Full Service Communication Services: Switcher Profile

Goals

To identify the type of residential and business customers that might be interested in switching to a full-service communications service (including voice, high-speed internet, automation services). Specific potential customer profiling behaviors include social media habits, streaming behaviors, shopping habits, and communication preferences (e.g., online, chat, phone). Additionally, to understand the types of bundles that resonate best with potential customers and would drive them to upgrade their communication services and their existing communication service pain points. This information will be used to inform a new business pitch.

Early Findings

Consumers: Residential Communication Services and Switching Motivations

  • A 2019 analysis of behavioral and survey research in the US, conducted by Broadbandnow, indicates that 39 million consumers switched communications services in 2018.
  • 38% of US consumers claimed "price" was the main motivation for switching or adding services, beyond moving (20%), higher quality (18%) or feature access (9%).
  • Service satisfaction increased as the number of services "bundled" together increased.
  • Streaming services led new TV subscriptions, with 26% of new TV subscribers saying they have "streaming only", while an additional 38% have TV streaming along with cable or satellite TV.
  • Cord cutters are most likely to cite "price" as a reason for switching.

Consumers: Switchers and Pain Points

  • A UK survey found that age and income have an inverse relationship to switching communication services, with those who are older with higher income less likely to switch. This is attributed in the study to the value of time over money for these higher income individuals.
  • "Bundled" offerings slightly reduce the likelihood of switching, as does having children in the household. A more recent study in Ireland suggests that households with children are more likely to switch for broadband services.
  • Consumers with internet-enabled smartphones are more likely to switch providers as well.
  • Pain points for current customers include poor customer service and price/value (including issues such as unexpected price increases after promotional period and hidden fees). In a recent Consumer Reports survey, 35% of respondents said they had no choice in terms of their bundle provider, while only 16% felt they received the best price for their service.
  • A recent UK survey found that 81% of millennials (compared to 67% of Gen X and 68% of baby boomers) wanted to receive information about telco bundles or products, implying further that younger consumers may be more open to switching. Their openness to receiving these communications may be driven by their high expectations of customer service, as well as a desire for personalized communications.
  • Streaming services are a draw for millennials, with the majority paying for at least one streaming service, and 59% paying for between 2 and 5 streaming services. Millennials are also far more likely than other generations to cancel pay TV.

Consumers: The Future of Communication Services

  • Connectivity, TV, and video will continue to drive interest in bundled communications services. However, Telco companies are looking to the future to diversify their bundled offerings, including smart home automation, iOt-enabled services, streaming games, and connected consumer devices.
  • Telco executives comment on TV as the core pillar for retaining their subscribers, with one executive commenting on a strategy of offering relevant content through partnerships, differentiating with unique content and exclusive sports, and offering a top-notch user experience. Another executive attributed the growth of their addressable market to the launch of a mobile-first OTT product.
  • Telecom companies are also exploring the use of advertising to defray costs for consumers.
  • Non-legacy bundles are estimated to represent 25% of bundled telecommunications services globally by 2021, driven by younger consumers (18-34) and the ability of streaming services (such as Netflix and Hulu) to offer services outside a traditional bundle.
  • Non-traditional bundles include combinations such as fixed broadband/smartphone or fixed broadband/fixed voice/OTT.
  • Growth segments, such as millennials, are looking for services, such as OTT.' In an Ernst and Young (EY) survey of telecom industry participants, 91% felt that OTT would have the biggest impact on consumer demand in the future.
  • Niche bundled services, such as fast broadband, smartphone, and HBO now, may have appeal to target audiences such as students.
  • Verizon recently launched a "Mix and Match on Fios" service to provide customized options at lower price points. Some options, which are intended to address some traditional frustrations, such as a fixed contract, include offering YouTube TV for $50/month, with the first month free. The entry level package, which costs $50/month, allows subscribers to select their top 5 channels out of a list of 200 channels. MoreFios TV offers 300 channels, for $70/month.

Businesses: Communication Services

  • Businesses value the benefits of internet communication, the ability to collaborate across teams, location flexibility, and customer service from their communications service providers.
  • Pain points for businesses include high costs, coverage issues, poor customer service, billing issues, inflexibility in managing multi-location operations, international travel costs, difficulty managing telecom inventory (e.g., cloud services, network surveillance, software licenses), and complexities associated with switching providers.
  • Some of the issues associated with provider switching include an inability of the company to identify their needs (and therefore, not getting the benefits and efficiencies associated with a bundled supplier), appropriately evaluate price benefits, and complexities associated with extracting the company from a previous supplier.
  • Bundled offerings, including cloud services coupled with value-add services, such as security features, are cited as a reason for businesses to upgrade or switch providers.
  • Lower cost, higher quality, and better customer service are three reasons for combining phone and internet services for businesses.
  • According to a 2018 survey of telecommunication industry participants, industry dynamics impacting the role of telecommunications include pressure to lower prices, competition from large web giants (e.g. Google, Microsoft, Amazon), and difficulty in adopting an agile service model. 61% of respondents said emerging technology and services will drive the future landscape of telecom services for business.
  • 5G availability and security services are 2020 business trends for the telecommunications industry as it relates to meeting the needs of business.
  • The business decision-making process is more complex than a consumer decision to upgrade or switch, as B2B buyers typically look at solutions on a modular level versus a system level. A typical business purchase requires approval by 6.8 decision-makers.
  • Verizon Business Solutions are highly rated, offering multiple service/pricing tiers, with the ability to bundle phone and internet, depending on the need. Their messaging is "experience affordable business internet that gets the job done."

Summary of Early Findings

  • In this early research, we uncovered information surrounding consumer motivations, pain points, and potential target audiences for communication bundles. We were able to establish that price and customer service are significan pain points for consumers, but they are also looking for customized features in their communication services. We found more information related to "switching" than "upgrading" (though some surveys addressed both), and our key insights are based on the information we were able to uncover (i.e., more likely to relate to switching than upgrading).
  • The research we uncovered suggests the growth potential in the industry lies in meeting the needs of younger consumers (younger millennials and Gen Z), who are more likely to seek customized bundles, switch, or adopt services outside a traditional bundle if it meets their standards of personalization and strong customer service. Early research also suggests that those who purchase bundled services tend to be more satisfied than those who buy individual communications services, and that these consumers may be slightly more loyal over a period.
  • We found information addressing the pain points of businesses as it relates to their communication products, as well as also identified numerous issues associated with switching suppliers, which may suggest more of an opportunity for service enhancements or upgrades. The needs of commercial enterprises are more complex than those of consumers (e.g. remote working, necessary bandwidth, security needs), and the decision-making process in businesses tends to be much more complicated and layered, which makes businesses a more challenging target for communication service offerings. However, these challenges may also offer new opportunities in the communications area, such as enhanced security offerings.
  • Finally, we were able to find that the telecom industry is adapting to the rapidly changing needs of consumers and businesses, noting one company, Verizon, who has begun to offer customized and cost-effective needs to meet these changing needs.
  • Our recommendations for further research are based on the information we found in early research.

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