Telcos try banking on service to repair a battered image

Consumers may no longer have to face bill shock, excessive fees and bad service as the mobile phone industry realises it has to improve, write Peter Cai and Clancy Yeates.

Consumers may no longer have to face bill shock, excessive fees and bad service as the mobile phone industry realises it has to improve, write Peter Cai and Clancy Yeates.

When Optus chief executive Kevin Russell was last in Sydney seven years ago, Australian cricketers were world beaters and the standard of telecommunication services was good.

However, when the Scotsman returned last year to take the helm at the country's second-largest telco, the service standard had dropped to an alarming level and the cricket team - sponsored by a rival carrier - was struggling.

Complaints to the industry ombudsman, Russell notes, reached "stratospheric" levels.

"The [Australian] market has gone backward in customer experience while other international markets moved forward," says Russell. "It is a quite stark difference."

Indeed global customer rankings have European, Asian and even the major North American carriers ranked substantially higher than their Australian counterparts in terms of customer service.

After years of taking customers for granted, locking many into inflexible contracts and the bill shock following an overseas holiday, Australian telcos are on the nose.

They are now ranked deep in negative territory according to the "net promoter score", an important industry metric that measures customers' willingness to advocate for their brands.

In contrast, northern European carriers are sitting on plus 15 and the more nimble Asian telcos are even better performers at plus 27.

Bill Morrow, Vodafone's new Australia boss, who is facing an uphill battle turning around a company that has been plagued by a history of network problems, shares Russell's assessment.

"Australia has a poor image in the telecommunication sector compared to other telco sectors in the world. This is why there is an opportunity for each one of us [three telcos] to lift the game and change the image of our respective brands," he says.

The drive to win over customers has serious implications for profits.

In the past few years, the mobile industry has experienced breakneck growth. Australia has one of the highest smartphone adoption rates in the world and telcos rode the wave successfully. Carriers brought in new customers while service standards slipped.

However, the market has reached a saturation point after years of strong growth. Past neglects are catching up with the telcos and as the Optus boss admits, "sins get exposed".

In the past, a disproportionate amount of resource was allocated into winning customers rather than investing in customer services.

That is about to end as the cost of acquiring new customers increases and telcos are keen to take advantage of the strong growth in demand brought about by data-hungry smartphones.

Telco executives are now turning to another once deeply unloved industry - banking - to see how it managed to win back customers.

Telstra chief David Thodey has sought advice from the Commonwealth Bank on how to improve popularity with its millions of customers Australia-wide. This involves major changes to Telstra's processes, technology and culture.

Thodey recently told BusinessDay that the formerly government-owned CBA had "a lot of parallels" with Telstra, and he took heart from the bank's success in transforming its customer satisfaction ratings under the leadership of former chief executive Ralph Norris.

According to Roy Morgan research, consumer satisfaction with CBA is running at nearly 81per cent, the highest rating of the big four and the bank's best rating since the survey began in 1996. An equivalent measure for Telstra has seen satisfaction fall below 70 per cent and trending lower.

A key difference between the strategies of CBA and Telstra was that the bank had not sent processing and call centre jobs offshore. Telstra runs local call centres, but also has a significant operation in the Philippines.

Thodey says that while he understands some customers are more comfortable hearing an Australian accent on the other end of the line, the first priority is to give a great customer experience, irrespective of where the call centre is.

For all the criticism heaped on banks by politicians and the media, customers have a much more positive view of the big lenders today than they did early last decade.

After a wave of branch closures in the 1990s, Roy Morgan's measure of satisfaction among customers hit rock bottom in 2001. Less than 60 per cent of customers were happy with their bank. Commonwealth Bank was at a point where nearly one in two of its customers were unsatisfied with the service.

Today, the measure of combined satisfaction among the big four banks has climbed to 79.5 per cent.

Westpac, the nation's second-biggest lender, saw a stumble in satisfaction in recent years following a series of out-of-cycle interest rate rises on mortgages, but it has since trended higher. All the major banks are within striking distance of Commonwealth Bank, separated by a margin of just two percentage points.

Westpac's general manager of retail banking, Gai McGrath, says the error many banks made in the 1990s and early last decade was to impose their views on customers.

"If you think about the whole shift of closing branches, and almost forcing customers into other channels, mainly going to ATMs and things, that was very much being driven by the banks," McGrath says.

