WDS.CO @WDSCOMPANY EXPERIENCE@WDS.CO

ExperienceWDS | DELIVERING ACTIONABLE INSIGHT FOR THE WIRELESS COMMUNITY

LOYALTY VS SATISFACTIONWHY THE TWO

MUST NOT BE CONFUSED

IS THREE A CROWD?

CAN WINDOWS PHONE CRASH THE

OS PARTY?

SPRINTWHY CUSTOMER

EXPERIENCE IS SO IMPORTANT

TO SPRINT

ISSUE 02 | Q4 2012

THE SMARTPHONERACE TO

THE BOTTOMCAN OEMS DIFFERENTIATE IN A WORLD

OF LOW-COST SMARTPHONES?

The science of customer experience WDS, A Xerox Company is trusted by many of the worlds best-known wireless brands to help assure the customer experience, improve future products and services and build long-term, profitable relationships with end-users.

Quite simply, we know what makes smartphones smarter and apps more appealing. Scan the QR code opposite and see how we do it. wds.co

The science of customer experience WDS, A Xerox Company is trusted by many of the worlds best-known wireless brands to help assure the customer experience, improve future products and services and build long-term, profitable relationships with end-users.

Quite simply, we know what makes smartphones smarter and apps more appealing. Scan the QR code opposite and see how we do it. wds.co

editorial

contents

One of the principle mistakes made by wireless organizations is to correlate satisfaction directly to loyalty. Although intrinsically linked, the two are very different and while the desire to make this link is understandable, its also dangerously ineffective.

In such a saturated market environment, one of the greatest challenges facing todays wireless brands is the ability to differentiate, as such the need to inspire loyalty through the customer experience has become all the more obvious. However, if the end-goal is to improve loyalty, are todays customer satisfaction methodologies even appropriate and is the industry making a link between satisfaction, loyalty and profitability that simply doesnt exist?

In this issue we investigate whether the industry is mistaking satisfaction for loyalty, highlight why many reward-based loyalty programs are only serving a very short-term purpose and outline how wireless brands can better guide investment to drive true brand loyalty. Its this type of insight that we believe creates actionable business intelligence for our customers and the wireless community at large.

In what is now our second edition of Experience, we also take a look at the smartphone race to the bottom and the challenges this presents to the top-end of the smartphone market; mobile operators migration to 4G technologies and the potential pitfalls that threaten to keep price as the primary differentiator; as well as an

in-depth analysis of the OS market economics and whether Windows Phone can break the current duopoly of Android and iOS?

We hope you enjoy the magazine and we welcome your feedback at experience@wds.co

David Ffoulkes-Jones CEO, WDS, A Xerox Company

06 Meet a WDS customer Deeanne King from Sprint talks about Sprints drive to improve loyalty and the challenges facing todays wireless carriers.

08 Build it and they will come... right? We ask whether technology and consumer expectations are aligned.

11 Race to the bottom Mature markets are now looking to drive growth in low-cost smartphones, but at what cost to brands at the top-end of the smartphone market?

16 Loyalty vs. SatisfactionIs the industry mistaking satisfaction for loyalty? What are the key differences and why does it matter?

21 Mobile patents landscapeIndustry analyst Chetan Sharma looks at the explosion of mobile patents and the power shift from Europe to the US.

26 Is three a crowd?Can new Windows Phone break the duopoly of iOS and Android?

Email : experience@wds.co twitter: @wdscompany Blog: blog.wds.co

Creating industry value through the customer experience

WDS, A Xerox Company is the trading name of Wireless Data Services Ltd. Registered in England and Wales (company number 01714719). Wireless Data Services Ltd., Alder Hills Park, 16 Alder Hills, Poole, Dorset, BH12 4AR, UK. VAT number GB 911330278 . WDS cannot accept (and hereby disclaims) any responsibility for loss or damage caused by errors or omissions. All rights reserved WDS, A Xerox Company 2012

26

1106 16

editorial

contents

One of the principle mistakes made by wireless organizations is to correlate satisfaction directly to loyalty. Although intrinsically linked, the two are very different and while the desire to make this link is understandable, its also dangerously ineffective.

In such a saturated market environment, one of the greatest challenges facing todays wireless brands is the ability to differentiate, as such the need to inspire loyalty through the customer experience has become all the more obvious. However, if the end-goal is to improve loyalty, are todays customer satisfaction methodologies even appropriate and is the industry making a link between satisfaction, loyalty and profitability that simply doesnt exist?

In this issue we investigate whether the industry is mistaking satisfaction for loyalty, highlight why many reward-based loyalty programs are only serving a very short-term purpose and outline how wireless brands can better guide investment to drive true brand loyalty. Its this type of insight that we believe creates actionable business intelligence for our customers and the wireless community at large.

In what is now our second edition of Experience, we also take a look at the smartphone race to the bottom and the challenges this presents to the top-end of the smartphone market; mobile operators migration to 4G technologies and the potential pitfalls that threaten to keep price as the primary differentiator; as well as an

in-depth analysis of the OS market economics and whether Windows Phone can break the current duopoly of Android and iOS?

We hope you enjoy the magazine and we welcome your feedback at experience@wds.co

David Ffoulkes-Jones CEO, WDS, A Xerox Company

06 Meet a WDS customer Deeanne King from Sprint talks about Sprints drive to improve loyalty and the challenges facing todays wireless carriers.

08 Build it and they will come... right? We ask whether technology and consumer expectations are aligned.

11 Race to the bottom Mature markets are now looking to drive growth in low-cost smartphones, but at what cost to brands at the top-end of the smartphone market?

16 Loyalty vs. SatisfactionIs the industry mistaking satisfaction for loyalty? What are the key differences and why does it matter?

21 Mobile patents landscapeIndustry analyst Chetan Sharma looks at the explosion of mobile patents and the power shift from Europe to the US.

26 Is three a crowd?Can new Windows Phone break the duopoly of iOS and Android?

Email : experience@wds.co twitter: @wdscompany Blog: blog.wds.co

Creating industry value through the customer experience

WDS, A Xerox Company is the trading name of Wireless Data Services Ltd. Registered in England and Wales (company number 01714719). Wireless Data Services Ltd., Alder Hills Park, 16 Alder Hills, Poole, Dorset, BH12 4AR, UK. VAT number GB 911330278 . WDS cannot accept (and hereby disclaims) any responsibility for loss or damage caused by errors or omissions. All rights reserved WDS, A Xerox Company 2012

26

1106 16

Serving over 56 million subscribers, Sprint is the third

largest wireless carrier in the United States (US). Founded

over a hundred years ago it has a strong pedigree of technical innovation, including the first

wireless 4G service from a national carrier in the US. It is also one of the industrys most

vocal advocates for the customer experience and winner of several

awards, including being ranked No. 1 for customer satisfaction

among US national carriers by the American Customer

Satisfaction Index.

WDS has been working with Sprint since 2011, helping the

carrier to implement a business change program designed

to deliver a more consistent customer experience. We

spoke with Deeanne King, Vice President, Customer

Management Operational Support about her role, Sprints drive to improve loyalty and the wider challenges facing todays

wireless carriers.

WDS: Sprint has been highly vocal in its support for a better customer experience. Why has customer experience become such an important topic for you?

DK: When Dan Hesse became CEO of Sprint in December 2007 he set three key priorities, these were Brand, Cash and Customer Experience. Prioritizing the customer experience at this level has helped us to achieve many of our key financial improvements and focus our efforts where it really counts.

WDS: And those improvements have come in the form of improved net additions and subscriber retention?

DK: Yes, absolutely. In Q1 2012 we achieved net adds of over a million subscribers for our sixth consecutive quarter, we were the only US carrier to do this. Our churn is also very stable. If you get the experience right, then the financial benefits will follow; our operating revenues have increased year-over-year for the seventh consecutive quarter (as at Q1 2012).

WDS: So, how do you define the Sprint Customer Experience?

DK: Being a Sprint customer should be easy. We work hard to make it easy for our customers to engage with Sprint services. They shouldnt have to expend a lot of effort trying to set up services or fix things if they go wrong.

WDS: Can you tell us about your role in achieving this ambition?

