Customer loyalty and retention in the UK mobile network market

Mobile Loyalty Background

The mobile telephone system is part of a global communication sector that has a number of distinct but interlinked elements. Whether one talks on a telephone, searches the net, emails, sends texts or downloads and participates in web-generated data sharing, one is using the mobile telephone network more and more, to the point where it and some of the competing companies appear to be reaching their service capacities. Or at least this seems to be the case when it comes to doing what these large providers should be best at: adding and keeping customers. Maintaining a loyal buyer base -- one that truly likes and advocates for the provider -- or at least happily retaining one beyond a small contract period is critical for any company that wants to be able to serve the global marketplace (Sharpley, 2009).

Underlying many of the customer service practices and promises is the notion that customers tend to be loyal and to retain their contract allegiance when they are treated fairly in relation to the promises made by their contract agreement (WDS, 2011). If these companies are going to keep their core base of customers, they have to demonstrate a capacity for giving them some of the basic elements that have been previously thought to be less important in the high-technology communication sector. But the truth is now hitting home. Customers want something more when it comes to personal treatment; they want it quickly, and they want it to come along with good prices, a fair representation of what they are buying and all of the newest of hardware (like handset) appeals (Tecmark, 2011). And if they don't get it, they are very likely to switch to another service, big or small, no matter where their previous allegiance was -- churning moves that are keeping the larger companies actively pursuing their buyers and that cost those companies a good deal of money (Genesys, 2009).

While these issues are important across nearly all segments of the telecom industry, they are particularly relevant to those in certain markets. Most significantly, established markets that have a grand selection of recognized and large companies that rely on an existing infrastructure for service and customer interaction seem most vulnerable to loyalty and retention concerns. It seems that customers in these markets are less willing to stay as happy as they used to be as the advantages jump from one company to another (Tecmark, 2011).

The United Kingdom is a premiere example of an established market. It has a number of well-known and large mobile sector providers, and it is restricted to some extent by the limitations of the carrying capacities and expectations of its infrastructure. As such, can serve as a positive example of where this market as a whole it heading in regard to what customer loyalty and retention means for the future.

MAJOR UK PROVIDERS

To understand the position of the UK, it is first necessary to review the infrastructure that already exists, including some of the specifics of where the major providers stand -- who they serve and what they are trying to do to keep their base. It should be noted that much of what they are doing changes quickly and can be seen by looking at contemporary online postings and similar resources. While these sites may not always be reliable, collectively the present a consistent picture of what is likely happening in the UK region (MobiThinking, 2012). Other resources, such as academic and corporate studies, offer insights too, many of which will be reviewed in the literature section that follows.

Each of the major five (now four since a significant merger has happened) carriers has its own approaches for generating loyalty or retaining buying customers, as will be discussed below. Overall, however, it can be said the all of the leading companies are learning that a key element of success in the future will be a requirement that they take very seriously their responsibility for learning about what these millions of individual consumers want -- and treating them respectfully through this learning process. The evidence appears to suggest that the main core of loyalty and satisfaction in an established market is very much "contract loyalty," which is more about companies living up to their promises more than a buyer's allegiance to a given corporate entity. This issue is becoming even more important in the face of "next generation access" where large and small companies alike are fighting to use their sensitivity to advancing capabilities to attract or keep their buyers (BuddeCom, 2012; Telecom, 2012). Yet, in return for this interest, there appears to be much more interest in judging whether the companies are actually doing what they promised -- something that was less important amongst trusted corporate names in the past (Wakefield, 2011; Bomsel, et al., 2003).

The section that follows provides an overview of what this means to the major corporate providers in the UK. Before looking at these specifics, it is worth looking at an overview of the "digitalbuzz" (2011) is in regard to the global future. This summary sets the tone of the market overall on several fronts, many of which will be seen to be mirrored in what the top UK companies are looking at:

(Our) infographic shows that over 1 billion of the world's 4+ billion mobiles phones are now smartphones, and 3 billion are SMS enabled (weirdly, 950 million mobile phones still don't have SMS [basic text] capabilities). In 2014, mobile internet usage will overtake desktop internet usage and already in 2011 more than 50% of all 'local' searches are done from a mobile device. 86% of mobile users are watching TV while using a mobile phone, 200+ million (1/3 of all users) access Facebook from a mobile device and 91% of all mobile internet use is 'social' related.

