And is this counteroffer a good or a bad idea?

I just had an interesting experience with Movistar a couple of days ago. It seems simple, but I would like to note down a couple of thoughts.

BACKGROUND

I had decided some time ago to cancel the contract for the 3G mobile dongle I had with them. Why? I very seldom use it and, truth be said, in the places where you DO need it, the quality of the connection is really poor and the download speed is simply unacceptable (I had never before seen speeds in the range of 1 Kb/s – and maybe the thing was rounding up the figure, by the way!)

Of course I did not want to pay for the lock-in (the dongle was subsidized, so you have a binding period), therefore I waited till the lock-in expiration date.

SO…

I first tried the web, of course but when I got to the line information – oops! It was not working (it might have worked out that way by design – I mean, I was logged in, so they could probably check all previous contact history and ‘subtly’ redirect me to the call center).

So, I called. After the first agent identified me and learnt that I wanted to cancel the line, she put me through to the cancellations department. This was almost immediate.

WHAT MOVISTAR DID…

After re-confirming my identity, the second agent asked whether I had ADSL with them (which I do) and, after checking the fixed line number and confirming that I was ‘eligible’, the agent pretty straightforwardly (read: immediately) offered me to keep the dongle at no cost for as long as I kept the ADSL service, with a reduction to 100 MB of the maximum speed [1].

The idea (well, the official selling message) is that, when you are not at home, you keep some connectivity with you (this is no breakthrough: for instance, many years ago operators started to apply to your outgoing mobile costs the same rates that applied to calls made from home, e. g., flat rates for domestic calls, if you were home – well, actually, close enough, of course: this is based on multilateration and/or other alternative techniques, although multilateration is less intrusive).

SOME REFLECTIONS:

– Apparently, this is something that happens a lot, and Movistar prepared the process some time ago (no improvisation on the side of the agent, I can tell you!). Important:

  • You sense that they appreciate your time (at least in my case): she was really diligent!
  • They have immediate access to all information and checks needed. This is especially important when the customer’s initial mood is bad and you want to win him back!

– The script and communication is well crafted and delivered: you get immediate confirmation that you will have no costs (this is what you wanted!) and then they right away explain the benefits. Straightforward and to the point. Very important: you do not get the impression of careless folks sticking to a script (though, of course, there is one behind). Maybe one of the first evidences of the effectiveness of moving some customer care activities back from offshore locations?

–  It is good for me, as a customer: I keep some extra connectivity at zero cost…

– … or maybe simply not bad: prices give information about the value of goods & services. They would probably got some had they priced it at, say, 0.5€ month. My guess is that they know that any non-zero price would be a non-starter [2] and do not want any bargaining… It’s not worth the cost – not even of the CC agent’s time [3].

– Maybe avoiding discussions on price altogether is a good way to go down the price squeeze path. Thus far, Movistar has been quite good at maintaining very sound margins, despite the increasing concurrence.

– Probably the most important thing from a customer satisfaction perspective is that it creates a positive experience of the relationship, whereas they started from a negative mood (I perceived that the service was not worth the money). +1.

– Would not you like to know how ‘eligibility’ is established? I would probably start by calculating it simply based on client baseline margin (ADSL, other mobile lines), the lost profit (of not charging by the dongle), and the cost of acquiring/regaining a customer (which I believe only goes down when, as in the case of a relative of mine, you already went pretty much through all operators in the market… or had an even worse experience with your new operator [3])

– It may help Movistar lock me in the ADSL (but not much, since I was willing to drop it altogether), and somehow help ‘fend’ me from competitors coming it via mobile GSM offers

– They keep the number (because I am not asking for a portability: this would have been, by the way, much more of a hassle for them)

–  It also helps them with other general metrics which market & financial analysts track and use to value companies & assess their performance, strategy, etc. (total number of lines, etc.)

– From a network resources utilization perspective, this means nothing for them (assuming the device works, you eat up the 100 MB quite quickly, and then you are probably served on a best-effort basis)

– They seem to be using quite effectively the fact that, for the most part (if not all) the network infrastructure used by ADSL is already amortized

– I would love to have some insights as to the internal calculations performed by the company, and the algorithms used to figure out profitability of ALL commercial actions!

– Both mobile and ADSL are segments where Movistar is seriously challenged by other operators, so these measures probably generate some synergies and help the company in defending BOTH

– It is going to be increasingly difficult for pure play mobile operators to compete at a global level. My guess is that the big players will be those with all network types (including FTTH) , offering TV, video, fixed & mobile internet & other data services.

WHICH ISSUES MAY BE AT STAKE HERE?

– Movistar’s need to cut ADSL market share erosion as much as possible while fiber customer acquisitions take up (Movistar would like to move all ADSL customers to fiber, of course, but pure-play ONO and others also want to take them)

– The fight for mobile market share

– Reduction of retention costs

– Leveraging existing technology & capabilities (OSS & BSS systems) to quickly respond to market pressures…

-…

NOTES:

[1] The typical contract gives you a certain amount of data (I had formerly 500 MB/month) that you can download at maximum speed (a few MB/s – the actual figure can vary a lot, of course). After you have downloaded it, the speed simply drops to what is probably a useless one for all practical purposes.

[2] Maybe the agent had some earlier info about my intention: I had called some time ago, but did not cancel at that time due to the lock-in penalty I would have had to pay. As for service value for the customer: you can get some interesting information by combining how much I do NOT want to pay for cancellation and how much I am willing to pay as part of the normal service (till the right moment comes to do away with it). Now, I suspect that some of these decisions are sort of ‘principle-based’, not necessarily the result of cold calculation, e. g., “They’re not going to make a profit out of my dissatisfaction!”

[3] By the way, accurately calculating individual product profitability (e. g., ADSL Internet, Imagenio, mobile line, etc.) vs. package profitability and how you create or destroy value has always been important, of course. Maybe we should start attaching specific value to the dependencies or connections between the items, and not the individual products?

[4] I do not know to what extent the phenomenon has been analyzed, but I am pretty sure that whenever you create a bad experience with a new customer (e. g., after a porting) you automatically reduce the cost for winning back the customer for the FORMER operator. This probably needs some statistical analyses, but it could give you an edge if you can somehow track/monitor former customers’ dissatisfaction (e. g., scanning social media)

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