Why telecoms omni-channel programs fail - the digital trauma

Part 2 of the trilogy on the telecoms omni-channel struggle

In our last post “Why retail still rules the telecoms channel mix - against all odds!”, my colleagues Martin Fabel and Jonatan Matsson talked about telecoms operators’ failure to digitize their go-to-market approaches. We emphasized that telecoms haven’t reached digital channel shares north of 20% although this channel is 50-60%% more efficient per transaction than own stores or telecoms retailers. We found that there is no correlation between footprint evolution and market growth, actually operator store footprints can be seen growing even at times when subscriber growth died.

We identified four major roadblocks:

1. Mimicking a company’s internal complexity in digital operations
2. Focusing on building digital front-ends instead of moving to an integrated omni-channel framework
3. Depending strongly on powerful retail partners
4. Internal power-struggle among organizational units

Now we would like to turn your attention to the first two of those root causes. A lot of the insights are compiled from our Digital Journey-Excellence assessment (DJ-X), which measures consumer journey and telecoms channel digitalization and related enablers across ten dimensions with more than 120 data points.

Root cause 1: Mimicking a company’s internal complexity in digital operations instead of being obsessed with consumer-friendly simplicity

Mobile network operators were rather lean startups not very long ago, at least compared to the state-owned, dinosaur-like, fixed-line incumbents. When those fixed-line incumbents got awarded their first mobile licenses and began to scale up the business, they initially launched with simple product portfolios and pricing plans. Only later did they start offering numerous additional options, which led to a new portfolio every couple of years. Those portfolios are already over–whelming for most consumers.

This evolution led to complex IT systems for billing and CRM, which were then mirrored on the operators’ websites, online shops and customer service platforms and apps.

Typically, several thousand product variations needed to be administered and enabled, which resulted in complex business rules. Most of the time, these rules needed to be manually adapted as well, meaning that such seemingly small changes such as roaming regulations required manual updating of thousands of data points in the IT jungle with non-performing data warehouses.

While it makes sense to keep a sophisticated portfolio in retail channels, assuming that sales agents can help shoppers find the right price plans (the complexity is actually ARPU increasing if managed carefully and by well qualified sales agents), this does not work so easily in digital channels. Online, consumers can quickly get lost in the details about minute pricing, data bundles, subsidies and contract periods. We found that very few operators are able to offer an online sales process in their organic channels which can be completed in 5 minutes or less – most required close to 10 minutes to fully complete, some even 15 minutes (which, not surprising is what a typical offline store transaction takes). It is not at all surprising that abandonment rate in digital shopping journeys have increased by 12pp in the past 6 years.

One of the reasons for this is that the eCommerce space has become much denser (and competitive!), also in telecoms. Next to operator websites, service providers and MVNOs we now have a big online presence of both electronic retailers (esp. for the handsets) and price comparison sites. While the latter have a very clear value proposition (they are in the end called “price comparison”) and cater for a specific segment which is shopping around, they mostly do have a much clearer and simpler interface as well as checkout process. This is even more important as only about 33% of operators help customers with AI based or even simple tariff recommendation engines, using demographic data, browsing history and next best action engines. Similarly, only a very low share automatically triggers customers with longer inactivity through personal or bot-based web-chat pop-ups.

For this reason, the only providers broadly perceived as customer-friendly are the disruptive challengers, often mobile virtual network operators (MVNOs). They are the ones that have very narrow portfolios (e.g. not more than an S, M and L bundle). And they are the ones where prices match across channels, whereas in more traditional carriers, we found that around two thirds of the operators have different pricing for the same product and one third even different products. While this probably mimics the different internal channel responsibilities and strategies, it is no less confusing to consumers and not driving omni-channel alignment. Required is what in most cases would be best described as a complete overhaul of the existing digital customer touchpoints within a holistic and seamless omni-channel framework. This includes radical simplification of e-shops as well as app (UI, visuals) and much more intuitive functionalities, e.g. simple configurators utilizing deep learning algorithms. This needs to be combined with much more dynamic, user specific content and selection, e.g. based on traffic origination, cookies as well as (if logged in) based on user history with the operator. This is no one time effort though, best-in-class operators are A/B testing new UI all the time, of course including also new products, price points and portfolios.

Root cause 2: Focusing on building digital front-ends instead of moving to an integrated omni-channel framework

A second way mobile operators hold themselves back around digital sales is by failing to offer a truly integrated omni-channel experience.

Most omni-channel programs have cost a lot and yielded little. Operators can easily spend >15 million euros on a website and online shop overhaul. We have seen large teams built (up to 100 full-time employees) to run online shops that have fewer transactions than a low-performing store. The operators also invested in omni-channel functionalities that were in little demand, such as informing sales agents in stores about exactly which items a customer had abandoned in an online cart the moment he or she walks into the store or calls the hotline.

These were some of the ideas that companies invested in, even as the basics were and are not in good shape. Websites often show out of date addresses and opening hours, and sales agents are not incentivized or trained to direct customers to digital channels. Basic things such as using the same digital sales interface for agents in store which customers use in the online shop are present in none but very few operators (about 25%). The latter, by the way, have in some cases only achieved this as part of multi-year sales IT transformation efforts costing millions of euros. Root causes for this CAPEX intensity have been discussed under #1.

In general, commissions for sales and retention do not support a shift toward digital selling. And operational processes are not set up to put priority on a convenient and compelling digital experience for customers. This also includes very analog things such as e.g. 1-day delivery or the selection of delivery-time-windows for handsets. Ideally, the process should start with a mandatory activation of an account through the operator’s app, regardless of the channel – or, even more important, especially in stores. If that is done well, consumers will have no reason to ever use any other channel to activate a new phone or contract. Today, we are still at up to seven days standard delivery time windows for SIM cards. Pretty clear why people are not really convinced of the digital efforts, right?

While most operators have put a lot of focus on the e-shop, we believe one core element of the organic shift to digital is often overlooked: digital service adoption through the operators own app and other automatized channels. Except for e-billing, which was pushed since the mid 2000’s, most other areas are as disappointing as the channel share of digital sales. While operators are now focusing more on increasing (temporary?) app penetration through high speed internet incentives (i.e. granting 5GB high speed internet if the app is being installed), the mandatory installation of the app at every major customer interaction – be it first time activation, contract renewal or an in-shop service procedure – is a key element of driving adoption. Of course, every app is only as good as its UX, functionality and content; meaning operators need to ensure that the most frequent use cases are available in simple form in the app.

With our DJ-X digital journey excellence assessment, we are tracking >120 KPIs which measure whether actual progress is being made in shifting customers to digital and whether relevant enablers are in place which. This includes Digital Channel Awareness (measured for both on- and offline population), ability to measure online and offline (!!) visits to digital triggers, incoming online traffic structure, available delivery options but also very practical KPIs such as mobile site loading times. And while a lot of operators may even track these KPIs, we have seen very few who can take the learnings and quickly test & implement MVPs (minimum viable products) on these. While most will blame the archaic IT structures, there is strong evidence that capabilities, culture and management are key drivers of whether an organization is able to work in an agile way or not.

In the third and last post of our trilogy on the telecoms omni–channel struggle our colleagues Federico Jüttner and John Gomes will speak about roadblocks three and four, dependence on strong retail partners and internal power struggle between organizational units. Stay tuned…