PATHFINDER REPORT Subscribers Demand New Communication Methods from Service Providers OCTOBER 2016 COMMISSIONED BY COPYRIGHT 2016 451 RESEARCH. ALL RIGHTS RESERVED.
About this paper A Pathfinder paper navigates decision-makers through the issues surrounding a specific technology or business case, explores the business value of adoption, and recommends the range of considerations and concrete next steps in the decision-making process. About 451 Research 451 Research is a preeminent information technology research and advisory company. With a core focus on technology innovation and market disruption, we provide essential insight for leaders of the digital economy. More than 100 analysts and consultants deliver that insight via syndicated research, advisory services and live events to over 1,000 client organizations in North America, Europe and around the world. Founded in 2000 and headquartered in New York, 451 Research is a division of The 451 Group. 2016 451 Research, LLC and/or its Affiliates. All Rights Reserved. Reproduction and distribution of this publication, in whole or in part, in any form without prior written permission is forbidden. The terms of use regarding distribution, both internally and externally, shall be governed by the terms laid out in your Service Agreement with 451 Research and/or its Affiliates. The information contained herein has been obtained from sources believed to be reliable. 451 Research disclaims all warranties as to the accuracy, completeness or adequacy of such information. Although 451 Research may discuss legal issues related to the information technology business, 451 Research does not provide legal advice or services and their research should not be construed or used as such. 451 Research shall have no liability for errors, omissions or inadequacies in the information contained herein or for interpretations thereof. The reader assumes sole responsibility for the selection of these materials to achieve its intended results. The opinions expressed herein are subject to change without notice. NEW YORK 20 West 37th Street New York, NY 10018 +1 212 505 3030 SAN FRANCISCO 140 Geary Street San Francisco, CA 94108 +1 415 989 1555 LONDON Paxton House 30, Artillery Lane London, E1 7LS, UK +44 (0) 207 426 1050 BOSTON One Liberty Square Boston, MA 02109 +1 617 598 7200 2
Executive Summary We are currently witnessing a dramatic shift in the balance of power between communication service providers (CSPs) and their subscribers. Fueled by increased adoption of internet use, mobile technologies and social media, today s empowered subscribers have access to more information, choices and opportunities. They decide what they want, and also where and how they want it. The effect is that subscribers dictate the terms of engagement with businesses, including with their CSP. As a result, it is now all about how CSPs embrace digital transformation to create extraordinary online experiences for their subscribers. Digital experiences represent a revolutionary shift in the brand-customer relationship. These driving factors have given a voice to customers, who now expect businesses to rise to the occasion. In a study conducted by 451 Research and commissioned by Nominum, we set out to gauge consumer attitudes toward new forms of digital engagement for CSPs. We examined attitudes toward existing communication approaches and emerging methods such as in-browser messaging, which sends push notifications that appear in a subscriber s web browsing window. Key Findings Providers must make critical adjustments to the customer experience in a manner that aligns with the current digital era, where consumers are almost always online and expect self-directed, on-demand, two-way engagement anywhere, on any device to ensure a positive experience. While CSPs provide an email address to their subscribers, the vast majority of the communication to this account proves to be ineffective, even if the customer does check it. Service providers are vying for attention against subscribers personal email accounts (such as Gmail), which also typically offer sophisticated filtering capabilities. Over half (53%) of our respondents stated that important emails end up in spam folders. Of subscribers we surveyed 86% STATE THAT IN-BROWSER MESSAGING IS IMPORTANT FOR SECURITY ALERTS AND AD- VICE ON HOW TO FIX PROBLEMS 83% ARE WILLING TO BE NOTIFIED FOR THE PURPOSES OF BILLING AND PAYMENTS 83% OF CUSTOMERS ALSO PLACE IMPORTANCE ON PROACTIVE ALERTS FOR CUSTOMER EXPERIENCE IMPROVEMENTS The three most popular in-browser messages were: PROACTIVE CUSTOMER EXPERIENCE MESSAGES SUCH AS BILLING REMINDERS (E.G., PAYMENT DUE, PAPERLESS BILLING) SECURITY ALERTS (E.G., DEVICE INFECTION) SERVICE NOTICES (E.G., SCHEDULED OUTAGES, APPOINTMENT REMINDERS) Methodology 451 Research s custom research includes best-in-class web surveys to capture data from end users. For this effort, the process included a web-based survey (n=200 US; n=200 UK). We focused on respondents that are TV, broadband and wireless account owners between the ages of 20-64 that generally lean toward SMS as a preferred communication method. 3
