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The key To profitability

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Customer Experience The key to profitability

This publication is free to TM Forum members Report author: Rob Rich Managing Director, tM Forum Insights Research: rrich@tmforum.org Publications Managing Editor: Annie turner aturner@tmforum.org Creative Director: David Andrews dandrews@tmforum.org Commercial Sales Consultant: Mark Bradbury mbradbury@tmforum.org Publisher: Katy gambino kgambino@tmforum.org Client Services: Caroline taylor ctaylor@tmforum.org Marketing Manager, Publications & Virtual Events: saryia green sgreen@tmforum.org Report Designer: the Page Design Consultancy Ltd Head of Research and Publications: Rebecca henderson rhenderson@tmforum.org Advisors: Keith Willetts, Chairman and Chief Executive Officer, tM Forum Martin Creaner, President and Chief Operating Officer, tM Forum nik Willetts, Chief Information Officer, tM Forum Published by: tM Forum 240 headquarters Plaza East tower, 10th Floor Morristown, nJ 07960-6628 UsA www.tmforum.org Phone: +1 973-944-5100 Fax: +1 973-944-5110

Page 4 Executive summary Page 5 Section 1 Understanding the value of customer experience and loyalty Page 11 Section 2 Customers needs and service providers differentiators levers for loyalty Page 16 Section 3 the service providers speak; perceptions and priorities for customer experience Page 19 Sponsored feature Compuware

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executive summary
seeking to increase profitability, communications service providers (CsPs) are turning more and more to initiatives in customer experience management to retain their customers, differentiate their offerings and lower their servicing costs. these decisions are being driven by factors such as market maturity for traditional services, general economic trends, and the emergence of new technologies and applications. shifts in customer behavior, preferences and demands are exerting a big influence too. Leaders in this space learning lessons from the success of companies like Amazon, Apple, tesco and Wal-Mart are taking an holistic approach from a planning perspective. they are laboring to understand the impact of customer experience management across the customers lifecycle, and focusing on the areas that will provide them with the greatest payback. CsPs are putting considerable effort into figuring out whats important to their customers, and leveraging their substantial assets to improve customer experience and loyalty. these assets include their product and service portfolio, marketing and sales capability, service quality, customer support capability, billing and cost management, and brand equity. At Management World 2010, a group of CsP executives participated in an executive roundtable to discuss customer experience initiatives, looking to leverage each others knowledge. Among the key strategic areas discussed were understanding customers expectations, determining adequate levels of support, creating effective differentiation, lowering costs and the role of standards. While approaches and attitudes regarding understanding and managing customers expectations generated the most heated debate, approaches to creating effective differentiation and lowering costs drove the deepest discussion.
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CsPs did not always agree as to which aspects of customer experience management were most valuable, but all acknowledged that the effective automation of processes was critical to lowering costs and increasing customer satisfaction. Most also agreed that customers must be involved in the design of customer-facing, self service tools, as otherwise adoption rates are very low indeed. several of the CsPs cited the need for industry standards and best practices to support effective process automation and the overall management of the customers experience. two areas that stood out were the creation of a set of accepted metrics around service management, and the development of interface standards for the systems that link into enterprise customers and the tools made available to them. In summary, the roundtable was an important opportunity to sense CsPs recognition of customer experience as an important topic, and to explore their perceptions and priorities. While CsPs differed sometimes on the priorities and approaches to specific issues, all recognized the importance of customer experience strategy to improve profit and the need for automation of key areas. they also were definite about the need for standards and best practices. Much work remains to be done here, but the industry appears to be poised to move in the right direction. this Quick Insights report builds on the Insights Research report tM Forum published last year, Customer Experience Management: Driving Loyalty and Profitability, which included information garnered from interviews conducted with executives from 20 service providers from around the world. Forum members can download it from our website. We hope you enjoy this report, and gain some new insight into this important area.
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Ultimately customer experience is all about profitability

Section 1

Understanding the value of customer experience and loyalty

Challenged by economic difficulties, increased competition and slowing growth, communications service providers (CsPs) are increasingly turning their focus to customer experience as a critical component of their success. C-Level executives from many CsPs publicly expound the virtues of leadership in customer experience, yet their companies frequently fall short of the leadership demonstrated by prominent firms in other industries which take customer-centric approaches to their bottom line strategies. this is borne out in a number of customer satisfaction surveys, especially in developed economies. Meanwhile, customer loyalty leaders like Apple, Wal-Mart, google, and honda continue to do well by focusing on customer experience as an essential driver of profitability. CsPs are increasingly noting this phenomenon and exploring how they might espouse the same principles to increase their own. Ultimately, effective customer experience is all about profitability. see box copy on page 8 for a discussion on customer service and profitability. Achieving success in managing the large array of touch points across the customer lifecycle is challenging. CsPs must move past their one-size-fits-all approach to customer management. the view of customer service as a form of altruism as it was implemented during the industrys civil service days, when CsPs were often government organizations
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should be long gone. Instead CsPs need to segment their customer base, then work to understand the needs, expectations and

