Tuesday, July 02, 2013

Telcos and trust

It has been an interesting time in telco land recently.  It is impossible not to notice that telcos are rediscovering consumer trust as an important lever in delivering financial results.

One can see this in the extent to which customer service features in recent presentations. Improving customer satisfaction was the first of the four strategies listed by Telstra in its Investor Day presentation in October.

Optus' Kevin Russell titled his recent AICC adress Transforming Customer Experience.  In that speech he said " Standards of service in Australia relative to standards of service that I'd seen change in the UK, just seem to, in my view, have gone backwards."

Optus also released research  on Customer Service: Perceptions & Expectations. The research showed negative advocacy scores for the telco sector - that is assumed to be a measure similar to the Net Promoter Score.

Vodafone's Bill Morrow was more direct in comments reported by The AustralianHe said "2013 is all about trying to earn back trust.."  He added "Mr Morrow's presentation outlined a journey for Vodafone from "low trust" in 2011 to "most trusted" by the end of the year." 

All these comments came to mind when today I read an item from the UK about Sainsbury becoming an MVNO.  In part the report read:

Called Mobile by Sainsbury's, the service is due to launch this summer and aims to remove what it claims is the stress of choosing a suitable mobile tariff.

"Our customers trust us to provide top quality products and service at fair prices, and Mobile by Sainsbury's feels like a natural extension of our brand as well as a great way to reward our customers," said Luke Jensen, group development director at Sainsbury's, in a statement.

There is that word "trust" again. 

Students of marketing, and more specifically the real science of markets that is economics, know how important brand and trust are in the context of markets with assymetric information.

The strategy in the Sainsbury case is to try to take the brand value from retail to mobile, in a belief that the brand value can withstand the negative effect of the telcos.

The practical reality seems to be from telcos however that the negative effect of the mobile ecosystem will damage any brand.

There is an alternative route for telcos which is to reduce the extent of the information assymetry. 

(Technically I think there are three responses to the market for lemons. The first is to remove the information assymetry.  The second is to provide a warranty against the negative outcomes.  The third is building trust as a supplier.  Clearly both the first two can be used as part of building the third.)

One of the most important questions is whether this problem really can be solved by each telco alone or whether there is an over-arching issue that requires co-operation.  I touched on this in a TJA article in 2010.  I also addressed the issue of why competition doesn't necessarily result in improved customer service in a submission to the ACMA.

The signs are there that the three mobile network owners in Australia understand the dimension of the problem.  If they think the value in the response is only in a battle for market share then there will be no co-operative action.  But if they recognise that the outcome can be increasing the perceived value of their product there might be a different approach.


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