For most telecommunications companies, challenges exist that make it less intuitive to invest in traditional loyalty programs, yet the industry is hungry for ways to reduce attrition and increase profitability.
I recently discussed these issues and opportunities with Nancy Berg, Kobie’s Vice President of Client Services & Partnerships:
What are some unique challenges facing loyalty in the telecommunications industry?
The obvious challenge is building loyalty and increasing advocacy in an industry that typically has high churn rates, and where the business model is very different than an industry where getting customers to use a credit card more frequently, or visiting a restaurant or retailer one additional time, is much more realistic. Customers would normally not buy additional telephones simply for an incentive or reward, so the opportunities are different.
Additionally, as technology has rapidly expanded and completely changed the telecom industry landscape, customers find there are many competitive alternatives—and whether it is pricing, improved functionality, quality of network, or the reality that there is cannibalization particularly with traditional landline products, the industry is aggressive in their acquisition efforts. All things considered, the telecom consumer is in a position of power that will make the future very interesting.
What have you learned working with, for example, Verizon? What trends are you noticing in the industry?
After many years of experience in this vertical, we have definitely learned (and proven) that a well designed rewards program can significantly improve the reduction of churn, increase margins, and drive new customer acquisitions and referrals. For example, we relaunched a B2B loyalty program that we had managed for years at the end of 2012. Our work included restructuring the value proposition so we were driving more incremental behavior, which also allowed us to expand to a larger target audience, and to leverage incentives to drive specific customer behaviors that are important to Verizon. We also expanded our social aspects of the program which is obviously important in today’s marketplace. The results have been strong and we continue to partner with Verizon to enhance the program and build new engagement strategies based on the data that we capture.
In the telecom industry we’re also seeing a shift in the types of contracts customers are willing to sign. For some segments, there is a migration toward the expanded pre-paid phone options instead of traditional two-year contracts. We’re seeing this growth in one of our prepaid mobile client’s business models which has been very interesting, and I expect will continue.
Acquisition has always been a heavy focus in the industry, but we’re seeing more emphasis in formal referral initiatives within a program. Building advocacy is an important component of building loyalty, so the emphasis on additional incentives for driving referrals is a perfect way to leverage the existing infrastructure. Regardless of the trends we’re seeing, telecom companies will undoubtedly continue to look for new ways to up-sell and cross-sell services that break through the traditional models.
What can telecommunication loyalty programs learn from other verticals and how do you envision the industry evolving?
Most telecommunication companies run fairly siloed internal operations which can make enterprise solutions hard to operationalize. However, we do see that starting to change and I expect the importance of looking at customers through one lens vs. a product-based perspective will continue to become a priority.
Driving incremental behaviors (such as getting the customers to pay their bills on time or incenting them to enroll in paperless billing) to impact profitability is a must.
When it comes to envisioning the industry’s evolution, mobile is going to be key in terms of telecom loyalty programs, as is cloud computing. Sensing technologies will also be top of mind. The data that telecommunication companies capture is staggering and how it can drive business strategies is going to be critical going forward. Social networking on mobile is a small fraction of that data subset but it too, will grow in importance. Incentivizing customers to allow marketers to use that data is going to be a phenomenally important next frontier.
What are some of the best practices for developing a telecommunication loyalty program?
Really in any industry, loyalty program best practices include:
• Setting clear goals and objectives. Be careful to set objectives that don’t contradict each other. We’ve seen that happen many times due to competing priorities. Also, be sure you’re aligned with what the loyalty program is trying to accomplish and how you’re going to measure success.
• We start all new opportunities with a well constructed financial model that provides a roadmap for the structure, the investment in value proposition and other factors. Clearly understanding what it will take for a return on investment is essential and the most important discussion the decision makers will have, so this model will shape the long term outlook.
• Structuring the program with a value proposition that is relevant and compelling. If the value prop is weak or no one cares, your end goals will suffer.
• Ensure consistent communication across all channels, driving engagement. Engaged members are important to your overall long-term success. Communication drives engagement.
• Include positive experiences that reinforce consumers’ feeling of importance. There are a number of ways to enhance the customer experience, which will positively impact the advocacy of your brand. Experiential opportunities and access are differentiators.
• Ensure differentiation from competitors’ programs. In highly standardized industries this couldn’t be more important.
Differentiation: Critical for Long-Lasting Telecom Loyalty
Considering how ubiquitous smartphone and feature phone adoption has become, along with new business models, contract-based telecoms will have to work much harder to engage and retain their current customers. Regardless of which route customers choose, there’s no getting around the fact that the telecom industry is becoming increasingly cluttered – for consumers and brands alike. Therefore, differentiation has never been more critical.
Taking the long view of customer loyalty along with adopting the above best practices can help ensure that telecommunication companies of all types are keeping customers engaged and connected for the long haul.
Are you involved in running a telecom loyalty program? If so, what are some of the greatest challenges you’ve encountered and how has your company addressed them? Drop us a line at info@kobie.com . We look forward to hearing from you.
