The telecom industry plays a central role in our hyper-connected lives — and yet, our loyalty to our communications service providers (CSPs) has never been lower. Customers simply perceive their providers as connectivity pipes — thus, they can easily be lured away the moment their contract ends with the promise of lower prices, a better bundle or a new mobile device. However, customers who are happy with their service and have had positive experiences with the company are much more likely to renew. Unfortunately, telcos today are struggling to meet customer expectations, which has led to increasingly high churn rates. A modern eCommerce platform — specifically a composable solution — delivers benefits that can give telcos the competitive advantage they need. Here, we explain how composable commerce can help telcos improve customer retention rates and increase loyalty.
Having the ability to connect to others via our landlines, cell phones and the internet is intrinsic to our everyday lives — enabling us to work from home, connect with friends around the world, binge-watch TV on streaming services and share cringeworthy moments on TikTok. Despite this fact, the average churn rate for telcos globally has held steady at 31% for the last three years and growth is stagnant. Why? According to a recent survey, customers aren’t particularly pleased with their chosen providers: 46% canceled a phone, internet TV or cable contract with a telecom company in 2022. The same survey found that customer loyalty to their telecommunications providers is also down by 22% post-pandemic, with 1 in 5 customers unwilling to give their current provider a second chance after a poor service experience.
High customer satisfaction is the number one reason for customers to keep their provider. Roughly 60 percent of broadband and mobile customers indicate that satisfaction is the main reason they don’t consider switching to another provider.
That subpar customer experiences exist in the telecom industry isn’t news but remains a massive issue. Compared to other industries, digital transformation in the telecom industry is still moving at a slow pace. The sector is also struggling to cope with cutthroat competition from a multitude of digitally-native startups and non-conventional entrants. To remain relevant, telcos are investing big bucks into fast-speed networks, FIOS and fiber optics to enable increasingly sophisticated applications, from the Internet of Things (IoT) to the widespread emergence of Web3, virtual reality and more.
However, customers aren’t willing to wait for these investments to translate into concrete benefits. Without seeing advantages in the short term, coupled with remarkably low barriers to switching networks, they tend to jump ship from one telco provider to another without a second thought.
Telcos are in constant motion to reverse this situation, with horizontal diversification as a strategy to attract both consumers and business customers. Incumbent players have started offering their own streaming services (chief among them, Germany’s Telekom), plus broadband, satellite TV and expanding into the B2B market. While these new products create revenue streams, they also add to an already complex IT environment that lags behind on digitization and is composed of multiple legacy systems. With seven in 10 telco operators saying that integration with legacy technology is the number one barrier to digital transformation, it comes as no surprise that this industry struggles with disjointed customer experiences, inflated costs, and inefficient and manual processes.
We're realizing that we've got to be more than just a telco. Historically, if you're a BT customer, you might interact with us once a year to get a new bill, product or broadband upgrade. So, our challenge is that we've got to shift the narrative from being known as the largest UK telco to being the largest UK customer brand. One that people say, 'I love that brand. They helped me in my life.' There's nothing in our new branding about being a fast broadband provider or having the best mobile network. It's actually, 'We're here to solve your technology problems.
It’s clear that telcos can shift the narrative and evolve from mere connectivity pipes to brands worthy of customer loyalty by focusing on digital-first, omnichannel customer experiences. In fact, 54% of telecommunication decision-makers reported that improving customer experience (CX) was their company's top transformation initiative for 2022. Fact is, in any industry, adopting technology that gives you flexibility, scalability and speed is critical to being able to deliver experiences that exceed customer expectations today.
Signaling changes in CX: Goodbye legacy infrastructure, hello composable commerce
The telecom industry was built on top of back-office systems like revenue assurance, billing and customer data programs of yesteryear. A fragmented commerce landscape, including a POS platform for brick-and-mortar stores and a stand-alone eCommerce solution, is usually commonplace. Also, many telcos rely on a separate customer service platform to support customer inquiries reaching their contact centers. Usually, this menagerie of solutions fails to sync and share information, leading to data silos and disjointed customer journeys. Compounded with a vast catalog of products and services managed by disparate solutions, telcos face commercial limitations that have a negative impact on customer service, hindering their growth potential.
Bain & Company analysis finds that reducing customer churn by just 5% can increase company profits by up to 25%. Instead of trying to fill a leaky bucket of customers, telcos should focus on plugging the leak in the first place.
Composable commerce removes these legacy obstacles in favor of a flexible, scalable and agile infrastructure. As a modular development approach leveraging best-of-breed technology in digital commerce (think building blocks like search, cart or checkout powered by a library of interchangeable eCommerce APIs), telcos can build customer experiences without being limited by old tech.
