By Richard Agnew
Most telcos have the potential to significantly improve customer satisfaction, and doing so can deliver measurable benefits in as little as six months, writes Jerry Todd
Work in Progress|~|charm2.gif|~|GCC telcos have real room for improvement in customer service|~|Like many former state-owned utilities, telecoms operators have had to transform themselves from inwardly-focused monopolies to customer-focused, competitive players in a relatively short period of time.
Customer satisfaction surveys in Europe suggest that even after ten years, this transformation is still a work in progress: in a German survey of six industries, fixed line telecom operators came in last, tied with the postal service.
The annual survey also showed that telco customer satisfaction had demonstrated little improvement over a seven-year period.
Meanwhile, there does appear to be a link between competition and satisfaction: an EU 15 survey showed that 71% of mobile clients were satisfied with their operators (the mobile sector tends to be more competitive than the fixed sector), versus 65% with their fixed operator, a difference of more than 9%.
In the GCC, there is real potential for improvement in customer satisfaction.
For starters, one of the primary drivers for increasing customer satisfaction — competition — is still a new phenomenon.
Only one country, Kuwait, has had a competitive mobile market for more than a year.
The sector’s governmental heritage of overly bureaucratic processes doesn’t help either, forcing customers to interact with multiple departments to perform simple tasks, which has been shown to cause dissatisfaction in other markets.
Among customers who filed a complaint at one European telco, the percentage of dissatisfied customers steadily grew from 10% when they had to interact with one employee to 60% when they had to interact with five employees.
When the number of required interactions was more than five, dissatisfaction grew to 90%.
Furthermore, few GCC telcos have developed the necessary performance management systems to prioritise, measure, and reward customer satisfaction enhancing actions at the frontline and the back office, as well as in the executive suite.
Based on our experience in European markets, we have seen that increasing customer satisfaction can result in real bottom line impact from churn reduction and increased upsell revenues.
The link between dissatisfaction and churn is compelling.
In one European telco, churn among very dissatisfied customers was more than double that of satisfied customers (see accompanying chart).
For a typical telco, this means that about 4% of revenue could be at risk from low customer satisfaction.
Dissatisfied customers also talk more about their experiences.
Our analysis shows that the most dissatisfied customers share their opinions with an average of five people, versus 3.6 people for the most satisfied customers.
At one telco, this actually meant that dissatisfied customers complained to more than 5% of the country’s population each month.
One implication is that customers that are unhappy with a recent value added service (VAS) purchase are not only less likely to consider additional purchases in the future, they are also more likely to tell others to avoid the same purchase, lowering up-sell revenues.
Higher satisfaction doesn’t necessarily mean higher cost, although it does require changes to processes, incentives, key performance indicators (KPIs), and culture.
In one European operator, ‘first time wrong’ fixed line installation resulted in twice the cost and double the percentage of dissatisfied customers of a typical, ‘first time right’ installation.
The streamlining of processes that is required to increase customer satisfaction can even make frontline service delivery more scalable by freeing up resources.
At the same telco, satisfaction with the call centre was twice as high for customers who were served by only one service representative versus those who talked to multiple representatives.
Many customer satisfaction improvement efforts underdeliver because they are too narrowly focused, and they don’t take the time to develop meaningful KPIs that measure the right things.
Customer satisfaction can be impacted by more than just operational issues like billing, call centres and repairs.
Relationship issues like accessibility, the quality of a telco’s sales representatives, and strategic issues such as breadth of product offering and price versus competition can be more important in some segments. ||**|||~|charm1.gif|~|Operators such as Wataniya can use customer satisfaction programmes to increase their credibility as they search for new growth opportunities in markets abroad.|~|For example, business customers at a central European telco cared more about product information, price, and sales representatives than six other operational areas like billing, installation and call centre.
Understanding and pursuing improvements in all areas that drive satisfaction is vital if double-digit satisfaction improvements are targeted.
When operational performance is a major issue, it is unlikely that any one single factor drives satisfaction; rather excellence is required in many areas.
The installation process of one telco had seven satisfaction drivers, four of which were highly important to customers, meaning that underperformance in any one of these four areas would result in a unsatisfactory customer experience.
Even when telcos have sophisticated measurement systems to track internal operational KPIs, they often measure the wrong things.
At one European telco, five different weighted KPIs were tracked for digital subscriber line (DSL) installation. Subsequent customer surveys showed that two of the KPIs were not considered important, and the two most important things to a customer — honouring the appointment and having a single contact point — weren’t even measured.
In our experience, increasing satisfaction requires a comprehensive programme built around five areas — detailed measurements of satisfaction drivers, rigorous fact-based prioritisation of drivers, quantifiable operational targets for priority drivers, sequenced initiatives across multiple areas, and strong centralised programme management coupled with a significant internal communication.
Developing an understanding of root drivers of customer satisfaction through extensive customer research allows for the development of a ‘customer satisfaction pyramid.’
This pyramid should comprehensively cover all the areas that contribute to satisfaction for customers across all products and services that the telco offers.
A typical tree for the consumer segment breaks satisfaction down along the three main drivers — strategic, relationship, and operational.
Each main driver has, on average, six sub drivers, that could each be further broken down into between three and ten root drivers of satisfaction.
Once all satisfaction drivers have been identified, the relative importance of each should be tested through further customer research, and the gap between current performance and either the competition or customer’s expectations should be quantified.
This exercise should go deep enough to actually define the ‘norm’ for a satisfaction driver — for example, 90% of customers would be satisfied if installation was finished in three days.
Once the information is complete, priority can be given to those satisfaction drivers that meet three criteria — customers say they are important, there is a meaningful gap versus the competition or the customer’s expectations and the operator has the ability to significantly improve performance.
Target setting starts at the strategic level but should be driven all the way down to the operational level and built into employee scorecards.
Top management should develop the top-down vision for where the company wants to be versus the competition, for example, ‘We want to match local competition on general satisfaction levels within three years’.
Constraints also should be identified, such as ‘We won’t compete on price, so we have to catch up faster on other dimensions of customer satisfaction.’
These top-down targets can then be cascaded through the satisfaction pyramid to assist in setting quantifiable stretch targets to priority areas, which would then allow management to identify the areas where initiatives are needed.
Like any comprehensive performance improvement programme, many of the best ideas will come from the frontline and middle management.
A process should be put in place to generate and qualify ideas from throughout the organisation.
Strong prioritisation is required to sequence the initiatives to achieve early wins quickly, which help build momentum for change, without overloading the organisation.
To manage the above steps through to their successful conclusion, a strong central team should be built to coordinate activities.
The team’s key roles are to provide oversight of the initiatives, to measure KPIs, to ensure systematic communications, to manage market research requirements, and to play a programme management role to ensure success of the entire programme.
On the eve of widespread competition, particularly in the mobile sector, GCC telcos have the opportunity to turn customer satisfaction from a sore point into a source of competitive advantage.
Doing so will not only help protect their positions domestically, but also increase their credibility as they search for new growth opportunities in other markets.
Addressing satisfaction comprehensively by deeply understanding what customers value and then launching a set of prioritised initiatives can result in measurable benefits in as little as six months.
Jerry Todd is a consultant with the telecoms practice at McKinsey &Co. He can be reached at email@example.com