Figure 1-1: Market trends driving customer experience initiatives

Market maturity

Customer behaviour & preferences

Customer experience

economic trends

New technologies

potential profitability of each segment, and service them accordingly. Over the past few years, there has been surge in interest in customer experience by CsPs. Four market-related trends are driving this, as depicted in figure 1-1.
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the trends are:

n Market maturity certainly, while service n Emerging technologies though the

providers across the world have benefited from the growth of mobile and broadband communications services, markets for todays core communications products are approaching, or have reached, full maturity. Consequently, in most developed and many emerging economies, it will take more than excellence in core services to drive incremental profitability. the importance of customer experience increases greatly in a mature market. Also, as market penetration increases, so too does the cost of acquiring customers. Overall prices stabilize (or decline), and new service alternatives or substitutes may arise.
n Economic trends fluctuations and

introduction of new technologies can often energize markets, those technologies can also shift the balance of market power. the enablement and introduction of smart phones in general (and the iPhone in particular), Web 2.0 applications such as social networks, and underlying technologies and frameworks such as service oriented architecture, are all good examples of this phenomenon. For the communications industry, these technologies can underpin new services, but they can also be used to create more efficient or effective delivery of other aspects of customer experience.
n Customer behavior, preferences and

changes in economic trends often drive change in the focus of customer experience programs. For example, in difficult economic times, customers discretionary spending is likely to become more conservative. Accordingly, service providers focus may shift to emphasize customer retention, cycle time reduction and cutting costs. In better economic times, the focus may be on the introduction of new products and offers, cross-selling, upselling, and greater business agility.

demands in many respects, customer demand is shaped by the preceding three forces, but also by evolving demographic, socio-political and attitudinal changes. An example would be the predisposition of young people toward instant communications and social networking. While some service providers may think of social networking as simply a new set of services they can offer, savvy companies recognize that they also represent preferred channels of interaction with these customers, as well as channels for customers to publicly criticize their CsPs or recommend them to others. As a result of this realization, several CsPs are taking first steps to leverage such channels.

In better economic times, the focus may be on the introduction of new products and offers, cross-selling, upselling and greater business agility.
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Clear steps towards more personalized customer relationships

Figure 1-2: An example of customer lifecycle

Acquisition

Fulfillment

Usage

Support

optimization

With so many touch

points, gaining leadership in customer experience and satisfaction will not be easy, as it is affected by virtually every customer-facing aspect of the service provider.

seeking to retain and upsell to customers, increase loyalty and attract new subscribers means service providers are turning to customer experience as a differentiator. their goal is to increase profitability by focusing on customers with higher economic lifetime value, providing them with superior service. they also hope to raise lifetime value by offering a variety of attractive new services. Better customer service should not only enable CPs to retain and upsell to users of traditional services, it should also aid service providers to secure a powerful position as enabler in the emerging digital services value chain. this in turn supports the development of a two-sided business model for the CsP, securing additional revenues and profits. there are clear steps CsPs must take to create more personalized relationships with their customers, as well as reduce churn and increase profitability all while becoming leaner and more agile. First, they must embrace the concept of a customer lifecycle, and understand the myriad touch points across that lifecycle. Figure 1-2 is a graphic representation of lifecycles stages. Virtually every customer touch point whether directly or indirectly linked to service providers and their partners contributes to customer perception, satisfaction, loyalty,

and ultimately profitability. With so many touch points, gaining leadership in customer experience and satisfaction will not be easy, as it is affected by virtually every customer-facing aspect of the service provider. the scope of issues impacting customer experience today is complex and dynamic. As new services, devices and applications extend the basis of customer experience to domains beyond the direct control of the service provider, it is likely to increase in complexity and dynamism in the future. In this report, we explore the fundamentals of customer experience in the communications industry, and discuss the key issues explored at the recent tM Forum executive roundtable on Managing Customer service at Management World 2010.