A new line for growth: 5 benefits of composable commerce for telco carriers
Like other sectors, consumers and businesses expect a seamless omnichannel experience no matter where they engage and buy. With composable commerce, telco operators can connect journeys that include brick-and-mortar visits and digital interactions into one flow. This is because a centralized commerce engine can pull data (customer, product and inventory) in real-time and orchestrate interactions via APIs. In turn, customers have a cohesive brand experience regardless of where and how they engage with their provider.
On a composable platform, telcos can offer a wide variety of product types, bundles and promotions through multiple channels in real-time — a largely mission-impossible task with a traditional commerce platform.
For example, a Canadian telco streamlined its checkout experience with composable commerce. The communication service provider (CSP) can now support multiple product combinations in a single transaction, complex discounts and a range of digital-first services like price plan change across all brands, including its MVNO businesses. With cloud-native infrastructure under the hood, the telco can also autoscale online capacity during promotional waves.
While the B2C market remains stagnant, the B2B sector is booming. Significant technology advances including 5G, the IoT and AI in telecommunications are all primed for monetization and with a B2B composable commerce solution in place, telcos can begin to explore and capitalize on the commercial possibilities they present — including connected cars, fixed wireless access and managed enterprise mobility services.
Another Canadian telecommunications company enables businesses to buy, deploy and proactively manage mobility services with a customized portal. Behind the scenes, essential commerce components like Pricing, Promotions, Product Catalog and Cart make this tailored experience for B2B buyers possible.
In order to switch the public perception from commoditized connectivity pipes to loyalty-worthy brands, telcos need to reward customers for their continued business. Composable commerce enables telcos to implement loyalty programs faster and manage them more efficiently by seamlessly plugging in new, exciting components. This flexible infrastructure also allows telcos to experiment with new loyalty schemes, retaining what works and ditching what doesn’t — without affecting the overall infrastructure. In short, telcos can add exclusive rewards and promotions to enhance their offering stickiness in an agile way, maximizing customer loyalty without overburdening their systems or staff.
An incumbent British telecom operator aims to achieve this by creating bundles with value-added services, such as Netflix subscriptions. The telecom giant plans to expand loyalty programs to B2B customers with composable commerce as well.
In a nutshell, composable commerce enables telcos to create stickier relationships and become more resilient to market fluctuations and competitor moves.
With a composable commerce approach delivered via four core technologies — microservices, APIs, cloud native and headless (MACH® architecture) — the telecommunications industry can finally ax legacy platforms.
A composable stack means tech leaders can pick and choose the components that best work for the company in terms of performance and cost, instead of all-in-one platforms that provide vanilla features without customization or extensibility options. With a lean infrastructure, telcos can achieve higher cost-effectiveness as they only pay for what they use and can eradicate the hidden costs of technical debt.
Improve CX and increase loyalty with commercetools
Currently, 15 telco and media customers, including Telus, Rogers Communication and NBCUniversal, are leveraging the capabilities of commercetools for Telecom to reimagine their business future. As founding members of the MACH Alliance, our composable eCommerce solution for telecom is built on the Open Digital Architecture (ODA) framework that is being embraced by the telecom industry to support digital transformation. Created by the TM Forum, the global non-profit telecommunications industry association, ODA is helping accelerate the industry’s move away from monolithic, legacy IT stacks towards more agile, horizontal, plug-and-play environments.
Migrating to commercetools enables telcos to incrementally transition to composable commerce while still running their legacy business and operations support systems, slowly transitioning these systems to over to an open, modular architecture. This opens up the freedom to immediately start creating best-in-class online shopping experiences, and deliver continuous improvements to keep customers engaged as well as keep pace with new trends and technologies.
commercetools for Telecom empowers telcos to retain customers by:
Delivering best-in-class digital experiences.
Enabling consistent brand experiences across all channels.
Integrating multiple disparate systems (e.g. smart TVs, mobile phone brands, shoppable content) into one unified, agile commerce platform.
Making it easier and faster to make changes and refresh the shopping experience
Auto-scaling to support high-traffic peaks seamlessly during holidays and promotions.
Freeing up teams to innovate new features rather than maintain legacy systems.
Interconnecting the future starts now
As ODA and composable commerce gain traction across the industry, the outlook for the future is looking brighter. Top telcos such as AT&T, Telus, and BT, which have already embraced this new modern era of technology based on open, modular architecture instead of closed, rigid systems, have all launched new initiatives that are helping increase customer retention and build loyalty.
For a telco to achieve growth, it needs a composable and evolutionary architecture. We need a method that doesn't stifle innovation but rather enhances it.
To continue exploring why it’s so imperative for telcos to modernize their commerce experiences and how commercetools can help, download our white paper, Turning Challenges into Opportunities: How Composable Technology Will Save the Telecom Industry.
Manuela Marques Tchoe is a Content Writer at commercetools. She was a Content and Product Marketing Director at conversational commerce provider tyntec. She has written content in partnership with Facebook, Rakuten Viber and other social media platforms.