The telecom industry plays a central role in our hyper-connected lives — and yet, our loyalty to carriers has never been lower. It’s common that telecom companies are perceived as connectivity pipes that can be easily swapped the moment a contract ends. As the sector struggles to provide seamless customer experiences, it's no wonder that churn rates are high. Can telecom companies turn this around? Here’s how composable commerce can rewire growth for telcos.
Despite how intertwined our lives are with the telecom sector — that’s how we can work from home, binge series on streaming services and share cringeworthy moments on TikTok — the industry is plagued with high churn rates averaging 30-35% globally and stagnating growth. Consumers aren’t particularly pleased with their chosen carriers: 46% canceled a phone, internet TV or cable contract with a telecom company in 2022. The same survey found that customer loyalty to telecommunications carriers 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.
That subpar customer experiences exist in the telecom industry isn’t news but remains a massive issue. Compared to other industries, digital transformations are still moving at a slow pace. The sector also struggles to cope with cutthroat competition in stagnant markets while 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 remain oblivious to the increase in technology capital expenditures that may translate into concrete benefits in just a couple of years. Without seeing advantages in the short term, coupled with remarkably low barriers to switching networks, customers tend to jump from one telco provider to another without looking back.
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 B2B services. While these new products create revenue streams, they 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.
It’s clear that focusing on digital-first customer experiences paves the way for telecom companies to switch from connectivity pipes to loyalty-worthy brands. In fact, 54% of telecommunication decision-makers reported that improving customer experience (CX) was the top transformation initiative for their company in 2022. So, how can telco carriers find the bandwidth to boost customer experiences?
Signaling changes in CX: Goodbye legacy infrastructure, hello composable commerce
The telco industry has been 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 its prospects for growth.
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.
Telco carriers choosing a composable commerce platform also leverage the many benefits of cloud-based infrastructure, which include minimizing silos and reducing time-to-market for new releases. Moreover, a cloud-native infrastructure enables telcos to handle high-traffic peaks seamlessly during promotions, such as a new iPhone launch, while reducing the costs of managing online capacity on-premise.
A new line for growth: 5 benefits of composable commerce for telco carriers
Telcos can boost customer experiences with composable commerce in the following ways:
#1 Seamless customer experiences across multiple channels
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 the telecom carrier.
#2 Maximize growth opportunities with promotions and bundles
Telco carriers 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 carrier 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 company can also autoscale online capacity during promotional waves.
#3 Leverage B2B opportunities
While the B2C market remains stagnant, the B2B sector is booming. Interesting upheavals like 5G, IoT and AI are primed for monetization by CSPs. A B2B composable commerce solution enables telco providers to maximize these new commercial possibilities, including connected cars, fixed wireless access and other use cases — and charge per-connection fees. In addition, allowing businesses to manage their corporate fleet of devices presents another opportunity for telcos.
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.
#4 From commodity to loyalty
In order to switch the public perception from commoditized connectivity pipes to loyalty-worthy brands, telcos need to reward customers for their loyalty. Composable commerce enables telcos to manage loyalty programs faster and 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.
#5 Make telco infrastructure lean and cost-effective
With a composable commerce approach delivered via four core technologies — microservices, APIs, cloud-native and headless (MACH architecture) — the telecommunications space can finally ax legacy platforms.
A composable stack means tech experts 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 are able to achieve higher cost-effectiveness as they only pay for what they use and can eradicate the hidden costs of technical debt.
Interconnecting the future starts now
The telco industry is at the cusp of a major transformation with the adoption of composable technology, enabling companies large and small to innovate faster and respond to changing customer demands more quickly. As a result, telcos can de-commoditize their offerings while powering up their CX, boosting customer loyalty and reducing churn.
Speak with our telco experts and understand how commercetools is helping to modernize digital commerce for telecom businesses.