In the early days of the online revolution, people were wary about the security risks of managing their money online or over the phone, despite bank assurances it was safe. Banks failed to pick up on this signal, dragging down their reputations in the process.

Optus boss Russell is also keeping a close eye on the banks.

"They [banks] had a challenge that is comparable with the telco industry in terms of being viewed very negatively," he says.

There are easy wins on customer service such as improving the online experience and scrapping fees.

Optus, which has experienced flat growth in mobile subscriber numbers over the past year, is preparing to give up short-term revenues and take a hit from scrapping breakage fees and excessive charges to boost its customer loyalty.

"If you are serious about customer experience, if you are really serious about loyalty of your customers, you must deal with the things that let customers down. Excess charges, roaming charges, unfair fees, are all part of what you must address," Russell says.

The company has introduced a pricing plan which allows customers to move automatically to a higher pricing point once they go over the limits. This is aimed at reducing bill shock.

It is also lowering fees for international roaming charges - one of the most frequent complaints directed at carriers.

Morrow, who arguably has the most challenging task in repairing Vodafone's damaged brand, emphasises the need to deliver consistent good services across all "touch points".

"I lecture quite often to people across the company that you can have nine times of calling the call centre with great experiences and once with poor experience - and then you are reduced to the least common denominator."

Morrow says the company has made significant inroads in improving customer experience, but still has a long way to go.

Telstra, the dominant telco with nearly half of the local mobile market, is also implementing an aggressive strategy to win the hearts and minds of consumers.

Gordon Ballantyne, the telco's chief customer service officer, who is overseeing nearly $20 billion worth of business, says increasing customer advocacy for the Telstra brand is the No.1 concern for the company.

The company is determined to "change the way every Australian talks about Telstra as an iconic brand", he says. Central to Telstra's strategy is the adaptation of the net promoter score.

"We measure every single customer interaction," he says. "We have NPS [net promoter score] for customer interaction; we have NPS for every product launch. We measure the actual end-to-end customer service experience."

He says the company is not just paying lip service to improving customer experience. The salary of executives (40 per cent) and front line sales staff (10 to 25 per cent) are linked to NPS.

"We are not just talking about it in a superficial way, but it is in the fabric of how we are remunerated, in the fabric of how we are measured, in the fabric of aspiration and ambition we have for the business," he says.

Optus has also introduced a similar measure to renumerate sales staff.

It also now analyses customer service through the organisation, from how it recruits staff through to even the tone of voice used by employees in communicating to customers.

Telstra, which is preparing for the launch of Apple's new iPhone 6 next week, has conducted more than 10 million surveys so far to gauge customer preferences. Senior executives, including Thodey and Ballantyne, receive daily updates on customer service.

Customer feedback weighs heavily on new product and services launch.

Telstra introduced a no "lock in" plan this year to cater for demand from customers who don't want to sign up to the usual two-year contract.

Westpac's McGrath says banks have invested heavily in looking at what products customers actually want and how they want to do their banking.

A key focus is technology for online-savvy customers. Whether it's Westpac's iPad application or Commonwealth Bank's Kaching, which allows instant money transfers, banks are spending big on new technology for online banking.

"If you look now at what's happening, particularly with digital adoption and creating some great experiences for customers, it's very much because the customers are saying this is how we live our lives," she says.

Despite predictions of the demise of the bank branch, overall numbers also increased up until 2012-13, when they dropped 1 per cent.

With more people banking online, the average size of branches is shrinking, with a greater emphasis on machines that allow customers to do it themselves.

McGrath argues this combination of innovation and a focus on the consumer's perspective has made customers happier.

"I think it was the broader range of choice that was provided to customers, which meant that the branch was not the only place that you could go to get your needs met," McGrath says.

At the same time, bank staff have a vested interest in lifting satisfaction ratings, which are increasingly tied to bonuses.

For instance, former Commonwealth Bank boss Ralph Norris - who set himself the goal of improving its ranking among the big four from worst to best - was scheduled to benefit from long-term incentives linked to customer satisfaction for more than two years after he left the bank in 2011.

McGrath says that over the past five years, a much wider range of staff have also had their bonuses linked to customer satisfaction ratings.

Customers who have dealt with staff in branches or call centres are surveyed, and their feedback can be used when bonuses are being set.

"Now we start to see at a role-based level that people are being measured on how customers feel about their interaction with a person," she says.

"I do think that it's in the DNA now, whereas before it might have been at the very senior level only."

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