Future-proofing the mobile network brand: the text-to-switch revolution.

The catalyst
Big changes are coming in the world of network providers: in Dec 2017 OFCOM, the UK telecoms regulator, declared that all mobile network providers must have a Text-to-switch system in place by July 1st 2019. This means that customers who wish to switch networks will no longer need to call up their provider, potentially going through a long and sometimes painful process with the retention team. Instead, they can simply request their PAC code to switch provider via a free text message.

This decision has potential ramifications for UK providers. Our GB wide survey suggests that while currently 42% of contract smartphone owners say they would consider switching to a different network, this figure rises to 48% when Text-to-switch is explained to them. This may not sound like a big increase now but it’s likely that for the majority in our survey this was the first time they had heard of Text-to-switch. As awareness grows over the coming years and text switching becomes part of mainstream mobile culture, we expect this competitor consideration figure to rise significantly.

So, removing a key barrier to customer inertia means that it will be more important than ever for providers to differentiate and be proactive to retain their customer base. In the context of greater competition and falling revenues, how well mobile network providers adapt to this new reality could influence the structure of the telecoms sector for the next decade. We believe that there are several areas where mobile network providers could achieve a much truer understanding of their customers – and so differentiate their services more effectively.

New propositions and differentiation
Over the past decade, the UK telecoms market has changed significantly, and it continues to evolve. Triple/quad play providers like Sky and Virgin Media are making a much bigger play with exceptionally competitive deals to bolster their customer base. MVNO’s like Tesco Mobile and giffgaff have matured, with improving consideration from consumers. These challenger brands are squeezing the customer bases of the bigger MNOs Vodafone, EE, O2 and Three with cheaper, simpler offers, demonstrated by the rise in popularity of SIM only contracts, as some consumers keep their handsets longer and others purchase new (or refurbed) phones separately.

So, looking to the future, how can network providers overcome these problems? Let’s start with differentiation. Most networks offer similar contract types, the main differentiator being price – but lowest price doesn’t guarantee purchase, as a long tail of other factors come into play in the mind of the consumer. Crucially these are not just rational factors (like price, call coverage or 4G data coverage) but emotional factors too (trust, loyalty, fear of the lesser known), many of which are difficult to quantify through traditional ‘explicit’ survey questioning.

Understanding key category drivers of choice and differentiators at a deeper unconscious ‘implicit’ level is becoming ever more important as the market becomes increasingly commoditised. Our neuroscience techniques can determine your true strengths, weaknesses, assets and perceptions and identify any ‘white space’ of opportunity for your brand.

Retail experience and customer service
Another key area of differentiation is the role of the retail estate: is this something that operators need to offer, as we move to an online world? Especially as it is possible to be successful without any physical retail space, as an ever-increasing number of MVNOs (such as giffgaff) have proven.

Put simply, retail outlets essentially have three roles: as CRM space in which to interact with existing customers (usually on a mission to query a bill, fix a phone or get tech support); as an experiential space for customers and considerers to browse phones and offers; and as permanent advertising for that brand, ensuring it stays top-of-mind.

These stores offer peace of mind to the significant number of customers who like to know there is a person to talk to if something goes wrong and it can’t be resolved on the phone or online: our GB wide survey suggests that 26% of respondents say they would only consider a network operator that has its own outlets.

Rewarding loyalty and building brand love
Rewarding loyalty is another lesser-tapped area of potential to add value. Customers want to be rewarded and feel that they are valued by their networks. Most providers are now taking steps towards this, but these activities are currently only on a relatively small-scale (Vodafone Treats, Three’s Wuntu scheme) or require conscious effort on the part of the customer (O2 Priority). While Text-to-switch will generate higher levels of churn, we also know that when it comes to switching, consumers who have more focused goals (such as getting the latest iPhone on the best deal) are more likely to switch whilst those who are more open minded or less focused have a higher chance of ending up staying with their incumbent provider – the inertia factor.

Part of a brand’s planning for increased churn should be to make itself more likeable. With the advent of Text-to-switch, network operators will be adjusting their thinking and forecasts to acknowledge that a proportion of customers will depart with neutral or even positive memories of the relationship. These ‘happy leavers’ who have simply switched to get a better deal elsewhere should be viewed as potential future returners, but what is the likelihood of returning? The concept of happy leavers will be familiar to networks like giffgaff where many customers are not tied in to long term contracts, but it may represent a shift in thinking for the likes of EE, Vodafone, and O2.

The future: proactivity and transparency to build lovable brands
With positive inertia playing a historical part in retention levels for providers, suggesting a policy which proactively offers a more suitable plan to existing customers would in the past have been rejected by strategists based on the endeavour being less profitable in the short term. Long term, however, that is exactly the kind of transparency that could help network providers become more likeable; driven home by an honest ‘because we want you to stay’ message. It does, however, take confidence from management and investors for companies to think long term so it will be interesting to see how this develops in the next few years.

So, with a likely faster evolving market from 2019, having a distinct and appealing brand while maintaining and growing loyalty amongst the customer base will become even more critical. Walnut have a team of telecoms and retail sector experts who are adept at helping clients understand true customer needs and purchase drivers, identifying ‘white space’ to evolve brand positioning in crowded markets and employing cutting edge techniques such as our industry leading neuroscience practise to get to the heart (or brain) of what customers really think. That’s what makes us the human understanding agency.

To discuss this further, please speak to:
Becky McGee, Associate Director: Becky.McGee@walnutunlimited.com
Richard Snoxell, Research Director: Richard.Snoxell@walnutunlimited.com

References
https://www.ofcom.org.uk/about-ofcom/latest/media/media-releases/2017/switch-mobile-provider-with-a-free-text
Walnut Omnibus survey among 1,375 adults 16+ who have a smartphone with a handset or SIMO contract