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Industry Research : Telcos Now Focused on Retaining Premium Customers
More companies are turning away from the high costs and low returns of a customer acquisition strategy and moving toward investing in their services to capture more revenue from the premium segment.
"For the first time in the last 15 years or so, I'm seeing them say 'that's enough' we don't want any new customers," said K. Balakrishnan, managing director and CEO of Servion, in an interview with ZDNet. The CEO was referring to how Indian telcos were realizing the new customers they were spending to acquire, were in fact the "poorest of the people" and the bottom end of the revenue pyramid.
Their spending power was low, but the cost of servicing was high especially since they did not understand English and many did not understand how an Interactive Voice Response (IVR) system worked due to their literacy level, Balakrishnan explained.
"[For Indian telcos], their core focus in the last 10 years has been in acquiring customers. I think they're starting to realize there's no point putting more servers, more networks and stuff like that, just to add customers who are not paying US$1 per month," he said.
This change in mindset is seen across many companies across the world, he added. Balakrishnan noted the whole approach to IVR had been to cut manpower costs, but more companies now were realizing the necessity to differentiate themselves through service especially in telecommunications and banking.
The primary driver of customer churn is customer service, said Shankaran Nair, Servion's president of strategy and global delivery, who sat in on the same interview. "An airline seat, is an airline seat, is an airline seat," he said, referring to how products were increasingly commoditized.
Leveraging analytics, mobility
According to Balakrishnan, the emergence of social media is only a small part driving this change. He noted the service problems companies had were essentially the same as that a decade ago, but customers now only need a few seconds to broadcast their bad experience globally.
"IVR has remained a dumb machine, not much has changed. Press one for English, and so on" the CEO said, referring to how customers typically still had to slowly sit through an audio menu and respond via their keypads.
Servion was investing in two new technology offerings, one of which would revolve around analytics, said Balakrishnan, adding that the company started investing in big data research last year.
This would be in the form of a "floating" or dynamic IVR, where the menu which greeted each customer would be customized according to various factors including the nature of previous calls, and the timing of the call such as whether they were near billing cycles.
Nair explained: "If you called me for the last five times about a lost credit card, that option will be floated to the top. For someone else who regularly checks his account balance, that will be customized for him."
He said companies with legacy systems might not be able to handle such processes as a decision would need to be generated in a few seconds, and from data across various servers such as customer details, the telephone network, and company information. The Servion system is currently in mid-deployment and will be first launched in the Middle East.
Another service the company is developing is a "visible" IVR, where consumers can access a directory tree over their smartphones or other devices.
Nair said the company was still debating several issues such as security and efficiency. "How do we best present it? Some customers will just keep pressing the button for the operator and that will just drive up costs," he said.
Posted by Veronica Silva Cusi, news correspondent
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Published: Monday, February 18, 2013