DK: As Vice President, Customer Management Operational Support, my role is to drive greater performance benefits into our Customer Operations division. This may come in the form of improved IT or better knowledge management to empower Customer Service Representatives (CSRs). My team also looks at analytics to identify call drivers and how those can be mitigated. I believe support interactions provide a great opportunity to better understand subscriber behavior and the customer experience. The CEO has put a laser light focus on finding out why consumers are calling, and everyone in the company has an incentive around reducing calls to care.

WDS: So theres a company-wide appreciation of how customer insight can deliver benefit across the Sprint business?

DK: Absolutely. We continually use customer insight to drive improvements. A great example is how we look to understand the typical requirements of a customer in the first 30 days of device ownership. This is a critical period in the customer lifecycle and if we can anticipate likely call drivers we can reduce the support burden and also improve the experience.

WDS has been a great partner in helping us to ensure we have the insight and the content we need to drive such improvements. The support content is

Meet a WDS customer Deeanne King,

Vice President, Customer Management Operational Support

shared across multiple channels to ensure we are setting up our customers for success at each step in a way that meets their individual preferences. This focus on optimizing the customer experience has seen Customer Satisfaction (CSAT) increase by 66% and FCR improve by 41% since 2008.

WDS: Most carriers are now starting to appreciate the importance of the retail touch point in shaping customer expectations and user behavior. How much do you relay care insight back into the retail environment?

DK: Each year we are consistently improving the level of integration with our retail partners and the knowledge we collect from the care channel is distributed across the board to create a consistent customer experience. WDS has been the corner stone for many of these improvements, making key knowledge available across the full spectrum of touch points, including retail, to both our staff and to customers.

Sprint wants to be the brand that does the right thing for the right reasons. This is one of the reasons why we continue to offer unlimited pricing; its hugely valued by our customers who appreciate the transparency and, as a benefit to Sprint, it reduces the volume of calls we take relating to overages and other billing concerns.

WDS: Can you give us an example of how youve improved the retail experience?

DK: Our Ready Now concept is well known in the industry. As part of the Ready Now initiative, customers are walked through their new device, shown how it works, how to set it up and how to get the most out of it for their everyday needs. Again, the initiative uses key customer insight and knowledge collected from Customer Operations so we can be sure where to focus our efforts.

This initiative has been very successful and as such we are now looking to implement a Virtual Ready Now for customers purchasing online or at third party retail outlets where the opportunity to provide a one on one discussion with a Sprint representative may not exist.

In addition, this content also helps us to deliver Sprint Zone which is an app that provides content and information about the customers account and device. We believe that this is a key channel for customers.

WDS: What are the key challenges to customer experience and retention anticipated by Sprint within the next couple of years?

DK: The market is highly competitive and heavily penetrated, its a switchers market and as such we really want to continue our focus on churn reduction by delivering a customer experience that is truly consistent across the entire lifecycle and across all touch points.

We will continue to focus on the network, not only in terms of upgrading and enhancing the infrastructure through the network program, but also to continue growth and increase our coverage within the US market. Ultimately we want to create value for our customers and offer the right products and services as well as a high performing and reliable network. Sprint wants to be the brand that does the right thing for the right reasons. This is one of the reasons why we continue to offer unlimited pricing; its hugely valued by our customers who appreciate the transparency and, as a benefit to Sprint, it reduces the volume of calls we take relating to overages and other billing concerns.

WDS: Churn reduction and loyalty go hand-in-hand. How do you define a loyal customer?

DK: If I think back through the history of wireless I would say that the industry was too focused on retaining customers in a way that wasnt always in the customers best interests. At Sprint we want to build a degree of loyalty that inspires brand advocacy. This can only be achieved by delivering on the Sprint promise. It isnt achieved through simple reward programs.

At Sprint we want to build a degree of loyalty that inspires brand advocacy. This can only be achieved by delivering on the Sprint promise. It isnt achieved through simple reward programs.

WDS has been working with Sprint since 2011 to deliver a business change program called Device Service Experience (DSE). DSEs goal is to support an increasingly intelligent device portfolio through the application of device knowledge and content across multiple channels and touch points. The result will be a highly consistent customer experience that in turn drives operational cost savings across the Sprint business.

This interview took place in July 2012.

Experience Issue 2 0706 Experience Issue 2

66%INCREASE IN CUSTOMER SATISFACTION

Serving over 56 million subscribers, Sprint is the third

largest wireless carrier in the United States (US). Founded

over a hundred years ago it has a strong pedigree of technical innovation, including the first

wireless 4G service from a national carrier in the US. It is also one of the industrys most

vocal advocates for the customer experience and winner of several

awards, including being ranked No. 1 for customer satisfaction

among US national carriers by the American Customer

Satisfaction Index.

WDS has been working with Sprint since 2011, helping the

carrier to implement a business change program designed

to deliver a more consistent customer experience. We

spoke with Deeanne King, Vice President, Customer

Management Operational Support about her role, Sprints drive to improve loyalty and the wider challenges facing todays

wireless carriers.

WDS: Sprint has been highly vocal in its support for a better customer experience. Why has customer experience become such an important topic for you?

DK: When Dan Hesse became CEO of Sprint in December 2007 he set three key priorities, these were Brand, Cash and Customer Experience. Prioritizing the customer experience at this level has helped us to achieve many of our key financial improvements and focus our efforts where it really counts.

WDS: And those improvements have come in the form of improved net additions and subscriber retention?

DK: Yes, absolutely. In Q1 2012 we achieved net adds of over a million subscribers for our sixth consecutive quarter, we were the only US carrier to do this. Our churn is also very stable. If you get the experience right, then the financial benefits will follow; our operating revenues have increased year-over-year for the seventh consecutive quarter (as at Q1 2012).

WDS: So, how do you define the Sprint Customer Experience?

DK: Being a Sprint customer should be easy. We work hard to make it easy for our customers to engage with Sprint services. They shouldnt have to expend a lot of effort trying to set up services or fix things if they go wrong.

WDS: Can you tell us about your role in achieving this ambition?

DK: As Vice President, Customer Management Operational Support, my role is to drive greater performance benefits into our Customer Operations division. This may come in the form of improved IT or better knowledge management to empower Customer Service Representatives (CSRs). My team also looks at analytics to identify call drivers and how those can be mitigated. I believe support interactions provide a great opportunity to better understand subscriber behavior and the customer experience. The CEO has put a laser light focus on finding out why consumers are calling, and everyone in the company has an incentive around reducing calls to care.

WDS: So theres a company-wide appreciation of how customer insight can deliver benefit across the Sprint business?

DK: Absolutely. We continually use customer insight to drive improvements. A great example is how we look to understand the typical requirements of a customer in the first 30 days of device ownership. This is a critical period in the customer lifecycle and if we can anticipate likely call drivers we can reduce the support burden and also improve the experience.

WDS has been a great partner in helping us to ensure we have the insight and the content we need to drive such improvements. The support content is

Meet a WDS customer Deeanne King,

Vice President, Customer Management Operational Support

shared across multiple channels to ensure we are setting up our customers for success at each step in a way that meets their individual preferences. This focus on optimizing the customer experience has seen Customer Satisfaction (CSAT) increase by 66% and FCR improve by 41% since 2008.

WDS: Most carriers are now starting to appreciate the importance of the retail touch point in shaping customer expectations and user behavior. How much do you relay care insight back into the retail environment?

DK: Each year we are consistently improving the level of integration with our retail partners and the knowledge we collect from the care channel is distributed across the board to create a consistent customer experience. WDS has been the corner stone for many of these improvements, making key knowledge available across the full spectrum of touch points, including retail, to both our staff and to customers.

Sprint wants to be the brand that does the right thing for the right reasons. This is one of the reasons why we continue to offer unlimited pricing; its hugely valued by our customers who appreciate the transparency and, as a benefit to Sprint, it reduces the volume of calls we take relating to overages and other billing concerns.

WDS: Can you give us an example of how youve improved the retail experience?

DK: Our Ready Now concept is well known in the industry. As part of the Ready Now initiative, customers are walked through their new device, shown how it works, how to set it up and how to get the most out of it for their everyday needs. Again, the initiative uses key customer insight and knowledge collected from Customer Operations so we can be sure where to focus our efforts.

