The Mobile Industry making work for itself
Published by Steve Litchfield at 17:09 UTC, February 8th 2008
What kind of crazy tech industry do we have where companies make work for themselves at the same time as making customers unhappy? And you can bet that the mobile industry is the worst offender of all. Read on for a few experiences, thoughts and links.
Firstly, I popped into my local computer shop to get some RAM for my laptop (don't worry, we'll get to the mobile bit in a minute):
"Hi there, I need to add more RAM to this" - I show them my Gateway laptop. "What sort do I need?"
"No problem, sir, bring it over here and we'll open it up."
60 seconds later, the hatch was unscrewed on the laptop's bottom and the existing chips identified. We walk over, grab two bigger (in capacity) chips from the right shelf and I ask, innocently:
"As the back's off, just stick in the new chips"
"Ah, I'd have to charge you for fitting, sir".
'What?' I think, 'you've already got the back off, you've already got the old chips out, it'd take 30 seconds to put the new ones in'.
"So, you're going to put the old chips back in, screw up the back... and when I get home I've got to unscrew it again etc.? That's crazy. Wouldn't it be easier for you to do it?" I protest.
"Sorry, sir, I'd have to charge you." I acquiesce and leave, muttering under my breath. The thing is: if the techie had fitted the chips himself, he'd know that there was zero chance of them being fitted wrongly or damaged by static on the way in, eliminating the biggest single cause of failure.
As it was, he was saying that the company preferred to have me go away and fit the chips myself in a possibly amateurish and ham-handed way in a probably static-rich home environment, drastically increasing the risk that I'd have to go back the next day and say "Sorry, the chips don't work, I need you to replace them", at which point the company is significantly out of pocket, not to mention the hassle of any replacement paperwork.
Why? It made no sense whatsoever. I lost (extra time and hassle) and the shop lost (in terms of far greater risk that I'd end up losing them money by breaking stuff rather than generating profit from a trouble-free sale.
All of which is an anecdotally round about way of introducing the main thought behind this mini-editorial, that the mobile networks in Europe (and probably most of the rest of the world, come to that) are acting in very much the same way, making work for themselves.
I'm talking about the way phone contracts are renewed. The phenomenon was covered recently as part of a length MEX blog post, and it rang very loud bells in my head. Let's look at what happens when a user renews their phone contract.
(The dialog is imaginary, but this is roughly what happens)
"Hi there, I'm on your XX contract and I have a older Nokia, my renewal is coming up, can I upgrade to the YY Superphone?"
"That'll be £100 on your current contract"
"But down the road at another network they're offering the YY Superphone for free on contract with exactly the same amount per month! Why can't you match that?"
"We could, but only if you were a new customer."
"Can't you just give me the same deal?" "No, sorry, only for new customers"
"So I've got to cancel this contract and phone number, go outside and come back in again and fill out all the paperwork, to get a new number and a new contract, to get this deal?" "Err... yes."
[Customer walks out with high blood pressure, foaming at the mouth, counts to 10 and then - possibly - walks back in again with grim determination]
As with my RAM chip example, the scenario is an utter lose-lose one.
To switch a customer onto the new device for free on their current contract would require minimal paperwork and admin. The work of 5 minutes for all concerned, probably just a tick box on a software form. Instead, the network shop would rather force the customer into apoplexy, incurring huge admin costs cancelling the old contract and setting up the new one from scratch - surely at least an hour of staff and customer time - for no gain whatsoever. And probably for a loss, since the customer is more likely to go to a rival shop/network in disgust.
The treatment of new customers better than old, loyal ones is utterly insane and surely one of the main reasons for 'churn' in the industry. Look at any really successful business in any field and you'll see customers who keep coming back, year on year, out of choice because of great customer service and a fair (not necessarily the cheapest) deal. Treat existing customers like second class citizens and they'll be off. I know I would be.
Steve Litchfield, AllAboutSymbian, 7 Feb 2008
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Categories: Hardware, Miscellaneous, Links of Interest, Industry, Editorial Thoughts
Platforms: General, S60 3rd Edition
News Discussion
stuclark
You've touched on one of the many idiocies of the mobile industry in this country. Unfortunately, NO network treats existing customers as well as new ones, and there's a simple reason for this - network figures are still calculated on new signups, not renewals. A renewal is worth nothing to a network (you're there anyway) whereas a new customer is worth at least 18 months new or extra revenue.
I recently had a similar argument with my provider. I wanted a "new deal" which they were refusing to offer me, at a cost to them of £10 per month.
I pointed out that all I had to do was to port my number out to a virtual network (one which runs on their real network); cancel my contract with them at no cost to me as I'm out of minimum contract; then 2 weeks later come back as a new customer and get the exact same deal I was on, plus the extra new deal, PLUS a new phone (for free), and port my number back in to their network. The cost to them for me doing this would be over £300. The cost to me, £10 per month.
