Understanding REAL customer expectations could change everything for MNOs

Telecoms.com periodically invites expert third parties to share their views on the industry’s most pressing issues. In this piece Steve Barefoot, Senior Product Analyst at Interop Technologies, explores how understanding customer expectations today is crucial for the success of MNOs.

MNOs are in the challenging – almost schizophrenic – position of needing to maintain a high Quality of Service (QoS ) network while concurrently finding ways to deliver agile products popularized not by QoS, but by overall Customer Experience (CX).

In a 2015 white paper, Deloitte summarized new consumer expectations – including how they’ve changed from “wanting the best” to “accepting the basics” – while research from Nielsen put “voice quality” fifth on the list of reasons subscribers stay with a provider. So how can understanding customer expectations today change the future for MNOs?

Understanding the mindset of the original MNO

We need to turn back the clock to understand why QoS is so ingrained in the mindset of the MNO. At the outset of the life of the MNO, customer experience was driven by a simple function of network footprint, network quality, customer service, and price. In that era, the focus was on maximizing QoS by building highly reliable and highly available networks that delivered services 99.999% of the time, in what became known as telco-grade, “five nines” service quality. Subscribers came to expect five nines as the baseline level of service from MNOs and it was encoded in MNOs’ DNA that this was the only acceptable QoS to provide.

Next Generation Networks (NGN) changed everything

Everything changed with the introduction of Next Generation Networks (NGN), which fostered the proliferation of IP-based OTT applications. These new apps met a market need and were available at little or no cost. Very quickly, subscribers demonstrated a willingness to exchange five nines QoS for free apps with new features and functions that were inherently less reliable. And with that, QoS, quite suddenly, became largely secondary to CX.

The meteoric rise in popularity of WhatsApp, WeChat, Line, KakaoTalk, and many other OTT messaging apps is clear evidence of consumers’ willingness to accept less than telco-grade quality. Although MNOs recognised this, they found it difficult (and still do) to reconcile this with their traditional five nines approach and thus, difficult to replicate their success.

Consumers’ real expectations: Voice Quality or Value Added Services?

A very reasonable concern about launching an imperfect service is the potential of losing customers through churn, but the 2015 Nielsen survey sheds some light on the reasons why subscribers stay with their current MNO. They identified the top six reasons subscribers stay as follows:

The keen-eyed among you will have noted that voice quality is number five on the list. One could interpret this as reinforcing the premise that subscribers are willing to accept less than perfect levels of voice service. This clearly shows that the five nines approach of MNOs is not only of diminishing importance to the customer, but further shows that the Value Added Services (VAS) is perceived as far more important as the second item on the list of reasons a subscriber would stay with their MNO is the availability of VAS. By their nature, VAS will likely be the product of an agile, responsive development process and this list reinforces that consumers will accept them—potential functional shortcomings and all.

Changes in consumer behaviours

In addition to the Nielsen survey, the broader 2015 white paper from Deloitte summarized new consumer expectations with the following four changes in behaviours that seem entirely consistent with what we have seen with the adoption of OTT services. The new consumers have changed:

The underlying lessons for MNOs

From this research and the marked success of OTT applications, MNOs must now realise that the value of QoS and the five nines approach of the past, although still important, simply doesn’t hold the same weight with customers today. As such, competing only on QoS may no longer be a valid business strategy and MNOs must move into providing the Value Added Services that their customers expect. But in order to successfully move into offering these digital services, they must recognise that launching a service that is not perfect is not incompatible with success. A case in point is WiFi Calling or VoWiFi.

WiFi Calling: An example of an imperfect success

WiFi Calling is a new technology that has many benefits, such as extending coverage to rural areas, providing coverage indoors, and supporting HD voice. However, WiFi Calling is not perfect. In some cases, there are vagaries in handing off calls from the cellular network to the WiFi network. It’s not 100% perfect; it’s not even 99.999% perfect, but is it good enough? If the OTTs have taught us anything, the answer is a resounding “yes.” The OTTs have shifted the baseline of customer expectations such that an occasional hiccup in moving between networks would be acceptable. In fact, 72% of consumers report having experienced dropped calls at least occasionally, so the phenomenon is not unfamiliar and has come to be accepted as part of the mobile voice experience.

Another factor MNOs should consider in launching WiFi Calling is the amount of time people are actually making voice calls. While it’s true that over 90% of people use their smartphone to make voice calls, it’s also true that 85% of the total time spent using a smartphone is using apps. Since most of the time subscribers spend on their device is not making a voice call, the potential problem of a handoff issue with WiFi Calling takes on a different perspective. And this further supports the Nielsen research in terms of the importance of those Value Added Services.

Customer experience is the key

The trend of consumers’ increasing willingness to adopt new products based on CX rather than on an idealized QoS represents an opportunity for MNOs to explore a new business approach that broadens the services they offer. MNOs that accept the increasing importance of CX can develop sustainable, long-term business strategies and will enjoy a competitive advantage in the digital services market.

Steve Barefoot is senior product analyst at Interop Technologies. In this role, Steve is charged with monitoring and analyzing trends in technologies, products, and markets. He brings to this task a wide-ranging, multidisciplinary background in research and analysis. Throughout his career Steve has published papers in peer-reviewed journals, served on the editorial board of the Journal of Environmental Forensics, and chaired scientific sessions internationally.