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Telcos Face a Transformational Time

May 18, 2023

Telcos face a transformational time. Increased pressure to upgrade infrastructure, increased competition in an oversaturated market, and increased expectations from their customers. While so many telcos have pinned their hopes on the industry revitalization that 5G promises, the real driver of new revenue growth may not simply be the latest technology but capturing the loyalty of future generations, those digital natives most likely to use it. Their lifetime customer value cannot be underestimated. But risk-averse telcos may need to dive headfirst into change to deliver the truly exceptional online experience that digital natives crave.  

A Pivotal Point in Telco History 

The U.S. telco industry is at a pivotal point, caught between the old ways of doing business and the new. Customers only upgrade their wireless phone and internet packages every 2-3 years, and with mobile internet penetration at 85% and broadband penetration now at 92%, the market is becoming saturated, with traditional revenue streams stagnating and traditional value pools eroding.  

Although 5G offers the promise of increased customer satisfaction, telcos are still trying to figure out how to fully monetize it. Meanwhile, as companies compete for subscribers, the cost of customer acquisition has increased, which means telcos are pushed to focus more on securing their existing customers’ lifetime value. This is because the probability of selling a product or service to a new consumer is around 5-20%, whereas an existing customer is more like 60-70%.  

Yet, this model depends on customer loyalty, something which has proven more elusive since the pandemic, especially among younger telco customers – 69% are likely to switch providers if they are unhappy with the online experience, compared to only 51% of older consumers. 

Some may believe that recent technology, like 5G, will be the flashy new toy that will capture the minds and loyalty of younger customers. And while faster speeds, lower latency, and a more seamless user experience may entice younger crowds, once every telco offers the same basic level of service, what will the market differentiator be?  

The Influential Power of Digital CX on Younger Consumers 

More than half of telco leaders say that customer experience (CX) will still be the main competitive differentiator in their industry and have made CX one of their top transformational initiatives. But, to maximize revenue from existing customers, manage churn, and capture a customer’s lifetime value, the focus must be on younger demographics and what they want out of a telco provider.  

This means appealing to digital natives, those who grew up with technology, from older Millennials right up to Generation Alpha. They were raised on tech, and are used to one-stop, one-touch, instant service delivery. They want the ultimate ease and convenience that digital native companies like Netflix, Zoom and Uber have introduced to the consumer mindset.  

And therein lies the problem. It’s what McKinsey coined as the “customer-back disruption”. Digital native companies have set the bar so high for seamless online experiences that telcos have had to rethink their own interaction models, and many are falling short of younger customers’ expectations. Perhaps that’s why, according to McKinsey’s research, 60% of new revenue growth in the last few years has been captured not by telcos, but by technology, media, and internet service providers who also offer similar services as telcos, but often design their customer support with a more digital-first approach.   

Conversely, telco customers report that self-service tools and digital interactions are still not consistent across channels nor easy to use. Only 27% of telco customers say that it requires minimal effort to make a purchase or change online, the same amount that say it’s “easy” to speak with a live representative. That means that two thirds of telco customers still find digital channels difficult to use. The same report shows that even text channels require more customer effort, which makes apps, live chat, and websites more appealing.  

Telcos, this is a Transformational Time 

The reality is that most business transformation efforts fail, often because companies focus on either the transformation of back-end processes or the customer pleasing front-end, but don’t reimagine it from the ground up as a total CX transformation.  

But first, let’s eschew the idea that digital transformation means human replacement. Though automation and artificial intelligence technologies, like intelligent chatbots and conversational AI’s like ChatGPT, will have their place in this envisioned all-digital future, they are likely not going to rise to the level of sophistication where they can replace humans entirely. There will always be complex customer needs that will require the finesse of the “human touch”.  

But what will the new vision of customer service look like with a more digital approach? Successful business transformation will need strong CX partnerships to aid with change management and help you map out a new end to end, all-digital approach to the customer journey. For that, your chosen CX partner must have a digital-native mindset.  

  • Digital-first organizations approach technology not as an enabler of business strategy but a business strategy onto itself. A CX partner like itel, with a dedicated Data Science & Innovation team, can help you understand which technology ‘roadmap’ can deliver the best possible digital experience for your customers. They can collect countless insights from contact center data and activities completed by team members, which will help inform common service pain points and what technologies will lead to more seamless customer interactions. Then, they can help you either adapt existing systems, or build integrated tools from scratch, such as custom chatbots and AI-enabled automations that deliver improved efficiency, and a more customer-centric experience. 
  • Successful digital-first organizations understand that digitization does not mean de-personalization. A zero-touch service model would certainly reduce cost but would lead to lackluster customer interactions. The goal is to incentivize customers to use digital channels as a primary means of contact by creating distinctive digital experiences robust enough to be a customers’ first choice. Like itel, CX partners will need robust training programs to ensure that agents have the right skills to support these digital experiences. While voice channels could be reserved for building white glove experiences where telcos actively reach out to engage customers, optimize service packages, and use customer data to hyper-personalize offers. 
  • Businesses with a digital-native approach have leaner, more agile approaches to operations, which enable them to innovate more quickly. The ability to make rapid business decisions and experiment with new models of operation are vital to remain ahead of the game in a highly competitive industry. At itel, for example, we favor a flat management style and a Six Sigma Lean methodology, where we leverage all levels of the organization to move quickly when faced with sudden disruptions. Plus, with greater flexibility comes the capability to scale rapidly or make necessary pivots, based on clients’ evolving needs.  

This transformational time can only happen with a CX partner that has the right technology stack, the right industry expertise, and the customer-centric vision to deliver an excellent digital experience. With the right partnership and approach, there are infinite possibilities to capture the younger consumer. And once you win them over, 76% are “very likely” to adopt a new product or service from a brand they already know, like, and trust.  

Need help accelerating your digital transformation? We have a long history of serving the needs of the telecommunications industry. Find out how we can support your business with Digital CX.

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