Anthony Hill of Nokia Siemens Networks argues that Customer Insight and Experience (CIE) can help CSPs to gain market share of mobile and fixed content revenues and compete in this space against Internet players and content providers
Network suppliers and operators are busy providing ever-increasing fixed and mobile bandwidth, but the real money is going to be made by those providing content and services across these networks. Communications service providers certainly have an opportunity to take part of this revenue, but it is by no means certain.
At the end of 2009, operators still got about 60% of their revenues worldwide from selling fixed and mobile voice, according to Gartner research. But the escalating demand for fast new information and entertainment services and applications will see these revenues erode significantly – and soon. Operators are all too aware of the risk they run in being relegated to “dumb pipes” as “over the top” players such as Google and Apple and other application and content providers threaten to claim the large part of data profits.
These companies have not only already started to raise consumers expectations by providing tailored services to suit customer interest and needs, but some are offering cloud-based services that compete directly with CSP offerings. Google Voice, Skype, Apple’s MobileMe, Facebook Mobile and Twitter are examples of these. CSPs are consequently reluctant to open up their networks to these players for fear of losing out to them. AT&T in the US is trying to block an iPhone application that allows VoIP services in order to secure its own revenues.
Remaining a dumb pipe is not an option for most CSPs, particularly mobile providers that are under increased pressure to maintain service levels as demand for network capacity escalates. Ovum estimates that by 2014, the number of mobile broadband subscribers will grow by 1000%. We at Nokia Siemens Networks believe that by 2015 mobile broadband data traffic on a laptop will increase by 1000% and that smart device data traffic will increase by a mammoth 10,000%. As demand for mobile data grows so too does the need for network upgrades, and with diminished revenues, it would be hard for CSPs to invest in infrastructure. Yet customer expectation for service quality and network coverage would force CSPs out of the market if their network failed to provide an adequate service.
Pressure to improve network quality and higher customer expectations are just two of the many challenges that CSPs currently face today. Others include fierce competition, decreasing influence of brand, little margin for differentiation and waning customer loyalty. In addition, increased churn rates are posing a major threat to CSPs’ stability due to their severe financial consequences. It is estimated that acquisition costs per subscriber are in the region of €200-350 and that in mature markets churn hits EBITDA margin severely.
Consequently, rather than bow down and let new entrants reap the fortunes of their networks, CSPs are intent on making the most of the opportunities for growth that demand for innovative fixed and new mobile content services promise.
Juniper Research is upbeat about the opportunities for CSPs to capitalise on mobile content. It predicts that the global market will be worth $167bn by 2013, shared among mobile network operators, content providers and third parties such as content aggregators and billing companies. Juniper analysts believe that if CSPs can transform their businesses into “smart pipe” service providers, they can they significantly increase their income from mobile content – to $52bn by 2013. But how are CSPs going about this?
Faced with competition from heavy-weight Internet rivals, the outlook for network and communications providers may look gloomy. But in reality they are in a prime position to make claims on data revenues through offering subscriber-specific third party content and services. Consumers are increasingly expecting service providers across industries to anticipate their needs and tailor services to their expectations. The Internet is conditioning individuals to expect more personalised services and teaching them about immediacy and the benefits of real-time. As a consequence subscribers are beginning to expect to be offered services that are relevant to their individual and changing needs and to what they are doing at any given time or place.
CSPs have a natural advantage in offering relevant and personalised bundles and services. They know their markets and subscribers best; they have the intelligence, through network-based data and behaviour patterns, to have a comprehensive idea of what services and content would best match the needs and habits of each individual customer. For example, CSPs can anticipate the types of content a subscriber may wish to consume while at work or during leisure time based on the knowledge of their individual usage patterns. They can elaborate their offerings to propose “mashups” of different applications - potentially combining services such as Facebook with presence and location information - that match user requirements and make it easier for customers to use the services they want.
By offering subscriber-specific and tailored services, CSPs can provide an excellent customer experience, winning loyalty from their customers thus reducing churn and developing profitable long-term customer relationships. Delivering excellent customer experience will also empower CSPs to stay ahead of the competition and maintain market share.
However, CSPs can only do all of this if they have a solid understanding of each customer’s usage patterns, interests and demographic in the first instance. To date many CSPs have struggled to improve customer experience mainly due to their failure to build accurate customer profiles because data held on any given customer is fragmented across the organisation and gathered by different systems. Many are still using traditional approaches to gathering insight, primarily relying on data from CRM and billing systems that is stored in data warehouses and analysed periodically.
By doing this they are disregarding the vast amount of data stored in the network and service platforms that provides real-time, vital information needed to identify the digital fingerprint of individual subscribers.
By bringing together detailed customer intelligence from network-based data, CRM systems and the IT environment which has been gathered from across all customer touch points, CSPs can gain a unified understanding of individual customer needs and act on this information to make real-time decisions. Real-time data can also help CSPs to target promotions much more precisely to individuals where they will be effective rather than mass scale offers. Time and location-specific offers are good examples of this. Offering music fans the chance to buy a bundle of MMS messages as they enter a concert venue will naturally have a greater success rate than a blanket promotion as concert goers will have a direct incentive to accept the offer.
Together with enabling optimum customer experience, leveraging customer insight allows service providers to identify demand for new types of services and also to cross and upsell new services.
Naturally there is the important issue of privacy to consider when gaining insight on customer needs and usage patterns. Nokia Siemens Networks ran a global survey last year to evaluate the importance to subscribers of privacy. While 80% of UK respondents viewed privacy as an important topic and 76% said they were concerned about privacy violations, users showed much less concern with privacy issues generally if the service they were being offered in return for disclosing information about themselves added value or benefit. This insight, coupled with the fact that CSPs were ranked relatively highly as companies to be trusted shows the potential for CSPs to win customer trust gain from a mutually beneficial relationship.
By establishing themselves as the gatekeepers to the Internet that ensure new, relevant and quality services are proactively provided to their customers, CSPs will also set themselves up to reap the benefits of the advanced communications of the future. As communications continue to evolve and users entrust more and more information about themselves online in order to receive personalised services that enhance their working and personal lives, CSPs are well placed to offer assurance and control over who accesses user data. By doing this they will offer additional value and create a solid basis for customer loyalty.
CSPs are in a strong position to gain share of fixed and mobile content revenues. Far from being “dumb pipes”, CSPs are sitting on a “goldmine” of valuable customer data captured through network-based data, IT and CRM.
Anthony Hill is head of business solutions sales, South West Europe, at Nokia Siemens Networks