What Is Digital Transformation? The subscriber experience is a catalyst in many digital transformation projects. It is why many CSPs invest in new digital technologies and processes to more effectively engage their customers. The essence of putting digital technologies to work in a transformative way is to ensure that data and insight connect people with the right information, which ultimately leads to a better experience for customers. As businesses adjust to the dynamic of the empowered customer and changing customer expectations, it is important to realize that digital transformation is more than just an IT strategy. Digital transformation is the result of IT innovation that is aligned with, and driven by, a well-planned business strategy with the goal of transforming how organizations: Serve customers, employees and partners Support continuous improvement in business operations Disrupt existing businesses and markets Invent new businesses and business models. CSPs want to adapt to the age of empowered customers, and their connectivity and customer experience demands. There are forces of change that must be embraced in order to stop asking customers to adapt to CSP-driven processes or technology constraints. Additionally, there are fresh competitive threats from new entrants, along with over-the-top (OTT) providers that are not only disrupting existing business models but also providing proven agility and superior customer experiences. Last, huge amounts of data now available must be used strategically to create contextually driven engagement. Figure 1: Forces of Change Driving Digital Transformation Empowered Customer Demands Maturing, Disruptive Technologies Self-Service Omnichannel Immediate Personalized, Immersive Customer Experience Disruptive Competitors Mobile Cloud Digital, Agile Processes Customer Experience Shifts Speed to Market Traditional Competitors New Digital Entrants (OTT) Social Contextually- Driven Action Niche Players Dynamic Big Data Self-Learning Intelligent Systems of Engagement These driving factors give a voice to subscribers, who now expect their CSP to rise to the occasion. In this new world order, delivering a differentiated experience is not a luxury, but a necessity to survive. 451 Research clearly demonstrates that subscriber experience is an essential opportunity for real competitive differentiation. 4
The Digital Communication Gap Between CSPs and Subscribers In today s world of rapid communications, where consumers are almost always online, there is a communication gap between service providers and subscribers. While CSPs provide an email address to their subscribers, the vast majority of the communication to this account proves to be ineffective, even if the customer does check it. On average only 64% of survey respondents stated that they have a CSP-provided email address. However, there is a big gap between age groups in our study 83% of respondents ages 55-65 claimed to have a CSP email address, vs. only 31% of respondents ages 20-24. Delving further, the situation looks even grimmer, with 22% of respondents never checking this email account and 40% checking it only monthly. Service providers are vying for attention against subscribers personal email accounts (such as Gmail), which also typically offer sophisticated filtering capabilities. Over half (53%) of our respondents stated that important emails end up in spam folders. Our data also shows that 62% of respondents said they receive too many emails from businesses this skyrockets to 81% for 20-24 year-olds. Among this group, 63% said that requested promotional emails also get lost. Figure 2: Email Proves to Be a Poor Communication Channel Big Gap Grim Situation 83% 31% of respondents ages 55-65 of respondents ages 20-24 83% of respondents ages 55-65 stated that they have an ISP email address, while only 31% of respondents ages 20-24 claimed to have one. 22% never check ISP email account and 40% check only monthly Lost in Shuffle 53% of respondents had important messages end up in spam folders NEW CHANNELS ARE NEEDED TO DELIVER THE COMMUNICATIONS TRIFECTA: RIGHT MESSAGE, RIGHT TIME, RIGHT TARGET Yesterday s world was about one-way customer interactions; today s world is about self-directed, on-demand two-way engagement anywhere, on any device to ensure a positive experience. Customers want to communicate on their terms in their preferred channels. Depending on the urgency, nature and overall context of the customer s situation, new forms of digital communications are one of the most important engagement opportunities, with many interactions beginning on mobile devices. Situational context and personalization are now required elements of an ideal customer experience. Any communication channel can provide basic personalization and can be tuned to its user, but true context should encompass much more including an individual user s location, current plan/services, stated preferences and online behavior. By capturing this data, businesses can gather analytical insight while facilitating a proactive customer interaction along their journey. It can also be more effective when combined with new digital communication tools that do not require an email address, phone number or direct mail. 5
