The concept of a "data-driven company" is widely promoted and discussed today. Are executives looking to invest in analytics and see an added value? Do many decision makers first analyze whether this investment simply pays off? This article is the first in a series on the practical application of analytics in the telecommunications sector. Here I would like to focus on the practical use of analytical solutions and whether it's worth investing in them.
Beginning and advanced analytics
In the common understanding of a telco employee, an analyst is a person who delivers reports summarizing, for example, the percentage of the annual sales plan for the e-shop channel. The analyst can count in Excel how much revenue and expenses a given activity generates or build some mysterious "models" that indicate which customer needs to be offered a better retention offer. This is all correct.
Looking from a broader perspective, we can say that the analyst primarily works with data and uses the available data sets for analyses that serve as the foundation for business decisions. This can be generating a simple report from the source system, developing a business case, or creating a model to identify customers with a higher propensity to churn.
By using the vast data sets at their disposal, telecommunications companies can obtain comprehensive knowledge about their customers, network capacity and operational processes. It is worth investing in analytics as these assets bring measurable and proven benefits. Analytics fits perfectly into the currently observed market trends in Central Europe, which include:
- Digitization of contacts with the client and transferring the client-company relationship to remote channels.
- Development of a convergent offer.
- Increasing the importance of building positive relationships and customer experience.
- Development of the 5G network.
In this series of articles, I will describe examples of how to increase the company's value (e.g., EBIT) and support the company in achieving its long-term goals through analytics.
Analytics in the digitization process
Let's take a closer look at the first of these trends – i.e., digitization – in operator-customer relations. Before COVID-19, which accelerated the need for digitization in the telecommunications sector, operators made efforts to shift some of their activity to digital channels. They expected several benefits:
- Lower customer service costs.
- Reduction in the value of commissions paid for traditional sales channels (assuming an actual reduction in the size of the network).
- Reduction in top-up distribution costs.
- Increased customer satisfaction due to improved service quality.
In 2022, achieving these goals became even more pressing. The increase in energy and employee costs makes the maintenance of a wide distribution network more expensive. And customer satisfaction has become even more critical.
Theory and practice
Operators try to persuade customers to use the digital option by offering them additional benefits. These can include subscription discounts, increased gigabyte packages for topping up or purchasing a package, or a shorter commitment period in the postpaid offer. Is this an effective and permanent way to move a client to a remote channel? Things may go differently, and many customers return to traditional channels at the end of the promotion. And promotions can't last forever. After the initial success, it is hard to prove that they bring financial benefits in the long run.
Customer service is the second way to transfer a customer to digital channels. Such channels can solve many customer inquiries and problems without contacting a consultant. Operators know the most common issues raised by customers and have the opportunity to react to them in the digital channel. They can use a phone app, a website or a chatbot. Of course, first, you have to persuade the customer to install the app or log in to the website.
The ideal situation is that the operator reacts preventively to the problem and solves it. Another option is for the operator to tell customers about the issue before they even contact the operator. Getting customers accustomed to using a remote channel to solve problems quickly and easily obtain necessary information results in some customers naturally making the next transaction in the digital channel. An additional financial benefit may not necessarily support this, and the number of calls to the call center will be reduced, which will reduce costs.
Supporting telecom customer journeys
In the banking sector, many companies have decided to use both of these methods simultaneously, which resulted in the share of digital channels in simple transactions with some entities exceeding 30% to 50%. This, in turn, is a value that cannot be found in telecommunications operators (with minor exceptions) even in simple transactions, such as retention contracts for single sim cards or prepaid top-ups.
Of course, analysts can support operators in transferring their clients' activities to digital channels. Using the available data, it is possible to outline individual customer journeys. This leads to the final event of interest to us – and thus identifies potential problems. For example, think about customers who want an explanation of their first invoice. What percentage of these customers look for this information in the application? On the website? How many finally connect with the consultant? Perhaps the information about the invoice amount is unclear to customers or located in the wrong place in the application. Analytics supports the operator in building and testing many customer journeys, leading to the final event and choosing the optimal path for individual customer groups.
Moving customers to remote channels brings challenges that are less relevant in traditional contact channels with the operator. For example, when negotiating a renewal contract in a store or a telesales channel, a properly motivated salesperson can effectively investigate the customer's needs during the conversation and persuade them to sign a retention contract, not necessarily offering an additional discount.
In the digital channel on the other side of the client, there is no longer a living person but an algorithm. It should offer, in real time, an offer attractive enough for the client to accept it. On the other hand, it should not give out discounts all over. Here, too, analytics comes in handy. It can segment customers based on their price sensitivity and tendency to resign. Then the system can select the appropriate discount level based on the available data.
The examples presented here are only a tiny part of the possibilities that analytics provides in digitizing the area of relations between the client and the operator. The following articles will present other practical examples of analytics in telecommunications companies.