This initiative has been very successful and as such we are now looking to implement a Virtual Ready Now for customers purchasing online or at third party retail outlets where the opportunity to provide a one on one discussion with a Sprint representative may not exist.

In addition, this content also helps us to deliver Sprint Zone which is an app that provides content and information about the customers account and device. We believe that this is a key channel for customers.

WDS: What are the key challenges to customer experience and retention anticipated by Sprint within the next couple of years?

DK: The market is highly competitive and heavily penetrated, its a switchers market and as such we really want to continue our focus on churn reduction by delivering a customer experience that is truly consistent across the entire lifecycle and across all touch points.

We will continue to focus on the network, not only in terms of upgrading and enhancing the infrastructure through the network program, but also to continue growth and increase our coverage within the US market. Ultimately we want to create value for our customers and offer the right products and services as well as a high performing and reliable network. Sprint wants to be the brand that does the right thing for the right reasons. This is one of the reasons why we continue to offer unlimited pricing; its hugely valued by our customers who appreciate the transparency and, as a benefit to Sprint, it reduces the volume of calls we take relating to overages and other billing concerns.

WDS: Churn reduction and loyalty go hand-in-hand. How do you define a loyal customer?

DK: If I think back through the history of wireless I would say that the industry was too focused on retaining customers in a way that wasnt always in the customers best interests. At Sprint we want to build a degree of loyalty that inspires brand advocacy. This can only be achieved by delivering on the Sprint promise. It isnt achieved through simple reward programs.

At Sprint we want to build a degree of loyalty that inspires brand advocacy. This can only be achieved by delivering on the Sprint promise. It isnt achieved through simple reward programs.

WDS has been working with Sprint since 2011 to deliver a business change program called Device Service Experience (DSE). DSEs goal is to support an increasingly intelligent device portfolio through the application of device knowledge and content across multiple channels and touch points. The result will be a highly consistent customer experience that in turn drives operational cost savings across the Sprint business.

This interview took place in July 2012.

Experience Issue 2 0706 Experience Issue 2

66%INCREASE IN CUSTOMER SATISFACTION

There is no doubt that operators played a key role in bridging the chasm and delivering the smartphone into the hands of the masses. Fundamentally it was the operators efforts that conceived the thriving digital ecosystem we have today. However in the midst of fresh revenue opportunities, have they been caught sleeping? Having invested in the network infrastructure only for OTT players to come and eat their lunch? After all despite growth in data consumption, are operators really seeing any incremental gains in revenue and loyalty?

For many operators, revenue has now become stagnant, or worse still has begun to shrink. Some of the worlds largest operators suffered from falling revenues, in Q2 2012, from -1.9% to -5.2% YoY.

Meanwhile, smaller more agile over-the-top (OTT) providers have made opportunist endeavors that leverage the operators network infrastructure in the provision of more compelling and lower cost VoIP

and IM services that rival operators more traditional voice and text services; not to mention delivering a host of cloud enabled services that consumers are growing thirsty for. As the market fragments, and customers devour a picknmix of services from a multitude of vendors, the customer experience is becoming increasingly dynamic and subsequently the operators customer relationships are becoming more fragile as their involvement and influence threatens to fade.

Treading Water

Network investment is a fundamental requirement in enabling the delivery of customer expectations, however, its not this element that will provide the necessary competitive advantage and inspire loyalty in this increasingly commoditized market.

Operators have concentrated solely upon building new networks for the explosion of data they expected to replace voice revenues and have thus been stuck treading water.

Experience Issue 2 0906 Experience issue 1

Build it and

they will come right?

The future sustainability of global operators, according to analysts and

business commentators, is dependent upon the uptake of new data services

and the expectation that data will fill the hole left behind by the downturn of voice

revenues. It is this market opportunity that fuelled investment into high speed 3G data

networks, and is today what drives the roll-out of 4G infrastructure in the latest

multi-million dollar investment on the operator road map.

After all, if you build it, they will come, right? Wrong. Of course, once one operator makes this move in any given market, the rest have

little choice but to follow, stripping any initial element of network differentiation

and competitive advantage. In essence, this relegates the network to the hygiene factor

level for consumers comparing operators with one another. Without a richer, more compelling

proposition, the consumer will always fall back to price as the primary differentiator.

Network investment is a fundamental requirement in enabling the delivery of customer expectations, however, its not this element that will provide the necessary competitive advantage and inspire loyalty in this increasingly commoditized market.

The industry is currently experiencing a challenging and turbulent period of change. Technologies have evolved rapidly, as have consumers expectations and behavior. This dynamic environment calls for a level of reactivity that large telco organizations are finding particularly difficult to manage, especially where inter-operational departments remain highly siloed.

There is no doubt that operators played a key role in bridging the chasm and delivering the smartphone into the hands of the masses. Fundamentally it was the operators efforts that conceived the thriving digital ecosystem we have today. However in the midst of fresh revenue opportunities, have they been caught sleeping? Having invested in the network infrastructure only for OTT players to come and eat their lunch? After all despite growth in data consumption, are operators really seeing any incremental gains in revenue and loyalty?

For many operators, revenue has now become stagnant, or worse still has begun to shrink. Some of the worlds largest operators suffered from falling revenues, in Q2 2012, from -1.9% to -5.2% YoY.

Meanwhile, smaller more agile over-the-top (OTT) providers have made opportunist endeavors that leverage the operators network infrastructure in the provision of more compelling and lower cost VoIP

and IM services that rival operators more traditional voice and text services; not to mention delivering a host of cloud enabled services that consumers are growing thirsty for. As the market fragments, and customers devour a picknmix of services from a multitude of vendors, the customer experience is becoming increasingly dynamic and subsequently the operators customer relationships are becoming more fragile as their involvement and influence threatens to fade.

Treading Water

Network investment is a fundamental requirement in enabling the delivery of customer expectations, however, its not this element that will provide the necessary competitive advantage and inspire loyalty in this increasingly commoditized market.

Operators have concentrated solely upon building new networks for the explosion of data they expected to replace voice revenues and have thus been stuck treading water.

Experience Issue 2 0906 Experience issue 1

Build it and

they will come right?

The future sustainability of global operators, according to analysts and

business commentators, is dependent upon the uptake of new data services

and the expectation that data will fill the hole left behind by the downturn of voice

revenues. It is this market opportunity that fuelled investment into high speed 3G data

networks, and is today what drives the roll-out of 4G infrastructure in the latest

multi-million dollar investment on the operator road map.

After all, if you build it, they will come, right? Wrong. Of course, once one operator makes this move in any given market, the rest have

little choice but to follow, stripping any initial element of network differentiation

and competitive advantage. In essence, this relegates the network to the hygiene factor

level for consumers comparing operators with one another. Without a richer, more compelling

proposition, the consumer will always fall back to price as the primary differentiator.

Network investment is a fundamental requirement in enabling the delivery of customer expectations, however, its not this element that will provide the necessary competitive advantage and inspire loyalty in this increasingly commoditized market.

The industry is currently experiencing a challenging and turbulent period of change. Technologies have evolved rapidly, as have consumers expectations and behavior. This dynamic environment calls for a level of reactivity that large telco organizations are finding particularly difficult to manage, especially where inter-operational departments remain highly siloed.

27 mi

llion

10 Experience Issue 2

Using unlimited tariffs to drive growth

was a great customer acquisition strategy; however its

created a generation of consumers that now associate operator value with

price. This leaves little room for growth or generation of new consumers.

Operators have struggled to engage properly with consumers and discover what it is they really want. What are consumers willing to pay more for?

The answer cannot and should not be network speed. The first to the 4G party have built it and subscribers have come, but will they stay once the playing field levels?

The battle for consumer loyalty

Competitive and social pressures are causing traditional revenue to shift to other parts of the ecosystem, namely to applications or content providers. The operator community is in need of a more sustainable business model that can successfully leverage its investments and ensure the operators themselves become the beneficiary of revenue streams supported / enabled by their [expensive] infrastructure.

According to research from Cisco IBSG, close to 50% of all mobile users viewed mobile operators as their preferred provider of mobile cloud services, dwarfing the less than 20% of respondents who preferred web companies.

