Point of View

Service Is the Path to Growth How Communications Companies Can Gain Market Share in the Digital Home John Smiley

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Amid today’s economic turmoil, growth remains the number one priority for Communications service providers. Now is the time to innovate, and differentiated customer service to home technology users provides a path to sustainable growth. Consumers are demanding (and willing to pay for) a new level of technology support in "the digital home," which comprises a wholesale shift away from analog devices to a new world of interconnected digital technologies such as broadband, home networks, consumer electronics and PCs.

Though primarily focused on the connectivity of PCs and peripherals (e.g., printers, faxes, etc.) for now, the digital home will continue to grow to encompass any interactive electronic device, including smart phones, gaming devices and, ultimately, home appliances and utilities. The time for Communications service providers to step forward is now because, for the moment, these providers are uniquely positioned to meet the challenges and capitalize on the opportunities of the digital home.

We all understand the need to innovate: Companies live and die by their ability to feed demand for new technologies, ideas and ways to connect. However, the companies able to capture the loyalty of consumers with superior service will best position themselves to achieve high performance. There are a billion new customers clamoring for new digital products and services. Breakthrough growth will come to companies who think up smart new ways to meet and support those needs ongoing.

Customer service is top of mind for many companies. Retail consumer technology companies, electronics manufacturers and telecommunications companies all are rethinking their attitudes toward services. Instead of regarding services as a drag on bottom-line profitability, providers must determine how to transform the consumer experience through their service offerings.

Our research shows that real benefits await Communications service providers that can achieve this transformation, from improved differentiation to greater brand loyalty and new revenue streams.

Here is what the market has to say…

Neither home users nor their service providers are keeping up with the digital home

At this time, neither digital home users nor the many providers that support their PCs and peripherals (not to mention smart phones and music players) are able to effectively manage consumers’ critical technology support needs. Most home and retail users do not have time to figure out (or cannot figure out) why their computer is running at a snail’s pace—is it a hard-drive failure, a virus or malware, an incompatibility issue, or just because a wire is in the wrong socket? The solution may not be easy

to get from one source, yet consumers say they still want one-stop shopping for all their support needs.i

With the pace of technological change, old customer service models for Communications service providers are changing. Traditional product sales models have evolved to become ongoing vendor-buyer relationships where post-product support determines future brand loyalty and future revenues. While it may be axiomatic that services build customer loyalty, the power of high-quality digital home support is startling. Among buyers, Accenture found that approximately two-thirds of consumers switched providers during the past year, and globally, it was customer service, not price, which was the number one reason. Furthermore, 71 percent of respondents agree that experiencing good customer support makes them more likely to buy from the same company in the future, while 58 percent say that it makes

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them more likely to recommend that company to their friends and family.ii

And, these same customers are also willing to pay for and reward good service: 69 percent of respondents are willing to pay for technical phone support while 62 percent said the same for remote monitoring services. Bottom line: These findings are no surprise when nearly three quarters of retail technology consumers today say they buy based on service quality.iii

Digital home services are difficult to build and deliver at high quality and low cost

For suppliers of consumer and home technologies, the focus in recent years has been not on service but rather on advancing supply chains, brand marketing and retail channels. Service capabilities have been left behind, and so providers must find new ways to take care of their customers. The trick to keeping the customer happy is to adapt to their needs and the way they do business, while also managing delivery costs.

When we ask Communications industry executives about their markets, customers and priorities, we hear the same comments, again and again:

• Weneedtoimproveservicetokeepcustomers and reduce churn.

• Weneedto save money on operational delivery of customer service.

• We need to generate (more) revenue through current products and channel.

There are reasons that both internal and external solutions have yet to solve the digital home users’ problems or make the most of this opportunity to date. For most Communications service providers, supporting the digital home user is effectively another line of business, which many are not able to resource or manage at the right level of cost or quality.

For example, operational executives struggle to satisfy customers but keep costs down in an environment where decreasing budgets and in-house IT development times can be prohibitive. Nobody today wants to build their own home support business when everyone is being asked to manage headcount and when any IT-related change can require an 18 month or longer lead time. Product development and marketing executives are also seeking new ways to generate revenue that include offering new home technology support services.

Digital home consumer needs are driving service providers to market

Among suppliers, many types of companies will play important roles in the converged home technology ecosystem over the long term, and no particular type of company currently has a lock on long-term competitive

advantage. If the type of company capable of dominating the networked, digital home is unclear, the capabilities needed to achieve that success are crystal clear: excellent customer support and a superior user experience. Asked what they are looking for in selecting a company that “makes everything work together,” users’ number one response (85 percent) was "customer support."iv The market recognizes this need, and there are more than one hundred suppliers of home technology support services today—providing a wide range of services (and quality). Analysts estimate the market for technical support services to digital end users at more than $30 billion, growing at a CAGR of more than 30 percent.v As more complex technology emerges, users simply want it all to work. Winners will be capable of delivering superior customer experiences and support.

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At the same time, many Communications service providers often face organizational inertia and other competing priorities. Training the right people, getting the right technology and building a home-user support business all can tax resources beyond their limits. Similarly, many third-party providers to whom Communications companies might look face their own challenges (e.g., costs to support are unnecessarily high when live-agent interactions can cost as much as $1 per minute, and where complex calls can last as long as 90 minutesvi ). Most external providers also lack the scale, global reach, labor model, industrialized IT and processes needed to lower costs while actually improving upside for Communications service providers.

