With the advent of triple/quadplay services, and the rise of ever-greater competition in the telecom space, there is an increased focus on customer loyalty, minimising churn, and cross-selling.
In theory, bundling helps to reduce churn. Some early results from carriers in North America and elsewhere bear this out. However, in my view this is a potential future minefield, with various little-considered secondary effects.
I wrote a couple of weeks ago about the notion of "resentment-based pricing":
"You know you're being ripped off hugely, but you "have" to pay as you have no immediate alternative. You grit your teeth, and (hopefully) expense it afterwards. You actively look for a way to avoid the cost, and minimise your usage. You complain to friends & colleagues. You develop "active customer disloyalty" and vow to switch suppliers, out of distaste for their show of customer disrespect, whenever you can. Examples: Hotel WiFi, cellular data roaming."
In the case of bundled services and customer lock-in, the resentment will start to simmer when specific service elements are priced wrongly. If I had a quad-play offer, and saw competing prices on mobile telephony falling faster than that tariff I had access to (or broadband speeds being increased more quickly, for example), it would wind me up.
Similarly, I wrote yesterday about the risks of heavy-handed lock-in from the lack of "portability" of content, email and so forth. Again, this is likely to ratchet up the "active customer disloyalty" and resentment factor.
Lastly, there is the issue of poor customer service. I already have my doubts about the ability of some service providers to offer adequate cross-technology support (fancy asking a mobile operator about your problems with Outlook? or asking your broadband provider about hooking up a Bluetooth headset?). I'll add to this the likelihood of crass attempts to cross-sell, abuse of privacy for marketing reasons and so on. There's a lot of fuss being made about the Google/Earthlink WiFi project in San Francisco.
I've had my own example this morning from Carphone Warehouse (my service provider for my personal O2 account) - I got some new T's & C's yesterday, and I immediately emailed their customer support team to ensure I was removed from their marketing lists as I've had SMS spam from them before. (Hey, if they want to market at me, they should pay me upfront. I might give them a refund if they're not wasting my time). I got an acknowledgement email this morning. Which essentially said:
"Sure, you're removed from our lists. No more marketing, promise! ..... Oh, and by the way, have you heard about our new XYZ service? It's great!!! Visit XYZservice.com to find out more!!!".
Idiots. And I even warned them on the first email that I blog about the mobile industry.
Back on the triple/quad-play side of things, I'm also increasingly confused about how this will play out in households with multiple family members. Mum's on Vodafone, Dad's got a company mobile, they use fixed-line or Skype to call Granny in Australia, the kids have got prepay from cool new MVNOs, they want a particular brand of digital TV service for some specific content, and they want the new 20Mb broadband connection for their PCs. How can you get a tailored bundle to deal with all that? How do you do the migration? What happens when the next new, cool MVNO comes out, or little Johnny gets bought a new phone for Xmas? I see more huge potential for dissatisfaction and resentment.
(Off topic, but I'm starting to wonder if there's a new business model for "quad-play aggregators", who will themselves bundle together Company A's Mobile service with Company B's ADSL and Company C's TV. I also reckon that a lot of homes will need 2+ separate broadband connections. )
Overall, I suspect that while bundling might reduce churn rates in any one single service, reducing price-based "casual churn", it will have the unintended consequence that any act of customer disloyalty will instead be much more "active", based on genuine resentment & distaste. It is also likely to drive up "collateral damage", as such extremely dissatified customers wilfully look to move not just the "offending" service, but related ones in the bundle, plus probably influencing their family members' choices as well. It will also be an awful lot harder to win them back.
I know that if I had already had a Carphone Warehouse bundled offer this morning, I'd certainly be looking at the overall cancellation clauses in the contract right now, rather than just those the cellular component.
Speaking Engagements & Private Workshops - Get Dean Bubley to present or chair your event
Need an experienced, provocative & influential telecoms keynote speaker, moderator/chair or workshop facilitator?
To see recent presentations, and discuss Dean Bubley's appearance at a specific event, click here
Wednesday, May 03, 2006
Active customer disloyalty and bundling
Subscribe to: Post Comments (Atom)
Post a Comment