The window of opportunity is far from closed here and with the next phase of the industrys evolution residing within the concept of a connected home, innovative differentiation in this arena may provide a feasible route to rebuilding valued customer relationships. Already, nearly 21% of US households, totaling about 27 million, have either an Internet-ready TV, game console, Blu-ray player, or smart set-top box connected to their home network, according to ABI Research.

With increasing price and commercial pressures, in a battle for customer loyalty against the ecosystems being built by companies such as Google, Microsoft and Apple; and against Over The Top (OTT) services that threaten to commoditize the operators core offer, operators must reverse the trend and win back customers loyalty based not on price, but service and brand value.

Optimizing the customer experience to achieve a compelling and sustainable competitive advantage

A focus on network speed stands only to further position the carrier as a pipe, a perception the operators are openly eager to avoid. Instead, their complex infrastructures must be synchronized across interdepartmental operations, to enable

a compelling, interlinking proposition that can successfully overcome the key challenges within todays market landscape.

In understanding the frequent interactions that its brand has with subscribers throughout the course of the customer lifecycle, operators can design a customer journey that is able to provide an experience that delivers to the brand vision so tightly, business strategy and customer experience become inseparable. It is a well thought-out customer experience program that can ensures the entire organization pulls in the same direction to deliver on the brand promise; building customer loyalty when its needed most by driving investment into key customer touch points that differentiate the brand.

A short term strategy based on continued technological iterations of the network, will not deliver long term value. Users must be able to build a connection with the

brand, not the network. Its the customer experience, knowing the customer,

delivering a great service, managing them in the way thats right for them

that will help achieve a sustainable competitive advantage

According to research from Cisco IBSG, close to 50%

of all mobile users viewed mobile operators as their preferred provider of mobile cloud services, dwarfing the less

than 20% of respondents who preferred web companies.

Nearly 21% of US households,

have either an Internet- ready TV, game console, Blu-ray player, or smart set-top box connected to their home network

Its not only emerging markets driving the growth of low cost smartphones. Mature markets too are showing keen interest as they look to slash their subsidy investments. But at what cost to brands at the top-end of the smartphone market?

THE SMARTPHONE

RACE TO THE BOTTOM

27 mi

llion

10 Experience Issue 2

Using unlimited tariffs to drive growth

was a great customer acquisition strategy; however its

created a generation of consumers that now associate operator value with

price. This leaves little room for growth or generation of new consumers.

Operators have struggled to engage properly with consumers and discover what it is they really want. What are consumers willing to pay more for?

The answer cannot and should not be network speed. The first to the 4G party have built it and subscribers have come, but will they stay once the playing field levels?

The battle for consumer loyalty

Competitive and social pressures are causing traditional revenue to shift to other parts of the ecosystem, namely to applications or content providers. The operator community is in need of a more sustainable business model that can successfully leverage its investments and ensure the operators themselves become the beneficiary of revenue streams supported / enabled by their [expensive] infrastructure.

According to research from Cisco IBSG, close to 50% of all mobile users viewed mobile operators as their preferred provider of mobile cloud services, dwarfing the less than 20% of respondents who preferred web companies.

The window of opportunity is far from closed here and with the next phase of the industrys evolution residing within the concept of a connected home, innovative differentiation in this arena may provide a feasible route to rebuilding valued customer relationships. Already, nearly 21% of US households, totaling about 27 million, have either an Internet-ready TV, game console, Blu-ray player, or smart set-top box connected to their home network, according to ABI Research.

With increasing price and commercial pressures, in a battle for customer loyalty against the ecosystems being built by companies such as Google, Microsoft and Apple; and against Over The Top (OTT) services that threaten to commoditize the operators core offer, operators must reverse the trend and win back customers loyalty based not on price, but service and brand value.

Optimizing the customer experience to achieve a compelling and sustainable competitive advantage

A focus on network speed stands only to further position the carrier as a pipe, a perception the operators are openly eager to avoid. Instead, their complex infrastructures must be synchronized across interdepartmental operations, to enable

a compelling, interlinking proposition that can successfully overcome the key challenges within todays market landscape.

In understanding the frequent interactions that its brand has with subscribers throughout the course of the customer lifecycle, operators can design a customer journey that is able to provide an experience that delivers to the brand vision so tightly, business strategy and customer experience become inseparable. It is a well thought-out customer experience program that can ensures the entire organization pulls in the same direction to deliver on the brand promise; building customer loyalty when its needed most by driving investment into key customer touch points that differentiate the brand.

A short term strategy based on continued technological iterations of the network, will not deliver long term value. Users must be able to build a connection with the

brand, not the network. Its the customer experience, knowing the customer,

delivering a great service, managing them in the way thats right for them

that will help achieve a sustainable competitive advantage

According to research from Cisco IBSG, close to 50%

of all mobile users viewed mobile operators as their preferred provider of mobile cloud services, dwarfing the less

than 20% of respondents who preferred web companies.

Nearly 21% of US households,

have either an Internet- ready TV, game console, Blu-ray player, or smart set-top box connected to their home network

Its not only emerging markets driving the growth of low cost smartphones. Mature markets too are showing keen interest as they look to slash their subsidy investments. But at what cost to brands at the top-end of the smartphone market?

THE SMARTPHONE

RACE TO THE BOTTOM

price points left consumers defaulting to the price tag when making purchasing decisions? If so, this is bad news for high-end device sales.

Consider an average consumer looking to purchase their first smartphone. Established requirements typically include the ability to take photos, access social media sites such as Facebook, send and receive email and perhaps join their friends and family in enjoying gameplay of popular titles such as Angry Birds or DrawSomething. In this instance, providing the device has a camera, a touchscreen and access to the Android Market, Windows Marketplace or Apples App Store it will meet all of the customers requirements.

Overwhelmed with choice, and unable to see the benefits delivered by improved hardware performance, the consumer will frequently default to price. Reliant on subsidies and price points to make their final decision it seems that for a large percentage of consumers, the value of higher end smartphone products is not currently understood nor appreciated.

Interestingly, Apple has managed to avoid this predicament entirely. With only one device in the market place, the iPhone, Apple maintains the perceived high-end value and prestige of the device through its positioning and status. Although there are iPhones available at lower price point, these are older generation iterations; therefore there is a clear difference in value for the consumer.

Continued

The new breed of smartphone Operating Systems have played a key role in democratizing the smartphone. Allowing manufacturers greater flexibility across reference designs and hardware specifications, platforms such as Android have helped to drive down unit costs and spur smartphone adoption across wider markets. But just how low can prices go?

This year, according to analysts, low-cost smartphones will replace high-end (and higher-margin) devices, as the primary growth engine for the industry. This race to the bottom offers a welcomed window of opportunity on a number of fronts for manufacturers and operators alike. In particular it opens up a number of emerging markets, where price sensitivity or local market regulation against device subsidies has made it difficult for many manufacturers to build significant market share or migrate featurephone customers onto a smartphone platform.

How low can they go?

Much of this charge is being led by Android, and more recently Windows Phone with the latest iterations being tuned to work as well as possible on devices with as little as 256MB of RAM. The Microsoft

platforms wider minimum hardware specifications were dramatically reduced at the beginning of 2012; now minimum processor requirements call for Qualcomms MSM7X27A S1 Snapdragon processors that can be clocked as low as 800MHz; this enables Windows Phone manufacturer partners to start competing at the lower-end of the market with devices such as the Nokia 610 which hit Indian shelves at an (unsubsidized) price of US$225. However, some maintain that this still isnt low enough.

According to the India Smartphone Outlook for 2012 report released by Convergence Catalyst, India is expected to witness 100% growth in 2012. The Indian market has therefore become a prime target for manufacturers looking for growth opportunities and price has fast become the primary battlefront. In a bid to increase its market share, RIM recently implemented a discount strategy and some of its devices are now selling for as little as US$150 (unsubsidized) from online Indian retail outlets.

However, to put this into context, local Indian mobile operator Videocon is currently selling its own branded V7400 Android device for US$72 (again unsubsidized)! These market pressures are driving profound efficiencies throughout the value chain, lowering price points and ultimately helping manufacturers to nurture new market opportunities and drive the smartphone into the hands of the next billion users.

