Telco Distribution Channels: What do customers prefer?
Let’s dive into each of these areas as we explore the factors that influence buyer behavior.
Digital Natives have an edge in adopting a digital purchasing mindset – the Net Generation, the Google Generation or Millennials – people born from 1981 to 1996 – mid-twenties to just entering their 40’s. They are people who grew up with technology – computers and the internet.
Digital Immigrants are the Gen-X’ers – born in 1965 to 1980 – 40 and 50-year-olds. They were raised prior to computers and the internet but then saw the digital transformation and have largely come to embrace it.
And finally there’s the Boomers and above – born before 1965 (in their 60’s+). Many of them didn’t adopt technology until later. Some have adapted, others struggle with the online experience.
Buying behavior changed for many due to the COVID-19 pandemic. Accenture surveyed 25,000 consumers across 22 countries and found that the pandemic caused 50% of consumers to rethink their personal purpose and reevaluate what’s important to them in life – they’re called the Reimagined. And it is causing changes in buying habits – across all 14 industries they evaluated. Of the remaining consumers, 33% were unsure and 17% (traditional consumers) were unaffected by the pandemic.
What this all means is those who might be influenced to make changes in their buying habits (the 50% Reimagined group) are also those most likely to buy digitally.
Here’s what they found about those consumers.
• 72% expect companies they’re doing business with to understand their needs and objectives during times of disruption. Note: Times of disruption are often when the opportunity to capture new customers and market share is also the greatest.
• 50% say companies disappointed them by not providing enough support and understanding of their needs during challenging times…vs 14% for traditional buyers.
So having an experience that is customer-focused and customer-optimized opens the doors to selling to these types of buyers. The digital offering provides a solid platform for that kind of customization.
Customer motivations have shifted during this time too. While price and quality are always a factor, with the tradition consumer, who is most likely to shop in-store, those factors account for 51% of their motivation while with the Reimagined consumer, it drops to 40%.
For Reimagined consumers, motivations like Service and Personal Care, Trust and Reputation, Product Origin, and Health and Safety play a bigger role. Those are much more easily delivered in a digital format.
Like other changes that impact consumer buying behavior, the telecom industry has had particular impacts of their own. In 2015 Kearney studied 15,000 customers over 20 countries in Europe as well as the U.S. and California for comparison purposes.
Europeans, when looking at mobile digital usage and m-commerce spend, were just as active as their U.S. counterparts in the digital domain. But they used their phones differently. They were more focused on saving money by making phone calls over apps and buying physical products online.
Americans spend more time on the internet and using apps (36% vs 25% in Europe) but use more digital purchasing options (53% downloaded digital content vs 44% for Europeans in the prior 3 months).
What this means for telco operators is…
Focus on apps. While global app stores dominate the landscape, there is still an opportunity to guide consumers to your own company apps through bundling and guiding the customer journey.
European consumers prefer bundles, flat rates and post-paid. With these preferences, digital engagement between telco and the consumer can mean an opportunity to capture new customers who may not make it to the company store. Buying behavior can also more often be triggered through digital means due to better speed, cost and customizability.
Online preferences. “Online sales of telecom services” accounted for 20% of sales but 39% of consumers said they preferred to shop online rather than in stores. In other countries – Germany (56%) and Norway (53%) they prefer more than half to make their telecom purchases online.
Operator shops. 63% of those who shop in stores prefer operator-owned shops over indirect retailers. In those offline stores, reduced wait times, qualified sales agents, strong customer service, and the ability to touch and feel handsets were all cited by a majority of respondents. Less important are omnichannel integration, store design, and location.
For some companies, a greenfield implementation is the right call. This may be where you don’t have a legacy brownfield business to compete with for attention and resources. This includes startups and smaller, more nimble market entrants who see opportunity going digital right away.
In that case, you can leverage the benefits of the continued evolution of the customer base towards the ubiquity of digital and not be held back by a hybrid company shop/digital model.
But many larger telcos, or companies who have been in business for decades or longer, do not have the luxury of jettisoning their core business approach to shift entirely to digital. They have too many complex systems, processes and technologies that hold them back from jumping all-in to 100% digital.
That’s where some telcos have found another, better, alternative…
Pivoting from a brick-and-mortar company store-focused business model into the digital domain requires more than just adding tech. While a greenfield approach may be warranted, many companies can’t justify betting their business on an all-or-nothing shift.
In that case a Digital Attacker model may provide the most effective approach.
A McKinsey report explores this model as well as when and how it might be a potential opportunity for telco operators.
”There is nothing simple about most telcos’ product portfolios, and that complexity is part of their problem. What started as a broad range of plans for a diverse customer base has evolved into a dizzying array of options that are difficult to under¬stand and navigate, damaging the customer experience, especially in comparison with that offered by ascendant digital-native alternatives.
Before the advent of the smartphone, you either went into a physical store or placed an order by phone. The internet changed that and more people started ordering online.”
Telcos who are taking the digital attacker approach are finding it is less expensive, less disruptive, and more successful that a wholesale changeover in their core business. Within a year of launch they are finding the digital attacker contributes:
• a 25% increase in gross subscriber adds and 5% bump in total profitability.
• 23% share of new customers
• 49% of what it costs the parent company to acquire a customer
• 25% of gross adds (70% of those are new to the operator and not cannibalized from the legacy business)
• 50-70% reduction in “cost-to-serve”
• NPS 30-40% higher than incumbent competitors
Who should take the Digital Attacker Approach?
The Digital Attacker model is not for everyone. A telco operator must assess a few things before embarking on that journey that will come with many obstacles and challenges along the way.
Appropriate market opportunity. Is there an underserved segment where differentiating your brand can help you capture market share? If there isn’t, you may just be adding a headache without upside benefit.
Cannibalization. Just because you can go digital doesn’t mean the adds you are going to get wouldn’t have been ones you would have received anyway in your legacy business. It doesn’t make sense to spend resources capturing business in the digital domain if you would have won that business anyway…unless there is another compelling reason to do so. But if it won’t cannibalize your core business, then the approach can still be considered.
Existing infrastructure. Do you have an existing structure (technology and processes) that will allow you to iterate quickly as you test new ideas and adjust to those learnings? Are you lean and nimble? Does your internal culture support an entrepreneurial initiative? That is what’s needed to launch a DA initiative successfully. If not, you’ll get bogged down in process changes that can’t be effectively supported and you’ll find the initiative stalling and becoming a distraction.
Cost advantage. Would making this move introduce opportunities for cost savings and other efficiencies that could gain you a competitive advantage in the market and boost profits? What areas of your business could see this benefit?
“Many telecom operators are in dire need of transforming themselves to cope with new market conditions but have had difficulty making an organization-wide overhaul…launching separate digital-attacker brands is an alternative route to digital transformation and a way to address customers’ changing demands rapidly. Once at scale, the digital attacker can become the main growth driver for the parent operator.”
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triPica, a rewarded innovation leader, enables our service providers worldwide in the Telco and the Utility industries to launch their digital strategy with the agility of a startup. Benefiting from our digital and secure SaaS BSS solution - from self-care online subscription to product and customer management - the customers are able to give autonomy and transparency to their users that the market today demands. triPica was established in 2016 and today serves customers globally in the Telecom and the Utility industries.