More for less has been the maxim in our telecom market for almost a decade now. Among competitors who have little else to differentiate on, price has been the primary lever of a competitive strategy. Operators have fallen over each other to woo customers with offers of free minutes, shorter pulse rates, free SMSes (short messaging services), discounted tariffs, unlimited calling to select numbers and other freebies. The first player to launch a disruptive tariff plan has invariably gained subscriber share immediately, but the success has been ephemeral. The advantage has been neutralized very quickly by competitors who have matched or improved on the offer, putting the industry back into a familiar gridlock when it comes to revenue market shares, except it’s now operating at an even lower price level as a whole.
The roll-out of 3G, or third-generation, services around the corner promises to unsettle this tenuous equilibrium—at least at the beginning. For the first time, a few operators will have something the others don’t—there are only between three and five 3G operators in each circle, when there are as many as 10 for 2G (second-generation)—and can successfully use that to break away from the pack. Those with 3G will be able to offer new services and better quality from which they hope to earn incremental revenue and realize better margins than their peers. Through this, they also hope to be able to draw to themselves a higher share of traffic even on conventional 2G services such as voice calling and basic value-added services (VAS).
The initial battles for 3G will be fought on familiar terrain—first on breadth of coverage, then on price, and, this time, perhaps also on speed of data downloads. Yet, as in the past, all of these advantages can be competed away quite quickly though, as the 3G competitors mirror each other’s successful strategy. To win conclusively, operators will have to deliver a perceptibly better user experience—an aspect that has received short shrift so far on the part of the telecom companies.
Sample this. My colleagues and I at The Boston Consulting Group conducted a simple user experience test across six mobile service providers for the Caller Ring Back Tone (CRBT) service. Our brief was to document the experience of a first-time user going through the entire Learn-Choose-Buy-Use-Stay cycle with a new service. CRBT has been the most successful VAS offering since it was introduced in 2004, quickly becoming the largest contributor to VAS revenue after SMS. So we expected, just as it is in voice calling and SMS, there would be little to choose between different mobile service providers: everyone would have similar features and quality. We were mistaken.
First, we found that none of the six service experiences we tested was uniformly better than others across every step of the usage experience. Each service would be fulfilling in some steps, but lacking in others. While one service made it easier for a first-timer to understand and subscribe, another offered a more up-to-date and easy to browse catalogue of songs to choose between and a feature to preview the song. Second, this cross-operator comparison revealed that each operator had glaring unexploited revenue enhancement opportunities. For instance, only one operator was alert enough to up-sell additional features and songs—recommending a more remunerative alternative— right after the initial subscription.
All mobile operators have been trying to push up VAS sales to mitigate the price erosion in basic voice calling. We decided to visit a few of these operators’ exclusive branded retail stores to test whether this strategy had filtered down to the lowest level of execution.
It hadn’t. The counter staff was unable to answer even the most basic questions about some of the VAS products. In some instances they provided wrong information, stating that a certain service or feature was not available from that operator when in fact it was—a missed revenue opportunity that, aggregated along all its retail stores, is a sizeable opportunity loss for the company. And, for many questions, we were asked to contact the call centre—an expensive channel—for simple service requests that could have been done through a self-service SMS command.
The examples above highlight the challenges of designing and implementing an end-to-end customer experience through multiple customer touch points. But how about those experiences which are directly controllable by the operator? Take simple Internet browsing. Most modern service delivery platforms have an ability to recognize which handset a subscriber is using and format Web pages in a way that optimizes layout and visual appeal based on handset screen size and resolution. But this capability continues to be under-utilized. How often have each of us been frustrated as we tried to browse popular Internet sites— whether an Internet search or a cricket score—on even our high-end smartphones?
All of these point to a yawning chasm between intent and execution. In this super-competitive telecom market, the most rewarding innovations will not be in new services, but instead in offering a well-orchestrated and compelling user experience.
Arvind Subramanian is partner and director, The Boston Consulting Group.
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