The race is on worldwide

But its not just emerging markets who are keenly watching the race to the bottom. For operators in many mature markets the growth of the entry-level smartphone category represents a welcome opportunity to relieve some of the cost pressures associated with heavy subsidy investments. Many Tier One operators routinely spend over US$1.5bn a quarter on devices, recouping less than half of that through sales revenue because of the large subsidy that has to be applied to lower the price point to an acceptable level.

As part of an operators subscriber acquisition and retention costs its a line item that many are looking to control in a bid to improve profit margins. Lower-cost devices offer a fast-track to this, offsetting more expensive products such as the iPhone which typically requires an average subsidy of around US$400 per device.

But does this potential reliance on entry-level devices actually threaten the wider value of more established OEM brands looking to maintain their margins on more expensive products?

An evolving market place

As we move away from the traditional landscape of non-smartphone and smartphone products, to a monotonous mass of smartphone and better smartphone products, how are value perceptions at the high-end holding up?

Take, for example Motorola, Samsung and HTC. Like many wireless OEMs, each occupies both ends of the smartphone pricing spectrum with product portfolios that span both lower and higher tier market segments. However, on the surface, these devices often look identical, with similar form factors, they run the same (or similar) OS, and they each tick the same boxes for functionality. Frequently the only real difference comes in the form of incremental processor speeds, camera resolution or graphical performance.

But are hardware specifications really appreciated by the average consumer and has the lack of clear differentiation across

Emerging wireless

markets have becom

e

a prime target for

manufacturers

looking for growth

opportunities

and price has fast

become the

primary battlefront.

12 Experience Issue 2

For a large

percentage of

consumers, the

value of higher

end smartphone

products is not

currently understood

nor appreciated

Experience Issue 2 13

price points left consumers defaulting to the price tag when making purchasing decisions? If so, this is bad news for high-end device sales.

Consider an average consumer looking to purchase their first smartphone. Established requirements typically include the ability to take photos, access social media sites such as Facebook, send and receive email and perhaps join their friends and family in enjoying gameplay of popular titles such as Angry Birds or DrawSomething. In this instance, providing the device has a camera, a touchscreen and access to the Android Market, Windows Marketplace or Apples App Store it will meet all of the customers requirements.

Overwhelmed with choice, and unable to see the benefits delivered by improved hardware performance, the consumer will frequently default to price. Reliant on subsidies and price points to make their final decision it seems that for a large percentage of consumers, the value of higher end smartphone products is not currently understood nor appreciated.

Interestingly, Apple has managed to avoid this predicament entirely. With only one device in the market place, the iPhone, Apple maintains the perceived high-end value and prestige of the device through its positioning and status. Although there are iPhones available at lower price point, these are older generation iterations; therefore there is a clear difference in value for the consumer.

Continued

The new breed of smartphone Operating Systems have played a key role in democratizing the smartphone. Allowing manufacturers greater flexibility across reference designs and hardware specifications, platforms such as Android have helped to drive down unit costs and spur smartphone adoption across wider markets. But just how low can prices go?

This year, according to analysts, low-cost smartphones will replace high-end (and higher-margin) devices, as the primary growth engine for the industry. This race to the bottom offers a welcomed window of opportunity on a number of fronts for manufacturers and operators alike. In particular it opens up a number of emerging markets, where price sensitivity or local market regulation against device subsidies has made it difficult for many manufacturers to build significant market share or migrate featurephone customers onto a smartphone platform.

How low can they go?

Much of this charge is being led by Android, and more recently Windows Phone with the latest iterations being tuned to work as well as possible on devices with as little as 256MB of RAM. The Microsoft

platforms wider minimum hardware specifications were dramatically reduced at the beginning of 2012; now minimum processor requirements call for Qualcomms MSM7X27A S1 Snapdragon processors that can be clocked as low as 800MHz; this enables Windows Phone manufacturer partners to start competing at the lower-end of the market with devices such as the Nokia 610 which hit Indian shelves at an (unsubsidized) price of US$225. However, some maintain that this still isnt low enough.

According to the India Smartphone Outlook for 2012 report released by Convergence Catalyst, India is expected to witness 100% growth in 2012. The Indian market has therefore become a prime target for manufacturers looking for growth opportunities and price has fast become the primary battlefront. In a bid to increase its market share, RIM recently implemented a discount strategy and some of its devices are now selling for as little as US$150 (unsubsidized) from online Indian retail outlets.

However, to put this into context, local Indian mobile operator Videocon is currently selling its own branded V7400 Android device for US$72 (again unsubsidized)! These market pressures are driving profound efficiencies throughout the value chain, lowering price points and ultimately helping manufacturers to nurture new market opportunities and drive the smartphone into the hands of the next billion users.

The race is on worldwide

But its not just emerging markets who are keenly watching the race to the bottom. For operators in many mature markets the growth of the entry-level smartphone category represents a welcome opportunity to relieve some of the cost pressures associated with heavy subsidy investments. Many Tier One operators routinely spend over US$1.5bn a quarter on devices, recouping less than half of that through sales revenue because of the large subsidy that has to be applied to lower the price point to an acceptable level.

As part of an operators subscriber acquisition and retention costs its a line item that many are looking to control in a bid to improve profit margins. Lower-cost devices offer a fast-track to this, offsetting more expensive products such as the iPhone which typically requires an average subsidy of around US$400 per device.

But does this potential reliance on entry-level devices actually threaten the wider value of more established OEM brands looking to maintain their margins on more expensive products?

An evolving market place

As we move away from the traditional landscape of non-smartphone and smartphone products, to a monotonous mass of smartphone and better smartphone products, how are value perceptions at the high-end holding up?

Take, for example Motorola, Samsung and HTC. Like many wireless OEMs, each occupies both ends of the smartphone pricing spectrum with product portfolios that span both lower and higher tier market segments. However, on the surface, these devices often look identical, with similar form factors, they run the same (or similar) OS, and they each tick the same boxes for functionality. Frequently the only real difference comes in the form of incremental processor speeds, camera resolution or graphical performance.

But are hardware specifications really appreciated by the average consumer and has the lack of clear differentiation across

Emerging wireless

markets have becom

e

a prime target for

manufacturers

looking for growth

opportunities

and price has fast

become the

primary battlefront.

12 Experience Issue 2

For a large

percentage of

consumers, the

value of higher

end smartphone

products is not

currently understood

nor appreciated

Experience Issue 2 13

Restoring value perceptions for high-end devices

Value statements for higher tier devices need to go beyond incremental performance enhancements. While quad-core processing will inevitably deliver a slicker experience, this value can only really be appreciated once ownership and usage of the device has begun; in most cases its not going to be on the consumers list of established requirements while in store shopping for a new device. OEMs need to deliver clear differential value that resonates with consumers in order to maintain the higher-end of their device portfolios.

Walk into any mobile retail outlet and the smartphones on offer will fall into two camps; the anonymous black touchscreen or the Blackberry / looks like a BlackBerry but

isnt Qwerty. The problem is compounded with the screens switched off, devoid of any icons or branding to help in the identification process. While form factor must always consider technical limitations, that shouldnt stop experimentation in industrial design, should it?

Gone are the days where devices were designed around specific demographics and use cases. At one point OEM brands were part built upon specific form factors. Wanted a flip phone, buy a Motorola. A candybar, buy a Nokia. A Qwerty, buy a BlackBerry.

Today, hardware is homogenizing, the smartphone parts-bin appears to be shared out across brands, with screens, keys, processors and more becoming interchangeable between manufacturers. There is no doubt that this standardization is helping to drive cost efficiencies in a bid to achieve lower price points and enable manufacturers to capitalize on high growth emerging markets, however, as a result of this trend, there has been a seismic shift in brand loyalty, moving away from hardware and over to software and service providers.

The speed of innovation has reached a tipping point, resulting in OEMs increasingly occupying the same all things to all men proposition. No longer do consumers turn to a specific OEM to cater to their established requirements, be it design or functionality.

Instead, smartphone hardware hashomogenized to form a standard black slab, capable of everything but nothing specifically well, so as not to narrow the target market.