The survey explored customers overall awareness and willingness to embrace in-browser communications. These messages usually provide a 90% view rate among the target audience within 24 hours of being sent. Digital communications can also encompass new rich-media engagement options, including videos, surveys and feature-rich web landing pages that are delivered to subscribers digital devices such as smartphones, tablets and desktop computers. Not only are customers generally willing to accept these communications, but they also deliver 5-15 times higher conversion rates compared with other communication methods. CYBERSECURITY There are various ways and reasons to engage customers via in-browser communications. According to our survey data, the most widely accepted value-added service is one that would protect subscribers from potential cyber threats. For example, protecting the home from malicious internet bot activity that deteriorates service will help CSPs retain subscribers and inspire brand loyalty. Figure 3: Cybersecurity Defense Q. On a scale of 1-10, how important are security alerts that notify you of an infected device and help you fix it? 86% 5% 9% 19% 67% 0% 20% 40% 60% 80% 100% Low (1-3) Low-Medium (4-5) High-Medium (6-7) High (8-10) Mobile devices are also not immune to threats such as phishing, malware, ransomware, online scams and fake antivirus products. Figure 3 shows that 86% of customers in our survey would accept in-browser messaging for important security alerts and advice on how to fix security-related problems. 6
BILLING AND REVENUE MANAGEMENT Figure 4 illustrates another popular use case regarding the ability to improve billing and revenue management. Of our survey respondents, 83% said they want to be reminded of a late bill, which can save on late fees or reconnection charges. These alerts can be used to improve service providers accounts receivable performance metrics by increasing the number of customers who pay on time. Service providers can recover past-due accounts with a series of progressively urgent messages, each with a click-through to a payment portal. Alerts can also be used to encourage paperless billing and promote autopay options. Figure 4: Billing and Revenue Management Q. On a scale of 1-10, how important are billing alerts that notify you of upcoming bills and payment options? 83% 8% 9% 23% 60% 0% 20% 40% 60% 80% 100% Low (1-3) Low-Medium (4-5) High-Medium (6-7) High (8-10) CUSTOMER EXPERIENCE In-browser notifications can also be used to improve the overall customer service experience. CSPs can use such alerts to familiarize subscribers with new services to create a positive onboarding experience. They can also meet consumer demand for a more personalized experience by showing subscribers how to customize their online settings in real time to reflect personal preferences and values. Specific subscribers can also be targeted with online surveys for customer feedback. Yet one of the more popular use cases is to provide proactive notifications for outages and upcoming service appointments in order to enhance relationship-building and brand loyalty. Figure 5 shows that 83% of customers place importance on proactive alerts for issues such as network downtime and technician appointments. Figure 5: Proactive Customer Experience Alerts Q. On a scale of 1-10, how important are alerts that notify you of network downtimes and technician appointments? 83% 5% 12% 26% 57% 0% 20% 40% 60% 80% 100% Low (1-3) Low-Medium (4-5) High-Medium (6-7) High (8-10) 7
MARKETING AND PROMOTIONS While customers are more sensitive today in terms of their willingness to receive promotional material, our data does show that if personalized correctly, in-browser messaging can be used effectively for cross-selling opportunities that focus on customer loyalty and retention by providing the right offer at the right time. With in-browser messaging, CSPs can promote new services with messages that align with subscriber behaviors and preferences, such as alerting subscribers at predefined data usage thresholds in order to help customers manage spending, or offering premium services and upgrades that inspire provider loyalty. Figure 6 shows that 61% of those surveyed are willing to accept notifications of new services. For example, service providers can promote paid content and on-demand video services, and launch context-aware promotions for premium entertainment services when subscribers are most likely to buy. Figure 6: New Services, Upgrades and Trial Offers Q. On a scale of 1-10, how important are offers from your Service Provider that notify you of new services, free trials and upgrades? 61% 19% 20% 28% 33% 0% 20% 40% 60% 80% 100% Low (1-3) Low-Medium (4-5) High-Medium (6-7) High (8-10) Figure 7 also illustrates the potential to open new revenue streams by presenting third-party promotions from authorized partners. Service providers are looking to embrace new business models that not only leverage their data assets, but also provide opportunities to capitalize on their audience with relevant offers from third-party advertisers. While this is relatively new, almost 30% of survey respondents said they are willing to accept such notifications. This is a strong metric for CSPs to explore, given that an average opt-in email rate on a website ranges from 1% to 5%. Figure 7: Third-Party Promotions Q. On a scale of 1-10, how important are offers from third-party promotions? 30% 49% 21% 18% 12% 0% 20% 40% 60% 80% 100% Low (1-3) Low-Medium (4-5) High-Medium (6-7) High (8-10) 8