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the impact of loyal customers on greater profit
Customer experience programs are no longer altruistic exercises, but a strategic means of attaining customers loyalty, plus improving competitiveness and profitability in the short and long term. Loyalty is essential to deriving long term results from customer relationships. the earliest loyalty programs date back to the 1930s, when packaged goods companies offered embedded coupons for rewards to buyers, and eventually retail chains began offering reward programs to frequent shoppers. these programs continued for decades but were leapfrogged in the1980s by more aggressive schemes from airlines, as they realized the value in providing customers with incentives to use a company exclusively and enjoy the benefits of their loyalty. Within a few years, dozens of travel companies launched similar initiatives. Loyalty programs are now achieving near ubiquity in many service industries, especially those where it is more difficult to differentiate by products attributes alone. Again, the goal of these programs is profitability, not altruism. the rationale is that stimulating greater customer loyalty will result in higher profitability because:
n Churn rate represents the percentage of n Regular customers tend to be less expensive

to service, as they are familiar with the processes involved, require less education, and are consistent in their order placement; n Increased customer retention and loyalty makes employees jobs easier and more satisfying. In turn, happy employees feed back into higher customer satisfaction in a virtuous circle.

Figure 1-3: The virtuous circle of customer loyalty

Training and empowerment of employees employee competence/ satisfaction

higher sales & profits

Customer satisfaction/ loyalty

Superior product/service delivery

n n

customers who end their relationship, the lower the amortized cost; Account maintenance costs decline as a percentage of total costs, or as a percentage of revenue, over the lifetime of the relationship; Long term customers tend to be less inclined to switch supplier and less sensitive to price, which can result in stable unit sales and increases in dollar sales volume; Long term customers may initiate word-ofmouth promotions and referrals; Long term customers are more likely to buy ancillary products and higher margin, supplemental offers; Long term customers are less likely to move, making it harder for new market entrants and competitors to increase market share;

Figure 1-3 represents a high level example of a virtuous circle driven by customer satisfaction and loyalty, depicting how superiority in product and service offerings, as well as strong customer support by competent employees, lead to higher sales and ultimately profitability. this is not a new idea, but implementing it successfully is difficult. Of course, for this circle to indeed be virtuous, the customer relationship(s) must be profitable. It is important that CsPs can assess the profitability of each customer (or customer segment) in the interests of working out more improvements or terminating relationships that are not profitable. to do this, the cost of each customer to the company must be understood and compared to the revenue they generate.
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A strategic means of attaining customers loyalty

Customer lifetime value: quantifying the value of customer loyalty Customer lifetime value (CLV) is the most commonly used approach to understanding customer profitability. It is generally accepted as a representation of how much each customer is worth in monetary terms, and a determinant of how much a CsP should be willing to spend to acquire or retain that customer. CLV models make several simplifying assumptions and often involve the following inputs:
n Churn rate represents the percentage of

n Discount rate is the cost of capital used

to discount future revenue from a customer. Discounting is an advanced method used in more sophisticated CLV calculations; n Profit margin is projected profit as a percentage of revenue for the period. this may be reflected as a percentage of gross or net profit. Again, this is generally projected across the models horizon to understand lifetime value. A focus on managing these inputs can help service providers realize better customer relationships and profits, but there are some challenges as well in achieving accurate calculations. For example, there are many costs involved in serving all customers that must be properly allocated across the base. A simple proportional allocation across the whole base or a segment may not accurately reflect the true cost of serving that customer. It is also likely that customer information may be fragmented across a variety of product or operations groups, and may be difficult to aggregate due to different representations, while complex account structures may not be understood or properly represented. For example, a profitable customer may have a separate account for a second home or another family member, which may appear to be unprofitable. If the service provider cannot relate the two accounts, CLV is not truly representative and the cancellation of the apparently unprofitable account may result in the customer churning from the profitable one. If service providers are to realize strong customer relationships and the attendant profits, they must concentrate on data management, coupled with analytics, to help them offer highly personalized solutions to customers while maintaining profitability. Acquiring new customers is expensive.
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n n

A simple proportional

allocation across the whole base or segment may not accurately reflect the true cost of serving that customer.
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customers who end their relationship with a company in a given period; Retention rate is calculated by subtracting the churn rate percentage from 100; Period/horizon are the units of time into which a customer relationship can be divided for analysis. A year is most commonly used, but CLV is a multi-period calculation, often projecting three to seven years into the future. In practice, analysis beyond this point is viewed as too speculative to be reliable. the model horizon is the number of periods used in the calculation; Periodic revenue is the amount of revenue collected from a customer in a given period (though this is often extended across multiple periods into the future to understand lifetime value), such as usage revenue, anticipated revenues from cross and upselling, and often some weighting for referrals by a loyal customer to others; Retention cost describes the amount of money the service provider must spend in a given period to retain an existing customer. Again, this is often forecast across multiple periods. Retention costs include customer support, billing, promotional incentives, and so on;

