Looking for a little SATISFACTION

For telecommunications providers in general, customer care has been an acquired taste. Getting network operators to think proactively about improving customer service and gauging how their operations affect customer attitudes has not been the easiest thing to accomplish.

As competitors enter the market via PCS, cellular and PCS providers alike will have to make customer care a big priority.

"Everyone is going to have to provide exceptional customer service," says Richard Lyons, executive director of Cellular One.

As recently as one year ago, customer churn in the cellular industry hovered close to 50% per year. Many experts now say it is around 30% per year.

The drop is partly due to an increased customer focus by carriers. In fact, some operators believe that customer churn may now be as low as 12% per year, or 1% per month. The discrepancy, they say, is based on the idea that many service disconnections are unfairly counted as churn.

The reduction in churn, however much it is, signals that wireless carriers have at least recognized the problem. Still, with only a few wireless companies to choose from in most markets, the right price or a little boost in service could be just enough to keep someone from moving to the other guy.

In fact, in many markets-without even considering price, service, free minutes, coverage or contractual obligations-an existing cellular provider has a 50/50 chance of winning or keeping a customer. Offering modest benefits can only improve those chances exponentially, meaning that keeping a customer in this day and age perhaps should not be as big a mystery as it was for so long.

One thing is certain: The odds shrink when there are three, four or five competitors. That day is unavoidably near.

The key to keeping customers, or recruiting loyal customers, when that day comes may lie in better understanding what most satisfies customers, the combination of factors likely to provoke customers to switch service providers, and the requirements for earning their loyalty.

Looking for Answers Coopers & Lybrand Consulting's Information/Communications Industry practice has been working with several long-standing cellular carriers, advising them regarding the increasingly competitive wireless market conditions and exploring ways for them to maintain strong relationships with their customers.

The agency, working jointly with Response Analysis Corp. of Princeton, N.J., devised and conducted a study on customer satisfaction and loyalty called "Wireless Voice of the Customer: Improving Wireless Customer Satisfaction and Loyalty." The study was driven in part by the theory that improved customer service can play an important role as a competitive strategy for incumbent wireless carriers, says John Patberg, a Princeton-based partner in the Coopers & Lybrand practice.

The study also was driven by a theory that customer satisfaction can be measured through four key value drivers: products and packaging (network services), customer service, price and company image.

The tendencies of both high-usage and low-usage customers were considered in the study, as were various satisfaction factors, including purchasing behavior and motivation, length of time using cellular, amount of monthly bills, primary uses of service and need-based segmentation.

The study involved about 600 users in three cities: San Francisco, Atlanta and Washington, D.C. Users were customers of Cellular One, Bell Atlantic, GTE Mobilnet, AirTouch and BellSouth Mobility. At least one-third of the study participants were considered people likely to switch services. More than a third averaged monthly bills of at least $100. Well over half had been cellular customers for at least two years.

Among the key value drivers, study participants were asked several questions to determine the importance and satisfaction ratings for each.

One surprise: Despite the fact that customer churn has been a troublesome fact for the cellular industry, and that operators talk about what kind of customers are most likely to switch, it was very hard to identify actual incidents of switching as the study progressed, says Patberg.

Also, in spite of the belief that good customer service will keep customers, the study found that "by far, price outweighed everything else," he adds. Among other curiosities, customer satisfaction levels for wireless were far below known satisfaction levels for wireline service, but strangely, customer loyalty levels were equal or higher to those for wireline.

These findings may signal to some carriers that customer churn is no longer such a critical issue, or that the possibility of losing customers to new PCS players is not a great threat.

However, network operators should not infer from these results that they can eschew service refinements because customers are not willing to switch providers. Rather, Patberg says these findings probably have a more telling significance.

"Customers may be saying, 'I'm not happy, but where can I go?' You have basically got a lot of duopoly situations in the industry right now. The market wants some new choices," says Patberg.

Faced with new choices, customer loyalty figures could turn out looking much more like the low satisfaction numbers.

The study also predicts that price, however important, still will be less significant in the years to come. "We're estimating that it will drop out of the equation over the next five years," says Patberg.

The reasoning: Early indications are that many PCS operators will try to compete heavily on price. The first three regional PCS networks in operation-Sprint Spectrum in Washington, D.C., and Western Wireless' VoiceStream in Hawaii and Salt Lake City-all offer consistently lower prices than the existing cellular carriers in these markets.

"You'll run into very few industries where irrationally low pricing has sustained competition. The airline industry may be one," says Patberg.

Other elements of wireless service are expected to emerge as the significance of price wanes.