PATHFINDER REPORT: SUBSCRIBERS DEMAND NEW COMMUNICATION Best Practices for Implementing In-Browser Messages New channels of communications are destined to be used widely among service providers, especially as customers rapidly begin to accept and prefer different modes of communication. Service providers will find a mutual acceptance of these applications as an effective method of reducing incoming calls to live agents in the contact center and, therefore, a welcome way to reduce operational costs and enhance operating margins. In addition, new opportunities arise to promote added value in terms of sales and marketing notices, personalized customer care, and the improved efficiency and financial benefits of enhanced billing and revenue management. In-browser messaging has the potential to directly share information in real time with all subscribers about service- and product-related topics. The right messages delivered at the right time, when the subscriber is online and engaged, can result in 10x higher click-through and conversion rates than traditional approaches. In-browser messaging can also be used to reach out to at-risk subscribers who have requested disconnection in an effort to reduce churn. Service providers can also lower costs by proactively reaching out to subscribers, which results in higher call-deflection rates. One provider we know retained 18% of at-risk subscribers and reduced call center traffic by 60% with such messages. UNDERSTAND HOW TO SEND THE RIGHT MESSAGE AT THE RIGHT TIME It s important to bear in mind that not all messages are created equal. Figure 8 illustrates survey respondents willingness to accept different types of messages from their providers. Respondents were asked to pick their top three choices among a list. The message types most willingly accepted by subscribers were: proactive customer experience messages such as billing reminders (e.g., payment due, paperless billing); security alerts (e.g., device infection); and service notices (e.g., scheduled outages, appointment reminders). These use cases also have strong business results. For example, in terms of security, subscribers with infected devices are 3.6 times more likely to switch service providers, and 8 times more likely to contact the call center. Figure 8: Significant Opportunities for In-Browser Notifications 83% Want Billing Reminders 79% Want Security Alerts Message Type 40% Want Privacy Notifications 45% Want 44% Promotions Want New Services 72% Want Service Notes Willingess to Accept 9
Although not among the top three choices, customers were still willing to accept promotional messages (e.g., phone upgrades, partner offers); new service announcements (e.g., parental controls, pay-per-view); and privacy notices (e.g., terms and conditions update). These messages have been proven to increase revenue. One service provider created a value-added internet safety bundle and promoted it using in-browser messaging and the 12-month adoption target was achieved in three months. The premium service bundle generated substantial new revenue and competitive differentiation. Another service provider launched a campaign targeted at subscribers who reached their data allowance. Within the first 24 hours, 16% of subscribers accepted the offer and added more data. PROVIDE INCENTIVES FOR PROMOTIONAL MESSAGES Since subscribers tend to be leery of marketing and promotional messages, the survey also explored ways to incentivize subscribers to opt-in. As shown in Figure 9, the two most popular incentives were to offer a price discount or an internet speed upgrade. However, there are creative ways to offer other incentives based on demographics. For example, respondents ages 55-65 showed higher interest in a free internet security add-on, while 20-24 year-olds cited a speed upgrade as their first choice. Figure 9: Increase Opt-in With Value-Added Free Services Q. As a reward for opting-in to receive promotional in-browser messages, which gift would you value the most? 83% 83% 47% 45% 26% 15% Free internet speed upgrade Monthly service discount Free movie every month Free internet security add-on Free cloud storage Free internet parental control add-on Conclusion and Recommendations Providers use in-browser messages for a wide variety of purposes, with measurable results. These messages can complement other communication methods, depending on the use case. The goal is to reduce customer friction and avoid critical messages getting lost in subscribers email accounts. Service providers should make it easier for subscribers to pay online or schedule automatic payments, direct infected or at-risk subscribers to safety tools, and send reminders so subscribers can confirm, cancel or move their service appointments. In-browser messaging can also be a tool for generating additional revenue with improved cross-selling and upselling opportunities. CSPs want to use promotional messages effectively for example, to promote appropriate services that align with specific subscriber behaviors and preferences, send alerts with incremental data options when subscribers reach their data limit, or to educate subscribers on premium services. Digital experiences represent a revolutionary shift in the brand-customer relationship, and service providers must make critical adjustments to the customer experience in a manner that accounts for and aligns with this overall digital shift. 10