The battle for the consumer
While the nextgen developments have commenced in the enterprise arena, the battle for the consumer is still largely being waged within the old structures. The buzzword here is still bundling.
While there is nothing intrinsically wrong with that model, it has its limitations and it won’t help the telcos in their eventual transition to nextgen.
Consumers have learned the tricks of the trade during a decade of price competition. Voice call prices have come down by 25% to 80% and, without any other obvious consumer advantage, the industry has conditioned the consumer to make decisions based solely on price, fixed or mobile.
The consumers have become experts here. They know when the free time starts and finishes; who is on which network and when is the cheapest time to call them; how to switch carriers (overwrite) in order to make those cheap calls to country xyz, etc.
So customers who are interested in bundling deals quickly figure out where they will save money without interfering with their usage pattern and then they sign up, getting an extra 10% discount and leaving the carrier with a lower margin. Very rarely do large number of customers move across as a result of bundling. The net return for telcos must be minimal and the limitations of bundling are becoming clearer every day – as a general rule, bundling takes place at the bottom 40% end of the residential market.
Customers will jump to parallel networks as soon as they perceive them to be offering value, and, in contrast with the bundling issue, this is not based on price alone. Value plays a key role and, as we have already said, it is difficult for the carriers to deal with this issue.
See also: Global – Industry – Strategies – Trust (Post Sept 11)
New business models
This brings me to what is probably the most important issue – changing business models. One-to-one marketing is the key to success with most future large-scale developments like the ones listed above. A large proportion of the costs of the various technologies (mobile, broadband, Internet, etc) will be paid for by organisations that wish to establish one-to-one contact with their customers. In exchange for a certain amount of private data, these organisations will pay for part, or all, of the customer’s access costs. This model is not all that different from how people pay for other media services such as magazines, newspapers, TV programs, etc). Customer service and branding will become crucial factors in this model of operation, since customers will only be prepared to supply personal data if they consider the company to be ethically sound and trustworthy. And so, to be able to participate in this new e-economy, companies will have to lift their game as soon as possible.
Once these models have been developed a clearer business picture will emerge for the operators of the networks. But customer relation management systems will remain the fundamental ingredient for success. Very few companies have developed sufficiently sophisticated systems – ones that not only record their customers but, far more importantly, track them, interpret their needs and communicate with them.
These systems will, of necessity, be under the control of the customers (permission-based). Users can indicate when they are ‘in the market’ for certain information which might lead to sales. This will involve a steep learning curve and behavioural changes by the service providers, and could mean that the impact of these developments will not be widespread for some time – possibly not until the second half of this decade. Some early success, however, can be achieved in business market and high-end niche consumer markets.
See: Australia – Business Market – Customer Relation Management and Permission Based Models
Customers love the telco industry
Once the aforementioned structural changes are in place, it will be the user who will be in the driver’s seat. Already more products and services are being produced than we can consume – there is an oversupply in virtually every market. Customers will be at a premium. This is one of the reasons for our prediction that the permission-based marketing model will become a dominant element in the telco industry. The good thing here is that, unlike some other industries, the telco industry is hot (or cool).
Exhibit 3 – Customers love the telco industry
• They are making more calls
• They are spending more money on PCs, Internet and mobile
• Seasoned users want high-speed always on Internet
• Businesses want e-services
• Residential killer ap: e-entertainment (2003+)
• Business killer ap: B2B: Underutilised in Australia!
(Source Paul Budde Communication)
However, as already mentioned, the problem is that at this stage the industry is not properly aligned to opportunities. And in the immediate future, we see the users continuing to lead the industry in instigating change. The first signs of this people power can already be observed:
• UK businesses have complained to the EC in Brussels to speed up national competition in the UK, since BT is unable to deliver the broadband services that UK businesses need to compete in Europe (see above). There has been a Parliamentary enquiry into this also the regulator has stepped in to address this situation (for more details, see United Kingdom – Voice, Data and Internet Services).
• The Dutch Parliament has expressed its concern regarding the capability of KPN to deliver the level infrastructure needed by a modern society.
• People in rural Australia, as well as those in cities such as Melbourne and Sydney, are frustrated that telcos are not providing the broadband networks they need and so have decided to bypass the slow-moving telcos (see Business and Residential Markets).
• Both in Canada and the US the broadband industry has been put on notice that if a more open industry is not forthcoming the Regulators will begin to open up their networks.
This is a beginning, but businesses and residential users need to become far more vocal in their demands for world-class telco service. The incumbent telco industry needs to be prevented from delaying the introduction of the new order; the way should be opened up for others who will offer a better customer service and who will use the e-economy to bypass the telcos, publishers, banks and other members of the establishment who have a vested interest in maintaining the status quo.
Exhibit 4 – Customer demand
• Customers want specialisation (no room for generalists)
• Customers want commodity prices for commodity products
• Consumers will pay premium prices for premium services
• Produces should be bundled according to customer requirements, not as stipulated by the telcos
• Desperate need for broadband access
• Start with always-on Internet (currently a premium service worth $50 pm)
• Content will follow automatically follow once infrastructure is in place
(Source Paul Budde Communication)