For manufacturers looking to add real value that can be both understood and appreciated by the average consumer, perhaps a more likely answer may come at the service level. There is a glimmer of more promising activity on this front.

Already we are starting to see Samsung drawing down on its wider product portfolio to offer value in the form of a connected home. In addition, HTC is refocusing its Sense UI initiative. Partnership and acquisition activity with music audio brand Beats and music streaming service MOG, alongside Dropbox integration could help evolve Sense into a truly differentiated platform of value adding services. The development and momentum of this trend will be intrinsic to the retention of brand value for the industrys most popular mobile handset OEMs as the race to the bottom really starts to set in.

For consumers navigating their way through a market offering an extensive choice of smartphone product, higher end options need to be better differentiated with clear justification of price points

through relevant, understood and widely appreciated value adds. The challenge will be in communicating this value so that it is understood at the point of sale, during the purchasing decision. A device may offer a best in class experience but unless the consumer has used the device or can clearly see a feature-benefit, manufacturers may find it increasingly difficult to build loyalty not only to their high-end, high-margin devices but to the brand itself

Were now in the age of the customer where weve seen the balance of power shift from brands to consumers. This means that wireless companies must work harder to engage customers and earn their continued loyalty. To do this, you need to live up to your brand promise by delivering an exceptional customer experience.

The challenge for the industry is delivering excellent customer care that ensures that all touchpoints throughout the customer lifecycle meet company goals for the quality of experience. This is a major issue for wireless companies because often the outsourcing model for customer care is focused solely on transactions how many, how fast, at what cost. Traditional models were not designed around the business process of the total customer experience. Because of this, many customer care outsourcing solutions cant deliver on todays customer-centric business objectives.

Xerox provides wireless customers with the ability to manage and optimize all the touchpoints that impact the customer experience. This aligns our relationship with our customers business goals and results in a mutually beneficial partnership.

For instance, Xerox helped one of its wireless communications customers address low customer satisfaction. Customers were particularly unhappy with care received via social media. With a comprehensive social Customer Relationship Management (CRM) strategy mapped to the wireless providers business objectives, Xerox helped the company significantly improve customer satisfaction, turning customers into brand advocates and winning a JD Powers Award for Best Customer Service.

Another wireless company was delivering a poor customer experience and looking to improve it. At the same time, a major acquisition meant a dramatic increase in volume and complexity. Xerox helped this customer not only improve customer satisfaction and quality, but process more volume while saving US$28 million annually in support costs. This customer is now number one in the industry for quality of service, as ranked by an independent third party.

Rather than resting on its laurels, Xerox is taking their commitment to the wireless industry a step further by adding deeper domain expertise. Our acquisition of WDS adds deep mobility expertise, tools, and

best practice-processes to enhance and scale our customer care outsourcing offering.

What does this mean for Xerox and WDS current and future wireless customers? First, it delivers unprecedented expertise and breadth of end-user lifecycle consulting and solutions for the mobility market. Customers gain more value from their partnership with WDS and Xerox, as well as a closer alignment to their business requirements and competitive advantage in a highly competitive market. Second, with access to Xeroxs renowned research and development centers, WDS can speed innovation and enhancements to its suite of solutions.

Together, our goal is to become the worlds leading wireless-focused solutions provider offering high-value, high-impact solutions and services to our clients across the wireless ecosystem. The bottom line for our customers is the ability to raise the bar on the customer experience, which in turn earns greater loyalty, turns customers into brand advocates, garners a larger share of wallet, and differentiates the brand in the marketplace

higher end options need to be better differentiated with clear justification of price points through relevant, understood and widely appreciated value adds

OEMs need to

deliver clear

differential value

that resonates with

consumers in order

to maintain the

higher-end of their

device portfolios.

14 Experience Issue 2

The New Customer Care Mandate: Manage all Customer Experience Touchpoints

Chris TranquillGroup President / SVP Telecommunications and Technology Group

Restoring value perceptions for high-end devices

Value statements for higher tier devices need to go beyond incremental performance enhancements. While quad-core processing will inevitably deliver a slicker experience, this value can only really be appreciated once ownership and usage of the device has begun; in most cases its not going to be on the consumers list of established requirements while in store shopping for a new device. OEMs need to deliver clear differential value that resonates with consumers in order to maintain the higher-end of their device portfolios.

Walk into any mobile retail outlet and the smartphones on offer will fall into two camps; the anonymous black touchscreen or the Blackberry / looks like a BlackBerry but

isnt Qwerty. The problem is compounded with the screens switched off, devoid of any icons or branding to help in the identification process. While form factor must always consider technical limitations, that shouldnt stop experimentation in industrial design, should it?

Gone are the days where devices were designed around specific demographics and use cases. At one point OEM brands were part built upon specific form factors. Wanted a flip phone, buy a Motorola. A candybar, buy a Nokia. A Qwerty, buy a BlackBerry.

Today, hardware is homogenizing, the smartphone parts-bin appears to be shared out across brands, with screens, keys, processors and more becoming interchangeable between manufacturers. There is no doubt that this standardization is helping to drive cost efficiencies in a bid to achieve lower price points and enable manufacturers to capitalize on high growth emerging markets, however, as a result of this trend, there has been a seismic shift in brand loyalty, moving away from hardware and over to software and service providers.

The speed of innovation has reached a tipping point, resulting in OEMs increasingly occupying the same all things to all men proposition. No longer do consumers turn to a specific OEM to cater to their established requirements, be it design or functionality.

Instead, smartphone hardware hashomogenized to form a standard black slab, capable of everything but nothing specifically well, so as not to narrow the target market.

For manufacturers looking to add real value that can be both understood and appreciated by the average consumer, perhaps a more likely answer may come at the service level. There is a glimmer of more promising activity on this front.

Already we are starting to see Samsung drawing down on its wider product portfolio to offer value in the form of a connected home. In addition, HTC is refocusing its Sense UI initiative. Partnership and acquisition activity with music audio brand Beats and music streaming service MOG, alongside Dropbox integration could help evolve Sense into a truly differentiated platform of value adding services. The development and momentum of this trend will be intrinsic to the retention of brand value for the industrys most popular mobile handset OEMs as the race to the bottom really starts to set in.

For consumers navigating their way through a market offering an extensive choice of smartphone product, higher end options need to be better differentiated with clear justification of price points

through relevant, understood and widely appreciated value adds. The challenge will be in communicating this value so that it is understood at the point of sale, during the purchasing decision. A device may offer a best in class experience but unless the consumer has used the device or can clearly see a feature-benefit, manufacturers may find it increasingly difficult to build loyalty not only to their high-end, high-margin devices but to the brand itself

Were now in the age of the customer where weve seen the balance of power shift from brands to consumers. This means that wireless companies must work harder to engage customers and earn their continued loyalty. To do this, you need to live up to your brand promise by delivering an exceptional customer experience.

The challenge for the industry is delivering excellent customer care that ensures that all touchpoints throughout the customer lifecycle meet company goals for the quality of experience. This is a major issue for wireless companies because often the outsourcing model for customer care is focused solely on transactions how many, how fast, at what cost. Traditional models were not designed around the business process of the total customer experience. Because of this, many customer care outsourcing solutions cant deliver on todays customer-centric business objectives.

Xerox provides wireless customers with the ability to manage and optimize all the touchpoints that impact the customer experience. This aligns our relationship with our customers business goals and results in a mutually beneficial partnership.

For instance, Xerox helped one of its wireless communications customers address low customer satisfaction. Customers were particularly unhappy with care received via social media. With a comprehensive social Customer Relationship Management (CRM) strategy mapped to the wireless providers business objectives, Xerox helped the company significantly improve customer satisfaction, turning customers into brand advocates and winning a JD Powers Award for Best Customer Service.

Another wireless company was delivering a poor customer experience and looking to improve it. At the same time, a major acquisition meant a dramatic increase in volume and complexity. Xerox helped this customer not only improve customer satisfaction and quality, but process more volume while saving US$28 million annually in support costs. This customer is now number one in the industry for quality of service, as ranked by an independent third party.