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Advertising costs, campaign management expenses, promotional service pricing and discounting, and equipment subsidies make a serious dent in a new customers profitability. that is especially true given the rising subsidies for smart phone users, which carriers hope will pay off through greater data services profitability in the future. the situation is exacerbated by falling prices and increased competition in mature markets. Acquiring customers through industry consolidation isnt cheap either. A north American service provider spent about $2,000 per subscriber via its acquisition of a smaller company last year. this made the CsP into the largest mobile service provider in the country, but it took a total investment of more than $28 billion (including the assumption of the acquired companys debt). Many synergies in operating costs clearly made this deal attractive to the acquiring company, but it is an expensive way of adding customers. While growth by acquisition certainly increases overall revenues, it often creates tremendous challenges to profitability. Organic growth through increased customer loyalty and retention is generally a more effective driver of profit, as well as a more accurate predictor of future profitability. service providers, especially those in mature markets, are increasingly recognizing this and taking steps toward creating a more personalized, flexible and satisfying experience for their customers. More and more, business managers are realizing that the clearest path to profitability for companies in almost all industries is through customer retention and maximizing lifetime value. All CsPs need to understand this and put as much effort as it takes to achieve profitable customer relationships.

More and more business managers are realizing that the clearest

path to profitability for companies in almost all industries is through customer retention and maximizing lifetime value.
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Acquisition costs make a dent in a new customers profitability

Section 2

Customers needs and service providers differentiators levers for loyalty

A comprehensive understanding of customers wants and needs is central to developing an effective customer experience strategy. While management techniques for corporate customers and consumers differ markedly and the real, deep personalization of accounts is increasingly important it is clear that there is a common set of fundamental characteristics of products and processes that transcend industries and market segments. they include:
n Productivity improvement time is an n Risk the acquisition and usage of products

ever more scarce commodity, and anything that can help save time or make better use of it is attractive to consumers and business customers alike; n Simplicity with the explosion of new products, services, and applications during the last decade, simplicity and intuitiveness have become an huge issue for consumers. successful products must be easy to find, acquire, use, upgrade and maintain, or they are doomed to the scrap heap; n Convenience given time constraints and consumers ever shortening attention spans, it is necessary that products and services be readily available;

and services must present a low risk to the customer. security, safety and reliability are especially important characteristics, as is predictability of costs; n Cool factor products that are perceived as innovative, fun, cute or that enhance ones image or status have been shown to increase desirability. some aspects of personalization (such as skinning) fall into this category; n Green while the environmental impact of a product is not usually the first consideration when buying, environmentally friendly products are gaining ground across a broad audience. these characteristics generally apply across the customer lifecycle, as represented by figure 2-1. service providers that can develop strategies addressing these fundamentals across the customer experience lifecycle will have a considerable competitive advantage, which will help them to acquire new customers, upsell to current ones and increase overall profitability.

Figure 2-1: Customer wants across the lifecycle

Acquisition

Fulfillment

Usage

Support

optimization

n n n

n n

Compelling products? Attractive channel? easy to determine the right solution? Can it be done quickly? Is it secure?

n n n n

Convenient? Simple process? Fast? Secure?

n n n n n

Convenient to use? Cool? Simple? Fast? Secure?

n n n n

easy to get support? Personalized? effective? Fast?

n n n n n

Compelling products? Personalized interaction? easy to upgrade? Can it be done quickly? Is there any risk?

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Service providers levers components that influence customer experience Applying the scope of customer experience and demand characteristics to the service providers business models, we believe there are six areas in which service providers can differentiate themselves, including:
n Product and service portfolio is the range

n Brand includes a CsPs reputation for

product excellence, image, responsiveness and trustworthiness. Figure 2-2 provides a graphical view of CsP customer experience levers. Finally, there are two additional important investment considerations in developing the customer experience differentiation approach:
n Which customers (or segments) are most

of products and services a CsP offers its customers, including devices, connectivity services, content, applications, and so on. this includes pricing, acquisition and fulfillment; Marketing and sales includes pricing, merchandising, offer management, campaign management and initial fulfillment; Service quality is about the perceived quality of services, including availability, usability, sustainability, capacity, performance, stability and security; Customer support refers to availability, accessibility, breadth, speed and effectiveness of support; Billing, charging and cost management involve the range and flexibility of billing and charging options available, plus enabling customers to control costs based on the transparency of billing information;

attractive from a customer lifetime value (CLV) perspective, and what investments are most likely to attract and retain them, as well as support maximization of lifetime value? n What is the investment budget and the likely cost of capital during the investment period? Ultimately, the service provider must maintain appropriate levels of cash flow and profitability, balancing the needs of both customers and investors. there may also be variations on funding strategies, such as success-based capital in emerging markets, but with a bottom line emphasis on matching investment capital with initiatives yielding the highest return.

