eCHANNEL: Online Telecom Buyers Spend More, Switch More

Posted: 10/2002

Online Telecom Buyers Spend More,
Switch More
Optimizing Online Sales Strategies
Part 1

By Dr. Bonny Brown and Dr.
Anthony Bastardi

CUSTOMERS SPEND more on telecommunications services than do offline customers,
but tend to be a less loyal customer segment overall — with more online
customers planning to switch telecom service providers than offline customers,
according to new research from Vividence Corp.

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

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.


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

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

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:

  • Presenting clear benefit
    statements around product differentiators;

  • Providing comparison engines
    that highlight unique advantages;

  • Offering online-only promotions
    that encourage switching; and

  • 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.



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