Rules of engagement: Winning with the basics in digital telecommunications

Here is an excerpt from an article written by Jens Backes, Duarte Begonha, and Ruben Schaubroeck for the McKinsey Quarterly, published by McKinsey & Company. To read the complete article, check out others, learn more about the firm, and sign up for email alerts, please click here.

* * *

Online sales and service are key measures of successful digital transformations. But most telecom operators aren’t implementing the fundamentals that drive customers online and keep them there.

It’s a familiar story. The chief digital officer plays by the rule book. Empowered by a direct reporting line to the CEO, she digitizes processes and capabilities, making them accessible to customers and coworkers through the web, an app, and even a voice assistant. She shifts marketing and sales budgets from physical to digital channels and revamps the user experience. And she introduces agile ways of working to help shake up the corporate culture. But a year or so into the project, the results are discouraging: the share of customers using the app in the past month has crept up only slowly, digital channels haven’t made a dent in call volumes at the company’s customer-service center, and the percentage of sales made through those channels is stuck in the single or low double digits.
That experience is all too common, though not universal. Research by Finalta, McKinsey’s benchmarking unit, shows that a majority of the telecom operators that digitize their operations struggle when the transformation is measured by a key gauge of success: whether digital channels have become a major conduit for sales and service. Yet the analysis also reveals that a few operators do spectacularly well. Among the 50 global brands benchmarked,  companies in the top quartile sign up 50 times more customers online than those in the bottom quartile do, for example.
Among the 50 global brands benchmarked, companies in the top quartile sign up 50 times more customers online than those in the bottom quartile do.

Significantly, the research also pinpoints what drives engagement with online sales and service—and therefore accounts for this vast disparity in performance. Irrespective of whether the operator is an incumbent or a challenger or the maturity of the local e-commerce market, what matters is a relentless focus on a relatively few basic measures along the customer life cycle. Here are seven of the most important, many of which have yet to be implemented by the majority of operators (See Exhibit 1).

[Here is the first of seven of the most important measures.]

1. Attraction: Reach customers looking to buy

Telecom operators attract large volumes of traffic to their websites. Most of it comes to them directly—and hence largely free—when consumers type in a company’s web address. The amount that companies spend generating traffic from other sources varies widely. Among a group of 20 operators in Western Europe, top-quartile spenders on digital marketing outspend those in the bottom quartile by roughly 70 percent. But the issue isn’t just how much you spend. Where you spend the digital-marketing budget is just as important.

Although many companies have installed digital-marketing platforms to help them optimize campaigns, many still overspend on display, video, and social-media advertising. Those ads almost never generate as many website visits as paid searches and, to a lesser extent, online affiliate marketing (including multisector price-comparison sites)—the go-to places for people intent on a purchase—do. Among the Western European operators we benchmarked, paid searches and affiliate marketing accounted for about half of the digital budget but generated almost all of the orders (Exhibit 2).

Social-media advertising could well become more effective once prospective customers can buy telecom services directly through social-media apps. At the moment, however, that is by no means commonplace. People using social media tend not to stop whatever they are doing to visit a commercial website or external app. For now, paid searches and affiliate marketing not only generate the most traffic but do so at a lower cost per click than display, video, and social-media advertising—all while drawing in the very visitors most likely to make a purchase, which further improves the cost per order.

* * *

The seven measures summarized in this article are only part of a broader and inevitably complex digital-transformation program that will include substantial organizational and cultural change. Despite that complexity, telecom operators must not lose sight of important tactical measures that can have a transformative impact. A handful of telecom operators have discovered what they are. Others would do well to learn from their example.

* * *

Here is a direct link to the complete article.

Duarte Begonha is a partner in McKinsey’s Lisbon office, Jens Backes is an associate partner in the Barcelona office, and Ruben Schaubroeck is a senior partner in the Brussels office.

The authors wish to thank Giannis Kourousias, Harrison Lung, and Joanne Mason for their contributions to this article.



Posted in

Leave a Comment

This site uses Akismet to reduce spam. Learn how your comment data is processed.