Figure 2-2: CSPs customer experience levers

Product and service portfolio the range of products and services a CsP offers its customers, including devices, connectivity services, content, applications, etc. Marketing and sales pricing, merchandising, offer management, campaign management and initial ordering; service quality the perceived quality of services, including availability, usability, sustainability, capacity, performance, stability and security; Customer support availability, accessibility, breadth, speed and effectiveness of support; Billing, charging and cost management the range and flexibility of billing/charging options available, and the ability of the customer to control costs based on transparency of billing information; Brand includes reputation for product excellence, image, responsiveness and trustworthiness.

Ultimately the service

provider must maintain appropriate levels of cash flow and profitability, balancing the needs of both the customers and investors.
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The key to success is a compelling set of offers

Service usage is the

most common experience the customer has with the service provider, yet monitoring the quality of the service provided to individuals has been a tall order for them.

Product and service portfolio Clearly, an important aspect of customer experience is offering an attractive set of products and services. Breadth is certainly important, but the key to success lies in creating a series of compelling offers whether they are individual services, or more likely multi-service bundles that appeal to the target customer base. Bundling is a concept that emerged approximately 15 years ago, yet service providers are still struggling to get it right. In addition, while many converged operators offer a triple play option, few have been able to translate their assets into focused offers that target segments. they instead opt to take a more-is-better approach. While a few segments (like sports fans or movie mavens) are sometimes well served, others are left to slog through large swaths of content, acting as their own packagers. service providers should look to the web for emerging trends that can be reflected in their services. For example, the trend toward social networking can be leveraged by offering a package that encourages communication among a pre-defined user group. Voice, texting and instant messaging services could all be configured for fast and convenient use among the group. Leveraging services through high degrees of integration among the services, or taking an integrated three-screen (handheld, PC, tV) approach to service assets could improve satisfaction, while promoting additional revenues. For example allowing customers to attach video trailers of new pay-per-view titles to messages enables service providers to leverage social networking principles and promote products at the same time. Perhaps an obvious example of a hot product is the iPhone, which has been an acquisition and retention engine for the

companies offering it. some might argue against the profitability angle, since iPhone fans tend to be heavy users of flat-rate data plans, and Apple retains control of its App store, but the top-line revenues and subscriber gains have been impressive. notably, the iPhone has many key characteristics, including improved productivity, simplicity (ease of use), low risk, and it certainly possesses the cool factor. Whether or not service providers choose to go the iPhone route, it is obvious that an attractive device portfolio is key to customer experience. Marketing and sales Marketing and sales are rarely the first things to come to mind when customer experience is discussed, but they are in many cases the workhorses of the acquisition cycle. they are also drivers of important touch points, supporting offer management and educating the customer base through well-run campaigns. Properly leveraged, they can contribute heavily to the bottom line in both good and bad economic times. For example, the promotion of new offers with simplified pricing models or carefully targeted bundles can improve customers perception through greater productivity, convenience and simplicity, not to mention a bigger slice of the customers spend. Information about the customer (customer intelligence) is especially important here, as it is throughout the customer lifecycle. Service quality service usage is of course the most common experience the customer has with the service provider, yet monitoring the quality of the service provided to individual customers has been a tall order for them. the difficulty lies in collecting and aggregating data, on an endto-end basis, by customer rather than asset or service. Doing it in anything approaching
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real-time is difficult, but has the advantage of allowing the service provider to see its networks and service performance as its customers see it. this is a far more effective and specific picture of particular customer experience than that given by performance management systems. they tend to measure the performance of networks, or particular areas in networks, or perhaps the experience of a group of users. there are a variety of uses for the output of these systems, including identifying poorly performing network assets or devices, but perhaps none more powerful or useful than providing an up-to-date view of the experience of a customer talking to a customer service representative (CsR) about a problem. Quick, accurate identification of problems can help speed their resolution and shorten the time the customer has to spend with the CsR, thereby increasing satisfaction. shorter resolution time is also likely to reduce the CsPs handling costs, making it a win-win for both CsP and customer. service providers can also use these systems for proactive outreach informing a customer that a problem has been corrected before the customer even reported it. this can improve customer confidence and satisfaction, and it also allows the service provider to capture the usage revenue it would have missed had the problem not been proactively resolved. Again, this is about profitability, not altruism, as mentioned in section 1 of this report. Customer support Customer support encompasses the response to a variety of situations, from responding to billing questions, to service problems, product questions, and so on. such a broad remit, combined with the preference of human
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contact by many high-touch customers can create a challenging financial situation for service providers. some keys to an effective, affordable customer care strategy include:
n Providing an appropriate experience based

on a customers lifetime value;

n Driving down cycle times; n Resolving problems through the first call; n supporting the customer through their

preferred channel;
n Personalizing the experience.