Locally related, socially oriented, entertainment focused. These components play into what companies have to do to keep their customers loyal even as their reach extends to new and emerging markets.

There are now four significant mobile providers in the UK. Until 2009 or so, there were actually five and much of the existing literature reflects this fact. With the merger of Orange and T-Mobile into one, which is now called Everything Everywhere, that conglomerate has positioned itself to be the segment leader in the UK, with a commanding lead in the number of core buyers. As of 2011, the percentage of market control by each of the leading companies was as follows (Telecoms, 2012):

Telefonic O2 -- 27%

Vodafone -- 24%

T-Mobile -- 21% (Everything, Everywhere Partner)

Orange -- 20% (Everything, Everywhere Partner)

UK Mobile Customer Tactics

Customers who "churn" from their provider do so for a variety of reasons, only some of which have to do with the ending of their contracts. Statistics of various kinds show that some 60% to 70% of customers say that they are happy right before they leave their providers. Yet, something pushes them over the edge, apparently even though there are inconveniences associated with moving. The review of the literature in the next section will look more specifically at some of these specifics and what particular studies are suggesting.

Still, there are at least 10 recognized strategies for reducing churn among telecom businesses that many try to employ in various way. They include handset exclusivity (which is diminishing), service rewards, coverage claims, community privileges (which are discussed below), various subsidies, value-added services for businesses or individuals, over-and-above (free battery replacement) options, reward points or contract-specific promises. Many of these practices are more along the lines of traditional customer service activities. And they are clear in that they are undertaken for specific reasons that distinguish between loyalty and retention issues. Loyalty, again, relates to the propensity of a customer to not just like but to proactively advocate for a given company. Retention measures, on the other hand, are associated with a customer willingly staying with their contractor. Recognizing the differences and how they work together can be critical to understanding what may work for UK buyers.

Two particular practices from within the UK have been noted when discussing these anti-churning approaches. One centered on Orange's Wednesday free cinema tickets. Another on O2's Blueroom theatre privileges, where customers get special advance access to shows before the general public does. These activities are well-known practices that do generate loyalty for their companies. However, they do not seem to be as good at generating contract retention. Customers like to make it known that they are get these kinds of benefits, but that does not necessary mean they will stay with the provider for this reason alone. Wireless Intelligence (2011), says this of O2:

Its 'Priority Club' loyalty programme, launched in 2008, offers a myriad of benefits for contract customers, including the opportunity to buy advance tickets for concerts at O2-sponsored music venues. Subscribers in the highest spending bracket (over GBP80 per month) are entitled to VIP concert tickets, a six-month early upgrade option and a personal account manager.

Interestingly, within the refined and established UK market, traditional advertising and buyer click thru (the ability to purchase by using links in the promotion) are seen as more likely to be highly desirable and effective. The Mobile Marketing Association and LightSpeed Research conducted a study in 2010 and found that over 29% of European consumers responded to these mobile advertisements, or adverts. More specifically, in the UK, SMS advertising worked about 40% of the time (as opposed to having to go to a website). Offers that were time-sensitive and had a good deal were most effective. And buying applications, games and music was the type of consumer activity uses most appreciated, particularly for younger users. What this may mean to particular providers can be very important: "But getting mobile advertising right requires researching the unique opportunity offered by the different mobile media. For example, an advert delivered via the under-hyped opted-in SMS turns out to be the most likely to open a consumer's wallet" (LightSpeed Research 2010)/

But the question still remains about what works overall in helping to sustain both customer loyalty and retention? According to the various studies on the subject, the issue is tied to the type of the contract benefits in general and how quickly and efficiently the company responds to various challenges (Sharpley, 2009). But how does this happen if issues such as privacy and net-neutrality (or one might say web integrity) prevail? In the U.S. more than elsewhere, there are growing movements to keep government and business from fundamentally changing the way the Internet works. In particular, the issues center on whether companies should be able to capture private and detailed customer data in regards to their activities and then to use that data to target more advertising and promotions. The studies clearly show that the more they can do this, the better the response of their customers to various offers that can be made. But doing this is premised on there being a certain level of corporate trust. This issue is now being called into question across the UK companies. It appears that they are not truly offering all that they promise as a series of BBC reports on "notspots" (places where reception is weak) and past reviews on how companies charged unfair fees have damaged their reputations (Wakefield, 2011). Changes in operational regulations may ultimately help in this regard, but they may also make it harder for companies to distinguish themselves while still respecting their customer's privacy (Bomsel, et al., 2003).