Brand image, customer service and network quality, especially in terms of coverage and reliability, probably will pick up the slack.

Cellular incumbents are certainly better situated to take advantage of the coming change.

"The incumbents do not have to try to win customers to get going. They can instead concentrate on helping their existing customers perceive a difference in service now," says Patberg.

However, even as a boat load of PCS competitors are only months away from arriving on cellular shores, it is still sometimes difficult to wean incumbents away from strategies designed primarily to boost subscribership.

Perhaps the new PCS carrier can take advantage of this opportunity. "It seems there is a market segment opportunity for people to invest in superior networks, services and customer service. A smart new entrant doing this could attract some customers," says Patberg.

Cellular companies that question this view need to look no further than the development of the existing market over the last 12 to 13 years. History has shown that there is always a change in the importance of certain service attributes over time. For example, customer service is far more important in the overall picture than it was five years ago. "That fact provides evidence of what could be coming," says Patberg.

The Road to Satisfaction Existing network operators may be able to learn a few things from these trends. Many of the particulars of the Coopers & Lybrand study also will help them to better know their customers and prevailing market attitudes.

As noted, some findings reinforce common beliefs about the market. All aspects of network service-dropped calls, call connection, coverage area and static/silent periods-were rated as "very important," by almost 75% of those surveyed.

However, in general, carriers still have not met such needs in equal stride. Barely more than one-third of those surveyed said they were "very satisfied" with how their current service addressed each area of network services.

Cost of service, one of four factors in the value driver of price, was rated by 77% of participants as important, seemingly making this the single most dominant service consideration for wireless customers. However, less than 20% of survey participants said they were satisfied with price as a comprehensive driver of value.

Also, certain factors of other value drivers were nearly as popular as cost of service, including a customer service representative's ability to solve problems, the level of trust a customer perceives in an operator, and the overall value image of the operator, as well as all elements of network service, says Patberg.

Importance ratings for the factors of different value drivers do vary somewhat based on how long customers have had service. For instance, survey respondents who have been customers for less than one year favored company trust slightly over cost of service. Customers with service for up to five years rated both company trust and knowledge of customer service representatives as the single most important factors. Customers with service for more than five years rated cost of service and number of dropped calls as most important.

The study reveals some general perceptions about the nature of customers, and in particular about those who have a tendency to switch.

Overall, Coopers & Lybrand used the study data to identify five needs-based clusters of customer types. "Value seekers" were characterized by low monthly bills, usage based on specific needs and spending limits, extreme price sensitivity, limited usage experience and personal calling. "Productivity users" were mostly business users with the heaviest calling patterns and extreme sensitivity to price. They were rated the most likely to switch service providers and demand high quality network service.

The "safety and simplicity" cluster contained customers who use wireless primarily for emergencies and were least likely to call customer service. They also did not like the complication and restrictions of their calling plans and were poorly informed of their service choices. Many "cell phone as perk" users have bills paid by an employer or another third party. The segment has mostly light to moderate users, but also a few heavy users. These users are the least concerned with price but are interested in improved network and customer service.

The last group, "bargain hunters," wanted flexibility in pricing plans, were extremely price sensitive, and accordingly were extremely likely to switch providers. These users were the most knowledgeable about their service choices.

"Cell phone as perk" users provided the highest satisfaction ratings and may best fit the profile of the emerging generation of wireless users, says Patberg. Further analysis of this customer group could reveal the future needs and expectations of the developing market, he adds.

Among customers likely to switch service providers, switchers were less satisfied than non-switchers across all service attributes except price. Also, customers using cellular for personal needs are more satisfied than those using it for business.

Customers with bills of less than $100 a month also were found to be consistently more satisfied across all four value drivers than customers spending more than $100 a month.

In addition, a switching pattern develops among people who have a tendency to switch service providers. Generally, the common reason that most switchers give for switching is that they got a "better deal" somewhere else. Satisfaction in respect to specific value drivers did not seem to have much bearing.

Getting Down to Business The study will likely serve as a cornerstone for ongoing analysis of the wireless market. The identification of specific trends may already give carriers some clues as to how to formulate new service strategies.

Gauging customer satisfaction can be a slippery subject, but it will get carriers much further in an increasingly competitive market than relying on past perceptions.

In what is perhaps a surprising finding, Patberg says researchers determined from the study that poor customer service experiences do not necessarily drive customers to switch service providers. "That's when you know the clouds are thick and black and low," he says.

However, part of the nature of competition is showing the market the possibilities-the potential for a different way. We may find out over a matter of a few short years whether or not a spate of new possibilities can change the face of an entire industry.