Providing an appropriate level of service is key to profitability. Building an effective support strategy for a customer based on their lifetime value, service portfolio and pricing plans is the goal. this can be tricky because customers preferences vary greatly. Certainly self-care using the web, interactive voice response technologies and even messaging can be effective, but preferences vary among business users and consumers, and high tech and hightouch customers not to mention teens and seniors. the key to an effective experience is knowledge of the customer so that the appropriate channel is used for interaction. Driving down cycle times is an important goal that reduces cost for the service provider while improving the quality of the customers experience. this can be accomplished by providing the CsR with the right customer account information prior to or while the call is routed, and providing CsRs with thorough training in questioning and problem-solving techniques. Wherever possible, simple issues should be channeled into self-care. service providers should be working continually to reduce cycle time on traditional services, as they need to master these skills before moving on to the more complex services of the future.
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Branding is essential to the overall perception of the service provider

Billing, charging and cost management there seem to be as many views of billing as there are bills. Long standing billing employees at incumbent carriers may recall nostalgically the paper bill as a monthly touch point, arriving in an envelope stuffed with promotional materials and the latest news from the operator. Customer memories may not be so fond. Many businesses and wireless customers, for example, remember large, detailed, complex bills filled with charges borne out of complex tariffs, plans, and government taxes and fees. turning customers into accountants should not be the goal of a customer-centric organization, yet the inflexibility of legacy systems has often created just that scenario not to mention the increase in billing costs acting as an impediment to new product introduction. In addition, many customers have approached new offers with real caution because they have felt burned by higherthan-expected data, messaging and roaming charges, due to the lack of visibility of usage. While service providers have come a long way in simplifying tariffs and plans, they are far from being out of the woods in many areas. Many still lack the cost transparency or spending control mechanisms (such as allowing the customer to set usage limits) that would ease customers concerns about new services. Branding In many ways, the first five areas we have identified are important to, or even defining characteristics of, brand. Yet, in turn, brand has an impact on these elements, and is essential to the overall perception of the service provider. It can also be a powerful acquisition and retention tool. service providers also have something to gain from their association with other brands and products, such as the
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benefits of being associated with the likes of Apple or google (Android) device While CsPs may not be aiming for the same brand image as Amazon or Apple, they should be working to establish a brand that is:
n targeted appropriate to the market and

product set;
n clear delivering an instantly n n n n n n n

comprehensible message; desirable something customers want to have or be part of; unique stands out in the crowd; meaningful matching customers expectations; consistent across all aspects of the company; recognizable clear, easily identified, repeated; actionable eliciting appropriate response; supportable and extensible able to support new products and partners.

In summary, most service providers have a rich set of capabilities that could and should be able to satisfy customer needs. the key is applying them appropriately and profitably across the customer lifecycle.

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Section 3

The service providers speak; perceptions and priorities for customer experience
Discussion at the tM Forum roundtable was as broad as the scope of customer experience itself, touching on a variety of topics. In the end most of the discussion revolved around strategic, financial, service management, analytics and channel management issues. service providers seem to have got to grips with the power customer experience has to affect the bottom line, and are now looking to understand how they can leverage others learnings to improve their business performance. Among the key strategic areas discussed were understanding customer expectations, determining adequate levels of support, creating effective differentiation, lowering costs and the role of standards. Expectations Understanding and managing customers expectations seemed to draw the most heated debate; both while discussing how expectations are set and also regarding the role and responsibility of the service provider in supporting customers. the discussion round setting customers expectations centered on the source of expectations. two factions emerged here. One argued that setting realistic expectations is relatively straightforward; CsPs should simply tell the customer what they plan to deliver in measurable terms, then do it. this should result in a satisfied customer, since the CsP has met the expectations it has set.
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the other faction argued that in practice customers expectations are less well defined and more personal, and develop more based on what is available across the market, not only on offerings from the CsP they are using. this group felt that expectations could only be grasped by understanding individual customers, because each customers priorities and perception of the market are different. they also argued that a CsP that simply focuses on its own stated goals, rather than trying to understand the customer, risked losing that customer even if it met its internal goals. this group cited a study in a European country as an example of perception and reality differing; an mobile virtual network operator (MVnO) was cited by customers as having the best service quality in the country, while the operator which ran the network the MVnO used was cited as having the worst service quality. Supporting roles and responsibilities In the area of roles and responsibilities for support, while all agreed that the world is changing rapidly, and a service now commonly spans the network, one or more devices and one or more applications, there were marked differences in opinions as to the CsPs role in supporting the service. Again, heated debate ensued with two factions developing. One argued that it is enough for CsPs to
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Involve customers in the development of self service systems

