: on paper, the program offers compelling rewards that will allow Verizon to build a relationship with its customers that functions in the foreground, rather than the background. The jury is still out, of course. By the time of BI’s next telecom loyalty report, however, we wouldn’t be surprised to see Verizon leading the pack – and other carriers following suit.
Rick Ferguson is Editor in Chief of the Wise Marketer Group.