Rather than resting on its laurels, Xerox is taking their commitment to the wireless industry a step further by adding deeper domain expertise. Our acquisition of WDS adds deep mobility expertise, tools, and

best practice-processes to enhance and scale our customer care outsourcing offering.

What does this mean for Xerox and WDS current and future wireless customers? First, it delivers unprecedented expertise and breadth of end-user lifecycle consulting and solutions for the mobility market. Customers gain more value from their partnership with WDS and Xerox, as well as a closer alignment to their business requirements and competitive advantage in a highly competitive market. Second, with access to Xeroxs renowned research and development centers, WDS can speed innovation and enhancements to its suite of solutions.

Together, our goal is to become the worlds leading wireless-focused solutions provider offering high-value, high-impact solutions and services to our clients across the wireless ecosystem. The bottom line for our customers is the ability to raise the bar on the customer experience, which in turn earns greater loyalty, turns customers into brand advocates, garners a larger share of wallet, and differentiates the brand in the marketplace

higher end options need to be better differentiated with clear justification of price points through relevant, understood and widely appreciated value adds

OEMs need to

deliver clear

differential value

that resonates with

consumers in order

to maintain the

higher-end of their

device portfolios.

14 Experience Issue 2

The New Customer Care Mandate: Manage all Customer Experience Touchpoints

Chris TranquillGroup President / SVP Telecommunications and Technology Group

16 Experience Issue 2 Experience Issue 2 17

After several years of strategy built around subscriber acquisition, large parts of the wireless industry are now turning their attention to subscriber retention. For many, most notably mobile operators, this is proving difficult. Those same subscriber acquisition strategies typically comprised price promotions, discounted (and often free) devices and flexible contracts and price plans. While proving successful in lowering barriers to entry for consumers looking to benefit from the smartphone revolution, they have seemingly created a generation of consumers that associate service provider value with price. A very clear lesson is being learnt; if you acquire a subscriber on price, chances are youll lose him on price.

As a result, several markets around the world continue to suffer double digit churn rates. In many cases this has been driven by high levels of pre-paid subscribers, conditioned into shopping for the best deal on a regular basis and continually jumping between networks. In other markets, where contract-based plans still account for more than 50% of subscribers, churn continues to

be driven through price-wars and discounted devices. But regardless of the drivers for churn, one thing remains clear; loyalty to a mobile operator requires breaking the continued cycle of service commoditization and instead, building value-based relationships with consumers. It means evolving the price-driven relationship into something a little less tangible, but much more emotional and, ultimately, valuable.

Does tenure indicate loyalty?

One of the principle mistakes made by wireless organizations is to correlate satisfaction directly to loyalty. The two are very different.

Customer satisfaction is just that, a customers degree of satisfaction at any given time in the customer lifecycle. Often measured through Net Promoter Score (NPS), customer satisfaction recognizes and measures whether the customers expectations have been met. As a key metric measured by nearly every wireless brand on the planet the temptation is to believe that a high NPS leads directly to improved loyalty and profitability per user. While the desire to make this link is understandable, its also dangerously ineffective.

While a measure of satisfaction may correlate to tenure it doesnt imply loyalty. Customer segments with high customer satisfaction scores may churn without warning or reason. Satisfaction scores are merely a window in time, often measured immediately after an interaction with customer care or an other front-office function. Satisfaction, after all, is the result of a process. Expose a seemingly satisfied customer to a more compelling deal in the subsequent weeks

(perhaps a lower tariff or a free device) and they may happily churn.

This is often because their relationship was developed on the price-based expectations set at the time of their acquisition. The wireless brand has been unable to develop the relationship any further; there is no emotional investment or connection to the brand and the consumer continues to associate value with price.

As a Key Performance Indicator (KPI), customer satisfaction has gained global popularity across the wireless industry, with hundreds of thousands of employees now being measured by customer satisfaction or customer retention metrics. This is no bad thing of course. When you witness how the industry struggles to differentiate on its tangible assets, it makes the need to inspire loyalty through the customer experience all the more obvious. But if the end-goal is to improve loyalty, are todays customer satisfaction methodologies even appropriate and is the industry making a link between satisfaction, loyalty and profitability that simply doesnt exist?

SATISFACTION

L O Y A L T Y

One and the same?

Acquire me on price, and youll lose me on price

Continued

Loyalty is expressed through a degree of resistance to competitive price-based offers and of forgiveness towards the brand when service dips below expectations.

16 Experience Issue 2 Experience Issue 2 17

After several years of strategy built around subscriber acquisition, large parts of the wireless industry are now turning their attention to subscriber retention. For many, most notably mobile operators, this is proving difficult. Those same subscriber acquisition strategies typically comprised price promotions, discounted (and often free) devices and flexible contracts and price plans. While proving successful in lowering barriers to entry for consumers looking to benefit from the smartphone revolution, they have seemingly created a generation of consumers that associate service provider value with price. A very clear lesson is being learnt; if you acquire a subscriber on price, chances are youll lose him on price.

As a result, several markets around the world continue to suffer double digit churn rates. In many cases this has been driven by high levels of pre-paid subscribers, conditioned into shopping for the best deal on a regular basis and continually jumping between networks. In other markets, where contract-based plans still account for more than 50% of subscribers, churn continues to

be driven through price-wars and discounted devices. But regardless of the drivers for churn, one thing remains clear; loyalty to a mobile operator requires breaking the continued cycle of service commoditization and instead, building value-based relationships with consumers. It means evolving the price-driven relationship into something a little less tangible, but much more emotional and, ultimately, valuable.

Does tenure indicate loyalty?

One of the principle mistakes made by wireless organizations is to correlate satisfaction directly to loyalty. The two are very different.

Customer satisfaction is just that, a customers degree of satisfaction at any given time in the customer lifecycle. Often measured through Net Promoter Score (NPS), customer satisfaction recognizes and measures whether the customers expectations have been met. As a key metric measured by nearly every wireless brand on the planet the temptation is to believe that a high NPS leads directly to improved loyalty and profitability per user. While the desire to make this link is understandable, its also dangerously ineffective.

While a measure of satisfaction may correlate to tenure it doesnt imply loyalty. Customer segments with high customer satisfaction scores may churn without warning or reason. Satisfaction scores are merely a window in time, often measured immediately after an interaction with customer care or an other front-office function. Satisfaction, after all, is the result of a process. Expose a seemingly satisfied customer to a more compelling deal in the subsequent weeks

(perhaps a lower tariff or a free device) and they may happily churn.

This is often because their relationship was developed on the price-based expectations set at the time of their acquisition. The wireless brand has been unable to develop the relationship any further; there is no emotional investment or connection to the brand and the consumer continues to associate value with price.

As a Key Performance Indicator (KPI), customer satisfaction has gained global popularity across the wireless industry, with hundreds of thousands of employees now being measured by customer satisfaction or customer retention metrics. This is no bad thing of course. When you witness how the industry struggles to differentiate on its tangible assets, it makes the need to inspire loyalty through the customer experience all the more obvious. But if the end-goal is to improve loyalty, are todays customer satisfaction methodologies even appropriate and is the industry making a link between satisfaction, loyalty and profitability that simply doesnt exist?

SATISFACTION

L O Y A L T Y

One and the same?

Acquire me on price, and youll lose me on price

Continued

Loyalty is expressed through a degree of resistance to competitive price-based offers and of forgiveness towards the brand when service dips below expectations.

18 Experience Issue 2

The true value of loyalty

This then, marks the value of a truly loyal customer. Loyalty is expressed through a degree of resistance to competitive price-based offers and of forgiveness towards the brand when service dips below expectations. Loyal customers may even continue to purchase from a brand after a bad experience or go out of their way to continue a relationship.

Think, for example, of the famous Apple Antennagate controversy. The brand equity, accumulated over time, across a base of highly loyal followers almost certainly helped Apple come out of the affair relatively unscathed; at least to a lesser extent than a rival manufacturer may have fared. Of course, theres always a tipping point at which loyalty has to concede to convenience, but that point is entirely flexible and a measure of the strength of the relationship.

