Posted: 10/2002
Online Telecom Buyers Spend More,
Switch More
Optimizing Online Sales Strategies
Part 1
By Dr. Bonny Brown and Dr. Anthony Bastardi
Vividence recently conducted primary research on predictors of customer churn and loyalty with regard to ISP and wireless carrier Web sites and also surveyed 3,000 online users regarding their telecommunications habits and service plans. Vividence also conducts Web site evaluation projects for clients in the telecom industry that allow Vividence to capture consumers' interactions with these sites and track every click and comment.
The company's research reveals that among online customers, 31 percent are high spenders (defined as the top quartile in spending across local/long distance, wireless, Internet and cable services combined), while, among offline customers, only 12 percent are high spenders. On average, online customers say they spend 32 percent more -- at least $151 per month -- than offline customers -- at least $114 per month -- for telecom services (see chart below).
The studies also found twice as many online customers plan to switch telecom service providers in the next six months than offline customers -- making loyalty-building efforts particularly challenging and important for the valuable online segment. Among online customers, 55 percent plan to switch at least one telecom service provider in the next six months. Whereas, among offline customers, only about half as many (27 percent) plan to switch one or more of their service providers in the next six months (see chart below).
This finding is not simply attributable to the notion that people who are planning to make a switch suddenly become online customers by beginning to use the Internet to do their research. Instead, the company's data show those customers who use the Internet to manage their telecom services also are more likely to have switched wireless providers in the past. Among online customers, 54 percent have switched wireless providers in the past, whereas among offline customers, only 30 percent have previously switched wireless providers.
The top reasons for switching wireless providers are consistent between online and offline customers, but why are online customers more likely to switch providers? Not surprisingly, more online customers describe themselves as advanced or power Internet users compared with offline customers (79 percent vs. 42 percent, respectively). Our experience shows that this increased competence in using the Web encourages online customers to be more likely to switch because Internet power users have easier access to competitive information and the potential advantages of switching to competitive services.
Some services are particularly easy to switch providers online (i.e., sign up for service, order new equipment, etc.), and are especially easy for those familiar with the process.
Web proficiency tends to correlate with early adoption of new technologies and heavier use of telecommunications products in general; therefore, online managers are more likely to stay abreast of the latest innovations in the industry and change their services accordingly.
Individuals who manage their accounts online have more opportunities to experience frustration with existing service providers due to poor Web site usability or other issues related to the provider's Web site.
Click Here for Chart
Source: Vividence Corp.
Recommendations
The findings make it clear that telecom companies must design effective Web sites to build loyalty in online customers and attract competitors' customers who might be researching alternatives on the Web. A Web site that offers a positive customer experience can be a serious competitive advantage, while a poorly designed Web site can be a severe liability if it does not actively retain customers and attract switchers.
Telecommunications companies must cater to online customers to effectively attract and build loyalty in this valuable customer segment. These companies should strive to build loyalty through customer-focused means, such as offering superior customer service, valuable Web site features and a positive online experience.
Telecom sites should create switching costs for users by offering and promoting site features that engender loyalty such as self-service account management, online bill paying and customer service.
These sites also should encourage the purchase of multiple services by offering a single point of access to all services offered by a single provider, allowing customers to access, for example, their long-distance, broadband and wireless accounts from a single Web site destination. Beyond establishing a cross-selling opportunity, this capability builds loyalty by offering the convenience of a single point of access to a variety of telecom services.
Telecom sites must actively attract and convert potential switchers by:
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Presenting clear benefit statements around product differentiators;
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Providing comparison engines that highlight unique advantages;
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Offering online-only promotions that encourage switching; and
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Driving online conversion of promotions executed in other mediums.
Once a switcher has been successfully attracted and converted into a customer, the telecom provider must diligently build loyalty in that customer.
Next month, in part two of this three-part series, we'll look at classic Web site usability problems and how to solve them. In part three, we'll look at developing a Web strategy checklist.
Dr. Bonny Brown is director of research for Vividence Corp., a provider of customer experience management solutions. She is an experimental social psychologist with 10 years of experience in both qualitative and quantitative research in psychology and human computer interaction. Dr. Anthony Bastardi is senior research scientist for Vividence, overseeing quantitative analytics. He is an experimental psychologist with 10 years of experience conducting theoretical and applied research in cognitive and social psychology, specializing in statistics.
| Links |
| Vividence Corp. www.vividence.com |