They pointed out I'd loose X, Y & Z discounts. I pointed out that as a new customer I'd get A, B & C discounts, plus they'd give me a phone worth over £300 for free, which I'd then ebay; more than covering the difference in cost between the X,Y,Z deal and the A,B,C deal, even when calculated over an 18 month period!
Needless to say, I didn't win, but I did get their CS managers to agree the current situation is ridiculous. Even when a new customer costs a network more money than an existing one, the new customer will always win, due to the "signups phenomenon".
Unregistered
I'm not sure that's true. Most net work execs have churn (a measure of the percentage of customer base lost) as a negative kpi.
The thing that drives this behaviour is that most consumers still don't leave the network. Faced with the prospect of having to cancel a contract and sign up for a new one most people will just take the path of least resistance.
tomsky
O2 give the same deals to existing customers renewing as their new customers. Its a fine line for them, attracting new customers and keeping old ones. That said, when I phoned up to change to Simplicity, they actually told me I'd be better off on an even cheaper contract, so sometimes they're their own worst enemy.
Tom
UKCodeMonkey
I've just asked for my PAC so I can move from Orange to Three. I had been happy with Orange, but am moving for a better mobile on a much cheaper tariff.
shoobe01
Maybe its just where I worked, but I am pretty sure that most folks will churn when given the chance.
Aside from the acquisition-only focus, I have seen some numbers that indicate that if everyone got the new customer deals, [this specific carrier] would not make any money on any of their subscribers. Hard to say its true or not, as even internally there are fourteen ways to cut the data, but its compelling enough that no one messes with the model.
But since its so obviously bad to treat your customers like this, something clearly needs to be fixed. CPGA is so very high its hard to see why you'd ever want to risk loosing anyone. I have always thought that maybe if you made the sales guys responsible for customer lifecycle (i.e. retention) this might go a long ways to help.
I also suspect that, eventually, the shakeout may be a split-the-difference solution. New customer deals are not as good as they used to be, but existing customer retention/upgrade deals are at least as good as those. (I recently upgraded my DBS system to HD, and found the competition didn't have particularly compelling new-customer deals, and my provider had a great deal with no expiry date to speak of for the upgrade. If this is true of the industry and not my poor perception of anecdotal data, it shows that a technological business with CPE and MRC collection can work to satisfy and retain customers).
Unregistered
maybe my experience will help a few readers with the crap customer service we all have to tolerate.
what you need to do is actually actually call up to end your contract (once it's expired on in the final month) after a few feeble attempts to fend you off with crappy handsets for free, insist on your PAC code and they will transfer you to the customer retentions team who depending on your average bill will usually give a much better offer, eg the latest handset either free or for a much smaller charge than the customer service person offered to you.
Don't forget to try and get a discount on your tariff as well, in general the larger your bill the more desperate they will be to retain you (obviously). Sometimes in the end, some networks are so desperate for new customers, that you will end up network hopping every year or every other year anyways for the best deal especially if like me, you're more interested in the latest handset than network loyalty.
good luck !
regards, A.H.
kflyer
Well, I feel that Sri Lanka is better. There are four mobile networks and all are in a competitive environment. The biggest business is prepaid and one network even offers per second billing (0.06USD PER MINUTE to other networks, 0.03USD P/M inter network). At Mobitel, the network with South Asia's fastest HSDPA speeds of up to 14.4Mbps, for every year that you be with them, you get discounts on all the rates (ie-10% discount on all rates if you be with them one year, and note that you only need to top it up by 0.2USD every 6 months if you are not using this SIM card, but still you'd get the discount). At Dialog, the biggest mobile network in the country, you get one minute incoming free for every year that you be with them (ie- If you have *registered* the SIM card three years ago, you get three minutes incoming free). Both networks offer excellent rewards and loyalty programs and more you use, the more you gain. All these are for prepaid only and fortunately or unfortunately, the idea of contracts is not much popular here. But being in a very competitive environment, all networks try to offer the best for their customer and this has resulted in a nice growth rate. A nice growth in profits and subscribers for every network and a nice drop of rates for every customer. So no second citizen levels for existing customers here. In that case, I'm proud of my small country, which was South Asia's 1st to introduce 3G networks a few years ago.
slimz
.. for all 4 network providers; T-mobile, Vodafone, eplus and o2(my provider). Provisions are given only for new contracts, that's why the difference. It's ridiculous, but it's reality.
Anoska
Here in Finland we "own" the mobile phone numbers. So if I change my operator I will take my number with me. This made changing operator much easier, and now it seems that new and old customers are treated equally.
Pythonista
bodstrup
The 'New User' discount is also used by newspapers, fitness centers, basically anyone who wants you to sign a contract, nothing special about the telco's
Also, you will rarely get a nice renewal deal from a shop - you need to call the people handling cancelations, they are often rewarded for keeping you - and may have the power to offer better terms than shop staff who must follow the rules - regardless of how stupid they may appear to the consumer.
Regards
Michael
rcadden
This is why I have long held the belief that rather than handset subsidies, carriers should offer monthly discounts, in various amounts dependent upon the length of contract you sign AND finish.
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