Demonstrations such as this show clearly that unlike satisfaction, loyalty does not occur spontaneously following a process. It is built over time and following multiple consumer interactions with multiple processes; from the retail experience, through quality of service on the network and post-sale care and maintenance. To this end loyal customers are highly prized, typically delivering far greater Customer Lifetime Value (CLV).

This increase in CLV comes from more than increased tenure (after all, a satisfied customer may stay on the network, even

an unsatisfied customer may stay through inertia). Loyal customers exhibit several additional characteristics beyond a greater resistance to churn, including advocacy levels that can help to drive referrals (helping to reduce subscriber acquisition costs) and a higher propensity to buy additional products and services from the same provider. Anecdotally, many wireless brands have also found their keenest and most loyal

advocates actively participating on official self-care forums to support other end-users. Activity such as this, coupled with a more predictable and stable retention rate, can have an immediate impact on the profitability of a brands end-user segments.

Satisfaction has become a prerequisite

This is not to say that satisfaction and loyalty are not linked (loyalty absolutely requires a degree of

satisfaction). Nor is it to undermine the importance of customer satisfaction. Customer satisfaction has become a prerequisite for doing business and almost all studies agree (as do most mobile operators) that there is a link between customer satisfaction scores and retention rates. The point is, without the associated loyalty, the stability of that retention rate cant be guaranteed in the event of a compelling competitive offer. Tenure is no indicator of loyalty. Just because a customer has been a customer for five years, it doesnt necessarily mean hes loyal or any less likely to be tempted away. It is only true loyalty that protects against this uncertainty.

When is a loyalty program not a loyalty program?

The problem is exacerbated by the insistence of many wireless brands to fight churn with the very weapon that helped cause the problem; price promotions.

So called loyalty programs are often little more than reward programs. Industry Analyst

Helen Karapandi from Analysis Mason supports this logic, identifying that loyalty is not just about specific programs, but also about basic hygiene factors1.

Indeed, in many cases its misleading to even associate these programs with loyalty. Often they have more to do with basic retention (through rewards), often achieving little more than financially rewarding established behavior. A study by Nokia Siemens Networks suggesting that 33% of decisions to churn are based on the end-user being exposed to a competitive offer, such reward-based programs often serve a very short-term purpose; acting only as a defense against competing offers.

Consider the two principal variables typically used by marketing functions to guide investment in loyalty and retention programs; value and risk of churn. In most cases, budget (in the form of device upgrades, rebates and price concessions) is directed toward high value customers with a high risk of churn (this risk of churn is measured through a combination of NPS, tenure, interaction with care and many other variables). See Fig 1.

One cannot argue with this logic and this is, of course, the most appropriate quadrant for investing in retention; the churn risk must be mitigated quickly. However, retention and reward programs are often homogenized and simply rewarding this quadrant with financial incentives serves only to reward a systemic failure in the customer experience. If the customer is a churn risk, then either the expectations of the customer segment have not been met or the relationship hasnt been developed sufficiently enough to protect the segment from competitive price-based offers. Can we really be sure that this investment is actually going to move a large part of that segment into the bottom right of the quadrant where churn risk is no longer an issue? Often relied upon as the sole weapon against churn, these programs risk creating a vicious circle that again creates a price-based connection between service provider and end-user that is broken only by a competitive, and more compelling, rewards program.

Unfortunately, and unlike many other industries, loyalty often goes unrewarded. This follows the assumption that the longer a customer has stayed within the network the less likely they are to churn. We know, however, that tenure is no indication of loyalty and that while this assumption may apply to a collective (considering customer inertia), it doesnt allow for segmentation to dig deep enough to identify those customers who remain within the network through loyalty. Consider the segment defined in the quadrant (Fig 1.) as low-value but low-risk of churn. They too deliver a medium CLV comparable to that delivered by the high-value, high churn-risk segment typically targeted by retention programs. Are they any less valuable? Indeed, perhaps they display the early signs of loyalty that will shift them towards the bottom right of the quadrant (through increased spend) and deliver additional value through advocacy.

The value-based relationship

Wireless brands almost certainly understand the logic of this issue, and the value of creating truly loyal customers. However, realigning the vision and separating customer satisfaction from customer loyalty requires a major business transformation initiative. Internal functions have been built around satisfaction measures and while these remain valid, their limitations must also be acknowledged.

Value must also be better defined. What is value and how is it measured? Should customer segment value be based on revenue per user, margin or even advocacy? Perhaps its a blend of all three or perhaps different value metrics should be associated to different customer segments.

Fundamentally, we must acknowledge that loyalty cannot be bought. Unfortunately, understanding the true nature of loyalty has been lost in the semantics of our industry. It is too often confused with satisfaction and too often we see loyalty programs are driven not by a desire to engender loyalty but to retain satisfaction.

Loyalty is not the product of a single experience, and therefore cant be measured through single-point methodologies such as NPS alone. While it is convenient to make the immediate association between process-driven NPS and Customer Satisfaction scores with loyalty, the reality is that true loyalty and all of its defining characteristics, is developed over time and is the result of a sustained level of interaction designed to deliver on the original brand promise. It is the customer experience, and how it is controlled, that allows this to happen, ensuring expectations are met (and exceeded) and that the original proposition remains compelling enough to retain the customer as part of a value-based relationship and not just because theres a free device or a discount on offer

Loyalty does not occur spontaneously and it cannot be bought. It is built over time and is the result of a multiple interactions between the consumer and service provider.

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HighCLV

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Loyalty programs are not a panacea for reducing churn: operators need to make sure the basics, such as customer satisfaction and pricing, are right before loyalty programs will have an impact. Helen Karapandi, Analysis Mason

Fig 1.

Experience Issue 2 19

1http://www.analysysmason.com/About-Us/News/Insight/Insight_Mobile_loyalty_Oct2011/

18 Experience Issue 2

The true value of loyalty

This then, marks the value of a truly loyal customer. Loyalty is expressed through a degree of resistance to competitive price-based offers and of forgiveness towards the brand when service dips below expectations. Loyal customers may even continue to purchase from a brand after a bad experience or go out of their way to continue a relationship.

Think, for example, of the famous Apple Antennagate controversy. The brand equity, accumulated over time, across a base of highly loyal followers almost certainly helped Apple come out of the affair relatively unscathed; at least to a lesser extent than a rival manufacturer may have fared. Of course, theres always a tipping point at which loyalty has to concede to convenience, but that point is entirely flexible and a measure of the strength of the relationship.

Demonstrations such as this show clearly that unlike satisfaction, loyalty does not occur spontaneously following a process. It is built over time and following multiple consumer interactions with multiple processes; from the retail experience, through quality of service on the network and post-sale care and maintenance. To this end loyal customers are highly prized, typically delivering far greater Customer Lifetime Value (CLV).

This increase in CLV comes from more than increased tenure (after all, a satisfied customer may stay on the network, even

an unsatisfied customer may stay through inertia). Loyal customers exhibit several additional characteristics beyond a greater resistance to churn, including advocacy levels that can help to drive referrals (helping to reduce subscriber acquisition costs) and a higher propensity to buy additional products and services from the same provider. Anecdotally, many wireless brands have also found their keenest and most loyal

advocates actively participating on official self-care forums to support other end-users. Activity such as this, coupled with a more predictable and stable retention rate, can have an immediate impact on the profitability of a brands end-user segments.

Satisfaction has become a prerequisite

This is not to say that satisfaction and loyalty are not linked (loyalty absolutely requires a degree of

satisfaction). Nor is it to undermine the importance of customer satisfaction. Customer satisfaction has become a prerequisite for doing business and almost all studies agree (as do most mobile operators) that there is a link between customer satisfaction scores and retention rates. The point is, without the associated loyalty, the stability of that retention rate cant be guaranteed in the event of a compelling competitive offer. Tenure is no indicator of loyalty. Just because a customer has been a customer for five years, it doesnt necessarily mean hes loyal or any less likely to be tempted away. It is only true loyalty that protects against this uncertainty.

When is a loyalty program not a loyalty program?

The problem is exacerbated by the insistence of many wireless brands to fight churn with the very weapon that helped cause the problem; price promotions.

So called loyalty programs are often little more than reward programs. Industry Analyst

Helen Karapandi from Analysis Mason supports this logic, id