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| Anamaria Chiuzan |
Anamaria Chiuzan, customer insight and loyalty senior marketing manager at The Logic Group, on how can mobile service providers can use loyalty schemes as a means to understand the customer mindset.
Winning customer loyalty is a success that comes with hard work, caring and nurturing customer experience and their expectations of good value for money. It’s also a rare commodity, especially in a market where customers are more frugal and the current uncertain economic climate adds more challenges into the mix.
In a recent survey on the imperatives for customer loyalty, banks and building societies celebrated the highest levels of loyalty (71%) in 2010, sitting at the top of a group of three sectors which attract considerably higher levels of loyalty than others. Of these sectors, supermarkets (63%) follow closely behind the banks, while over half of the public say they are loyal customers of mobile phone and land line companies (58%).
Loving rewards
Customers seem to be extremely familiar with the rewards and loyalty deals provided by supermarkets; the schemes reward customers every time they shop with offers such as cash off the products they buy most frequently. In the mobile sector, carriers learn from best practice in retail, rewarding loyalty to post-paid customers historically revolves around the contract renewal; encouraging mobile users to renew their contract by offering an upgrade on their handset or tariff.
Most of the time, once customers have signed up to another 18 or 24 month contract, the majority of mobile providers will not get in touch until customers have to make the same decision again. As churn is more of a threat with pay as you go customers, the loyalty experience is quite different, with regular offers around subscribers’ top-up cycles and network traffic designed to keep customers in the network and service usage up.
However, whether on post-paid contracts or pay as you go plans, these are the same customers that shop in supermarkets or manage their accounts with preferred banks. Ultimately, their choices and preferences are driven by factors that determine their immediate interaction with a brand. So what are the drivers behind the ostensibly high levels of loyalty found by the survey in the mobile sector?
The first thing to note is that most of us are members of some kind of loyalty scheme. Three in five consumers say they are a member of one of more schemes; and allegiance towards different sectors and companies is shaped by a range of factors. One significant point being the type of people we are; our age, gender, social class and region. For example 66% of those aged 15 to 24 are loyal to a mobile phone or landline company, compared to 34% of the same age group which are loyal to a bar, pub or club, and 40% who feel loyal to a cinema or theatre.
Relevant offers
Mobile providers have typically invested in the tools that allow them to have a good view of their customer profiles. The challenge is the ability to act upon this customer knowledge with immediate, timely and relevant offers that meet the different needs of different types of customers.
A mobile phone can be a big investment, you are buying into a contract of sometimes up to two years, plus cash spent upfront on the latest handset. Beyond the carrot of an upgraded phone, mobile carriers have made notable advances to reward customer loyalty and attract new customers.
Of note, O2 Pay Monthly customers who spend more than £35 a month become part of The O2 Priority Club, which rewards customers with benefits including extra minutes or texts, as well as exclusive VIP tickets for The O2. Vodafone followed suit this year, with customers now entitled to advanced tickets and to enter competitions to win unique customer experiences in areas including; festivals, fashion and Formula 1. And of course there’s ‘Orange Wednesday’ an incredibly successful 2-for-1 cinema ticket offer run weekly by the service provider. But how many customers do these offers really appeal to?
Big competition
As with supermarkets, there is big competition in the market amongst the top five providers, to keep their customers, reduce churn rates and increase ARPU. The key to a successful loyalty programme is to encourage customers to stay active and spend more on your services. This is the case for pay as you go deals which give subscribers a percentage top up bonus, free service use or more specifically ‘surprise’ rewards which prove more effective than a simple handset upgrade or keeping your customer tied in to the longest possible contract.
Mobile networks don’t make it easy for you to switch providers or cancel your contract, often showering customers with price match deals to retain their custom at the crucial contract-renewal moment. Earlier this year, YouGov research showed that for both customer satisfaction and loyalty, Vodafone outperforms O2 in the UK smartphone market: ‘Most research in recent years has shown that O2 has led other mobile operators on both customer satisfaction and loyalty, however... half of O2 customers (50%) said they would be willing to switch brands, compared to just over a third of Vodafone customers (34%).’
As loyalty programmes become more sophisticated businesses need to address consumer cynicism about the value they add, building on loyalty as a key part of the customer journey. All businesses are operating in a highly competitive environment, not least the mobile industry, and are under ever-increasing pressure to retain customers. This has led many to focus on the quick wins delivered by money off offers and deals, which are undoubtedly popular amongst consumers.
Recognising customers will only demand more value for their money under tough economic pressures is stage one, the next challenge is for businesses to help their customers better understand the value of loyalty rewards and in turn use their loyalty schemes as a means of demonstrating an understanding of the customer mindset and as a platform to recognise custom and meet expectations.
Mobile service providers have the capability to segment and target customers effectively, but data gained from marketing initiatives such as loyalty schemes and web analytics must be used rapidly to develop customer rewards which are visible and relevant to consumers. We know that where it is about signing up to a long term contract, people often stay with a company out of convenience and necessity as opposed to any real emotional connection.
Deep and meaningful
The question is, can mobile providers continue to rely on convenience and necessity or should they be seeking to form deeper and more meaningful bonds with their customers?
To beat the inertia trend, mobile carriers alongside any other business out there must make sure we don’t trade loyalty just for money off deals and any rewards or incentive schemes provides clear benefits that meet our customers need for value.
And let’s remember that the customer experience must take into account the diversity of our customers’ needs and ultimately complement the value and rewards we give to our customers if we truly want to build loyalty.
The Logic Group partners with leading organisations across Europe to enhance the effectiveness, security and profitability of their customer interactions. www.the-logic-group.com