Is acquisition enough – a telecommunications example

By Charmaine Calleja 211807066

I have been an Optus customer for over 5 years…. until recently.   I was won over by Optus initially because they were advertising a significantly cheaper package than rival competitor Telstra.

Over the first couple of months with Optus I experienced a few issues with the modem coverage at home and was pulling my hair out at the lack of customer service and support provided.  Unfortunately, I was locked into a contract for 24months and couldn’t justify the contract termination fees to change.

While waiting for my contract to end, my modem had eventually been upgraded and the service had improved, and a few more years passed.

Recently, another advertisement caught my eye…….

telstra1

Immediately, the thought of moving to what is known as ‘the most superior telecommunications provider in Australia’ captivated me.   Everyone always talks about Telstra having the best mobile reception in Australia and the most reliable internet service around.

So, I embarked on the journey to switch providers.    Now, of course, we cannot live without the internet at home, so before cancelling the Optus service, I arranged for the connection of the Telstra service.  Things were looking up!  My new modem arrived and was installed, Foxtel was installed, and my new mobile phone sim card had arrived.

The next step was to call and cancel my Optus service.  Ironically, it was the fastest phone response time I had encountered.  The Optus call centre were quite eager to put me through to their retention team and the representative there worked very hard to create an offer to entice me to stay – if only they had been this responsive to my needs 24 months ago!

So what did my telecommunication adventures tell us about marketing evaluation and success?

It is clear that with the right combination of Product and Price, advertising can be veryps-of-marketing successful in the acquisition of new customers.  An enticing proposition coupled with a trusted and reputable brand can drive customers to tackle the barriers sometimes faced with switching between competitors, which can be particularly difficult in industries like telecommunications and banking.

 

In their 2016 financial reports, both Telstra and Optus claim to have continued focus on driving growth and long term shareholder value, an area in which Telstra having been claiming success for some time with the number of 3G subscribers hitting milestone figures in 2007.

growth

Is increasing the number of customers alone reason for claiming marketing success?

There are a number of financial metrics that organisations now rely on to determine how well a marketing strategy or project has performed, such as:

  • Profit Contributionsmetrics
  • Profit Margins
  • Return on Investment
  • Customer Value
  • Customer Life time value

While these metrics can lead to marketing departments being accountable for contributing to creating business value, they also come with their limitations and challenges for example:

  • Financial metrics alone can lead to extremely short term focuses which leads to a lack of investment in long term growth.
  • There is no one metric that can provide an adequate report of performance. In fact most argue that a combination of financial and non-financial measures is required.
  • Some metrics can be open for interpretation. For example, a small investment with a high ROI may contribute less in dollars than a larger investment with a lower ROI.

Retention is the key

retention

Within the telecommunications industry it is not uncommon for customers to be locked into 12, 18 or 24 month contracts.  This essentially works to extend the customer life time value and increases the barriers for customers to switch to competitors.

Locking customers for 2 years does not mean that the organisation can forget about actively managing customer retention.  Long term success comes from customer retention as it is well documented that is cost more to acquire a new customer than to keep and cross-sell products to existing customers.

For my experience, Optus applied customer retention strategies when the customer has called to leave and not actively through the customer life time with the organisation.  At this stage, in most cases, the horse has already bolted!

Telstra on the other hand, have identified the importance of keeping their existing customers happy and are investing initiatives such as creating WiFi hot spots around the country for their customers to use.  Although this cannibalise their potential earnings through use of the 3G and 4G networks, Telstra place more value on keep their existing customers happy.

On this basis, organisations who invest in and measure both short-term (acquisition of new customers) and long-term success (the retention/customer life time value of the customers acquired) provide a more comprehensive view of the success of their marketing performance.

References

ANNIE, L 2001, ‘Branded for success: Telstra leads the fame game with a $9.4b price tag’, Age, The (Melbourne), p. 4

Telstra 3G subscriptions top 2m’, ABC Premium News, 2007.

Docurated. 2016. How to Measure Marketing Effectiveness: Tips from 26 Experts. [ONLINE] Available at: http://www.docurated.com/all-things-productivity/whats-your-1-way-to-measure-marketing-effectiveness. Accessed 03 October 2016.

Telstra. 2016. Telstra Annual Report 2016. [ONLINE] Available at: https://www.telstra.com.au/content/dam/tcom/about-us/…e/2016-Annual-Report.pdf. Accessed 3 October 2016.

Singtel (Optus). 2015. Singtel Annual Report 2016. [ONLINE] Available at: https://media.optus.com.au/annual-reports/2015/singtel-annual-report-2015/. Accessed 3 October 2016.

Ambler, T, 2008. ‘Assessing marketing performance: don’t settle for a silver metric.’ Journal of Marketing Management, 24/No. 7-8, 733-750.

Currim, I, 2013, ‘What Drives Managerial Use of Marketing and Financial Metrics and Does Metric Use Affect Performance of Marketing-Mix Activities?’, Vol 77, 17-40.

Ledbetter, D, 2016, ‘Why Retention is more important than acquisition for Mobile Marketing’, Business 2 Community. Online available at http://www.business2community.com/mobile-apps/retention-important-acquisition-mobile-marketing-01447606#Hcsll14x7AJW0MEr.97 Accessed 3 October, 2016.

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