demonstrate excellence in the delivery of service components, such as the connectivity. this group worried about the cost of supporting the applications and devices that a customer might have, and how that might impact profitability. the other faction felt that the CsP is the only one truly in a position to support all aspects of the end to end service, and that consequently, the CsP has the opportunity to provide tremendous and unique value to the customer. they argued that if the CsP abandons that role, it risks losing the opportunity to upsell to the customer, as well as losing the customer altogether. this group also suggested that it may be possible to charge a small premium for supporting applications, and to tailor an appropriate support package. there was no universal final agreement as to scope of the role, but there was agreement that, regardless of the role played by the CsP, no one will own the customer. Rather the service provider will have to work toward gaining the loyalty and trust of the customer. Differentiation Discussions around differentiation, and where to invest in customer experience to create differentiation, brought little controversy, with opinions varying more by target segment and market maturity than by the service providers approach. Most agreed that for corporate customers, service quality and support were especially important. Participants felt that the provision of systems and tools, enabling large customers to efficiently manage their relationship with the CsP, was particularly key. One highly pertinent point of learning emerged here; not
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surprisingly, those CsPs that had involved their customers in the design of the self service systems had much higher adoption rates than those that had built the tools without customers participation. A final comment that was well received was the changing nature of contract management concerning multi-year contracts for enterprise customers. With so much change occurring in the enterprise, the usual approach of writing a highly detailed contract and dealing with adjustments through a predetermined change management process is less effective, and a new approach is needed. no one was clear on what the approach should be, but participants agreed this needed to be looked into. In discussing consumer markets, several participants felt that the although service quality and support were important, offer management and personalization capabilities were more so in terms of customer retention. this was particularly true in developed markets where there was less perceived difference in service quality between providers. Interestingly, several others commented that while there was little perceived differentiation in service quality for voice, they were experiencing a resurgent push for service quality among their customer base for mobile broadband. Lowering costs, service management Most of the discussion around lowering costs centered on automation, while the service management debate centered on encoding the expertise that is in peoples heads that is, how to manage the services and infrastructure with tools, freeing experts to work on more complex or creative problems. the second area of priority centered on
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CUStoMEr eXPeRIeNCe

providing customer service representatives (CsRs) with adequate tools to resolve customers problems quickly and efficiently. In particular, the priority was to increase the percentage of problems that could be solved on the first call without escalation. service providers expected that this would not only save the CsR time (and so the company cost), but would result in more satisfied customers and greater confidence in the CsP. the third most important area was self service tools, though several CsPs expressed concern about heavy investment here, as adoption rates were relatively low for most of them. Standards and best practices the definition of standards and best practices were cited as key by several of the roundtables participants. the first area of importance mentioned was the definition of a common set of key performance indicators for service management. Participants felt this would allow vendors to develop a core set of compliant management tools, easing the burden of development felt by individual CsPs.

the second area that was highlighted was the interface between the enterprise customers systems and the service providers systems. Participants stated that there were no standards here, and that each customer required a customized interface to the CsPs tools. standardizing the interfaces could lead to lower costs and the promulgation of best practices for CsPs and enterprise customers alike. In conclusion In summary, the roundtable was an important opportunity to sense CsPs recognition of customer experience as an important topic, and to explore perceptions and priorities. not all the participants agreed on roles, responsibilities, differentiation opportunities, or their ability to management customer expectations. however most did recognize the importance of customer experience strategy in improving profit, the need for automation of key areas, and the desirability of standards and best practices. Much remains to be accomplished here, but the industry appears to be moving in the right direction.