All of the competing UK companies are attempting to address these issues by using strategies relating to their contract benefits. This includes offering a greater selection of short-term contracts, even when products like iPhone draw in high-value consumers willing to sign up for longer term agreements. Orange and O2 are using community privilege programs (free or advanced access tickets) as a step toward personalizing the retention efforts. But the evidence suggests they have to become better at knowing more about who their customers are and treating them better. Online support and the ability of customers to use web-based services as they see fit seems to be critical in this regard too, but it does not necessarily suggest ways that companies themselves can be the ones in control of who stays and who goes.

BIBLIOGRAPHY & REFERENCES

BBC Mobile (2011, Aug. 31). Mobile Internet use nearing 50%. Viewable at http://www.bbc.co.uk/news/technology-14731757.

Bomsel, O., Cave, M., Le Blanc, G. And Neumann, K-H. (2003). How mobile termination charges shape the dynamics of the telecom sector. The University of Warwick. Viewable at http://www.cerna.ensmp.fr/Documents/OB-GLB-F2M-FinalReport.pdf.

BuddeCom (2012). United Kingdom - Mobile Market Insights, Statistics and Forecasts. Viewable http://www.budde.com.au/Research/United-Kingdom-Mobile-Market-Insights-Statistics-and-Forecasts.html.

DigitalBuzz (2011). Infographic: Mobile statistics, stats & facts 2011. Viewable and downloadable at http://www.digitalbuzzblog.com/2011-mobile-statistics-stats-facts-marketing-infographic/.

Ernst & Young (2010). Top 10 risks in telecommunications. http://www.ey.com/Publication/vwLUAssets/Top_10_risks_telecommunications/$FILE/Top10_risks-telecommunications2010pdf.pdf.

Genesys (2009). The cost of poor customer service. The economic impact of the customer experience and engagement in 16 key economies. Viewable at https://www1.vtrenz.net/imarkownerfiles/ownerassets/1076/Genesys_Global_Survey09_screen.pdf.

Kuusik, A. (2007) Affecting customer loyalty: Do different factors have various influences in different loyalty levels? Tartu University Press.

LightSpeed Research (2010). 29% of European Mobile Consumers Respond to Mobile Adverts They See. Viewable at http://www.lightspeedresearch.com/press-releases/29-of-european-mobile-consumers-respond-to-mobile-adverts-they-see/. Accessed March 2, 2012.

Mobi (2012). Global mobile statistics 2012: all quality mobile marketing research, mobile Web stats, subscribers, ad revenue, usage, trends… Viewable at http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats%20.

MobiThinking (2012). Global Mobi Statistics 2012. Viewable at http://mobithinking.com/mobile-marketing-tools/latest-mobile-stats.

OpenSignalMaps (2011). UK Mobile Notspots Report - August 2011. Viewable athttp://opensignalmaps.com/reports/uk-august-2011.php. Accessed March 2, 2012.

Satmetrix (2010). Orange Business Services. Case Study. Satmetrix Systems, Inc.

Sharpley, D. (2009). Customer loyalty anchored on customized services. TelecomsEurope. Aug. 27, 2009. Viewable at http://www.telecomseurope.net/content/customer-loyalty-anchored-customized-service.

Tecmark (2011). Mobile and UK Web Traffic. Research by Tecmark, Ltd. Viewable at http://www.tecmark.co.uk/wp-content/uploads/2011/08/Mobile-and-UK-Web-Traffic-August-2011.pdf.

Telecoms (2012). UK Mobile Network Operator Subscriber Data 2007-2011. Viewable at http://www.telecomsmarketresearch.com/resources/UK_Mobile_Operator_Subscriber_Statistics_2.shtml#Vodafone . Accessed on February 29, 2012.

Wakefield, J. (2011). 3G mobile data network crowd-sourcing survey by BBC News. BBC Mobile. Viewable at http://www.bbc.co.uk/news/business-14574816.

WDS (2011). Mobile Churn: Industry Report. WDS, Inc. Viewable at http://www.wds.co/enlightened/churn/WDS_Churn_2011.pdf.

Wireless Intelligence (2011). O2 records lowest churn rates in UK. Viewable at http://www.wirelessintelligence.com/analysis/2011/04/o2-records-lowest-churn-rates-in-uk/.