Customer experience becoming a key telco differentiator
The telecoms sector is responding well to an ongoing revolution in the communications and media sectors, with an increasing focus on the overall customer experience, according to an IBM survey of over 250 industry executives.
The survey, conducted by the Economist Intelligence Unit on behalf of IBM's Institute for Business Value, also found that 69% of telecommunications service providers expect business model transformation to be the primary source of value over the next five years, compared to only 34% in the preceding five years.
Collaboration too The majority of the executives surveyed (72%) said they expect collaboration with external partners will be critical as they structure their new business models. Cost containment and efficiency have been key watchwords in the industry for nearly a decade, but the new opportunities involving data, content, video, advertising and IT services are causing service providers to take a fresh look at business models to once again drive growth.
This growth imperative is reinforced by the continued decline in voice revenues - although telecoms executives do not anticipate the rate of decline to be as severe as once feared - and the rapid convergence of new media, online and telecommunications players.
Business model changes needed While telecoms executives reported a willingness to embrace business model change, they also continue to prioritise traditional sources of competitive advantage such as network coverage (52%) and customer reach (45%).
A smaller percentage are prioritizing the capabilities required to deliver personalised, interactive services and offers to customers, such as device control/management (8%), ease of use (11%), customer service (16%), and customer knowledge (22%).
Key strategies "Service providers have demonstrated a new recognition that business model innovation is paramount, yet many of our survey respondents still pointed to traditional strengths as their differentiators," commented Noel Taylor, general manager and global communications sector leader for IBM Global Business Services. "Ease of use, customer knowledge and device management are all central to the delivery of new content and advertising-based services - and all potentially offer key sources of competitive advantage - but they are not yet key priorities for many service providers."
Although broadband and voice services are expected to remain dominant in the short term, the survey showed that telecoms executives expect the mix of revenue sources to shift significantly over the next five years toward converged content services such as television, video, and the ability to manage these environments.
Some 44% are bullish about securing major-to-moderate revenues from video-related services, either in the form of subscription-based revenue or through advertising. Over half the executives (68% in Asia Pacific and 56% in North America) expect non-video content services such as ring tones, text voting, or music downloads to make major-to-moderate revenue contributions.
The service differentiator As consumers increasingly demand convenience, control, flexibility and choice, creating a consistent customer experience across all devices and networks has become a top focus for telecommunications and media providers. Sixty percent of executives who cited revenue growth as important believe the growth can be influenced by improving the experience across all channels, including online and retail operations.
"Driving substantial revenues from new service is a vastly different challenge from delivering traditional telephony services. Consumers clearly expect flexibility and control over their end-to-end media experience across a myriad of applications, whether they're at home, in the car or walking through the mall," said Taylor. "To respond to consumer trends and improve loyalty, service providers will need to place greater emphasis on ease of use and simplicity despite the underlying complexity of the services and devices, and support it with outstanding customer service."
Marketing revenues to gain The access that service providers have to customers through multiple devices and channels, as well as the extensive customer insights inherent in that relationship, tend to appeal to advertisers' demands for personalised marketing messages based on contextual factors such as location, presence, access speed, and device capabilities.
"While many operators expect advertising to make a significant contribution to overall revenues, they have yet to find a systematic way to exploit this new market opportunity," said Bill Battino, communications sector managing partner for IBM Global Business Services. "Many expect to partner with established on-line players such as Google, Yahoo! and AOL for advertising-based services but just how service providers will monetize customer information and access remains to be seen. Telecom operators have a fundamental choice to make - whether to create rich customer databases with advanced analytics to serve ads directly via mobile and broadband platforms or to work through ad agencies and online aggregators in a more passive fashion."