Most did recognize the importance of customer experience strategy in improving

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profit, the need for the automation of key areas and the desirability of standards and best practices.
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sPOnsORED FEAtURE

the one who sends the (data service) bill, owns the (data service) problem
Data, data everywhere: the wireless industry passed an interesting crossover milestone late last year, but with surprisingly little fanfare from press and analysts: Ericsson reported that for the first time ever, in December 2009, worldwide mobile data traffic exceeded mobile voice data traffic. see figure 1. More recently in their Us Wireless Data Market Q2 2010 Update1, Chetan sharma Consulting predicted that on the current trajectory, the next major crossover data ARPU exceeding voice ARPU would occur in the Us market in Q2 2013. see figure 2. Lets put these dry statistics into hard business terms: Within the next 36 months, your mobile data customer will be more important to your business than your mobile voice customer. this change is inevitable and irreversible. For a wireless operator to be successful in this new era, they have to recognize that this is a highly disruptive change that cannot be addressed by fine-tuning existing management tools and processes. Using yesterdays solutions to solve todays and tomorrows problems? One of the key processes that will distinguish the major players from the also rans is the way that they manage the user experience of their data service to ensure a profitable and loyal customer relationship. the traditional solutions used for decades to manage voice services simply dont work for mobile data services. the reason is that unlike voice services, mobile data services are not confined to end-points within the mobile operators walled garden. the major problem thats being exposed inside almost every operator is that theres a deep disconnect between what the operator thinks is happening on the data network, and what the end user is actually experiencing. the operator sees all lights are green on their network. While the end user is experiencing the entire service delivery chain and perceives problems as the fault of the operator. see figure 3. In other words, operators are in the awkward position of not having full visibility into the service delivery chain that their customers are using, while still being expected to assure that the customer has a good experience. Disruptive problems demand innovative solutions: At the heart of the problem facing operators as they transition from a voicecentric to a data-centric business is the fact that there is a rapidly widening gap between the operators view of their mobile data service quality and the actual end-user experience of the service. the only way to narrow this gap is for the operator to adopt an innovative service Performance Management approach: manage mobile data services by managing the entire service delivery chain, not just the elements that are under the operators direct control. the approach goes beyond just implementing the latest visibility management software tools; it also includes aligning departments, and even managing the customer experience before they actually become a customer. The Service Performance Management approach defines 4 key principles: i) Unite at the customer: Eachdepartment must communicate problems across departmental boundaries, and always in terms of what the problems mean to the customer. For instance, if Engineering detects that Cell tower 123A is operating at reduced throughput because of an electronics failure, they must communicate this to other departments as Customers in postal code 34017 may be experiencing slow performance for the next 2 hours. ii) Create a customer experience ecosystem: true end-user-focused service management requires a unified ecosystem of people, responsibilities, processes and tools inside the operator to find and fix problems quickly. Without this, operators are unwittingly putting their customers at the forefront of problem detection. iii) Develop an outside-in view of your business: the outside-in view of the customer experience is an important part of building a long-term relationship with customers. It starts with real-time

Figure 1

Figure 2

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monitoring of the performance of the operators own website from outside the organization (the customers point-of-view), which includes partner sites. It continues with monitoring the performance of customers most important applications and services over both the operators network and their competitors networks. Using the collective intelligence gained from outside-in monitoring, very valuable customer data can be obtained. iv) Develop a real-time, end-user experience view of data service performance: the vast majority of the mobile data traffic is to/from services and websites which reside outside the operators own network. A real-time, end-user experience view of data service performance allows the operator to gain visibility into the performance of the entire service delivery chain: the device, application, network and content that make up the mobile data service for the user. With this visibility, the operator gains the ability to proactively identify and resolve service experience issues before they become impediments to individual user perception of the service. Compuware puts it all together: In response to requests from many operators around the world, Compuware developed the vision of Proactive Customer Awareness (PCA). this incorporates the service Performance Management approach described above, plus it uses a phased implementation methodology which defines 3 major milestones as shown. see figure 4. this is the approach that Carriers around the world are adopting as their strategic direction and deployment methodology to achieve their business goals. Compuwares PCA solution builds a new foundation for managing and growing high-performance customer data experience. It combines our market leadership in enterprise end-user
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Figure 3

experience management and outside-in web performance management to deliver a truly unique, end-to-end solution to manage the data service experience. Conclusion: As mobile operators become increasingly dependent on data services for revenue and margin, they are faced with the fact that their existing network management tools and operational processes are unable to meet the needs and expectations of

this new era. there is only one solution: Re-focus the organization to unite around the customer, not just the network. this requires working with a vendor that has the operational experience in a number of areas, such as end-user experience management, website performance management, and service delivery management.
References: (1) www.chetansharma.com: Report Us Mobile Data Market Update Q2 2010

Figure 4

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