Communications service providers are the logical leaders in the market for the digital home

Shifting consumer preferences require a multi-modal delivery channel as geography, age and socio-economic

status all can determine how consumers prefer to get help. For example, in-store repair options are unpopular with all countries except Italy, where 41 percent of survey participants indicated it as a preference.vii The majority of survey participants in South Korea, China and Taiwan prefer home visits for repairs/customer support. In the United States, Canada, Japan, United Kingdom and Germany, consumers typically prefer remote support options such as phone and online.viii

Most Communications service providers are developing capabilities for home technology support, even if they are pushed in this direction more by consumers than by their own strategy. The Wall Street Journal reports that providers are "wading into the tech support business, seeing it as a way to hold on to customers while developing a new revenue stream."ix Buyers in multiple markets look to their Communications provider as their first and best choice for service.x In fact, when Accenture asked respondents to rate different types of companies in terms of their perceived ability to assure that everything in the digital ecosystem works together smoothly, 58 percent trusted Internet or software companies while 48 percent favored telecommunications, cable, satellite or media companies.xi

Communications service providers today own game-changing advantages. Already the consumer choice for break/fix services, providers can build on their strong brands, the frequency with which they touch customers and their knowledge of the customer based on the fact that they already have the connection to the home to give consumers one-stop shopping. All of this gives providers the ability to fulfill the promise to deliver a superior customer experience. To do so effectively, they must deepen their connection to and understanding of the customer and offer a simple and rich customer experience that will be crucial to achieving high performance.

Customer care in support of home technology users has taken on new meaning for an entire market of Communications service providers for whom digital home support capabilities are no longer a nice-to-have but a must-have. The real question is, which Communications providers will move beyond the challenges to capitalize on the opportunity?

Whether Communications service providers go it alone or seek help, they face the same key strategic imperatives, such as, “What do customers value (most)?”; “How should you price and deliver home technical support?”; and “What capabilities do you need to make it all work?”. All of these questions really come down to how Communications service providers can save money, improve service and increase sales through an improved home technology support function that helps them achieve high performance.

Achieving high performance as a provider of services to digital home users

To help position themselves for high performance and success in serving the digital home, Communications service providers must develop strategies for how to build and deliver improved technical support to digital home users. They can then determine how best to monetize these services and leverage their unique position in the digital home value chain to create distinctive, long-term relationships with their customers.Winners will identify and develop the best internal and external processes, technologies and standards to create the distinctive capabilities that serve as the building blocks of high performance. Some of the critical questions to answer include the following:

•Whatdocustomersvalue;thatis,what is the right mix of price versus quality?

•Whatshouldyourdigitalhomesupport service offer?

Communications service providers today own game-changing advantages to give consumers the one-stop shopping for which they are asking.

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• Howshouldyoupricetheservice?

• Howshouldyoudeliverit;thatis,what is the right mix of onsite versus remote delivery?

• Whatcapabilitiesdoyouneedintermof people, processes and technology?

• Whatchannelswilldriveeffectiveand efficient sales and service?

At Accenture, we are answering these same questions through independent research and our own market assessment. For example, through our Premium Technology Services pilot program, we have been able to validate the need for digital home support services and determine how providers should develop, price and deliver their offerings. Communications service providers can now leverage our industrialized IT management solutions into the consumer channel as we help providers save millions

annually in operational costs while increasing revenues and delivering service to end customers better and faster than ever before.

i Accenture, “Global Digital Home Consumer Study,” 2006.

ii Ibid. iii Ibid.iv Ibid.v Parks Associates, “Digital Home Tech

Support: Analysis and Forecasts,” 2008.vi “Customer Care Outsourcing,” a

report from VentureForward, original copyright 2007, updated 2009.

vii Accenture, “Premium Technology Services: A New Source of Growth and Enhanced Customer Relationships in the Digital Home,” copyright 2008.

viii Ibid.ix Andrew Lavallee, “Computer Glitch?

Consider Calling the Phone Company,” The Wall Street Journal, July 31, 2008.

x Accenture, “Premium Technology Services: A New Source of Growth and Enhanced Customer Relationships in the Digital Home,” copyright 2008.

xi Accenture, “Tech-Forward Consumers Study,” 2008.

Capitalizing on the digital home support market

How do Communications service providers:

•SaveMoney– By improving or replacing his company’s home technology support services, a company executive can reduce costs through fewer minutes, lower repeat rates and call deflection. For example, in one year Accenture helped a client save more than $15 million on their total cost of ownership (TCO) for digital home support using automated tools and labor arbitrage.

•ImproveService– With better service comes higher customer retention and brand loyalty in an industry where negative (or positive) experiences stick with consumers and switching costs for the end customer are relatively low. Our experience has shown that the industry failure rate for consumer home technology fixes can be as high as 30 percent.

•IncreaseRevenue– Communications service providers that offer cable, phone and Internet can drive supplemental monthly fees for premium technology support customers willing to pay for a higher level of support. For instance, Accenture can assist clients to be more innovative in addressing consumer issues, such as product upgrades. At scale, Accenture can provide packaged services to clients for less money than for what service providers can offer it to their users.

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Copyright © 2010 Accenture All rights reserved.

Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

Contact usLearn how Accenture helps Communications service providers address the challenges and opportunities outlined here by visiting us at www.accenture.com/premium-technology-services or by contacting john.t.smiley@accenture.com for an assessment of your support capabilities and a live demonstration of the Accenture Premium Technology Services offering.

About the authorJohn Smiley is an Executive Director with Accenture Customer Contact Business Process Outsourcing. He brings extensive experience in systems integration and business process outsourcing and manages the Customer Contact BPO offering globally.

About Accenture Accenture is a global management consulting, technology services and outsourcing company, with more than 176,000 people serving clients in more than 120 countries. Combining unparalleled experience, comprehensive capabilities across all industries and business functions, and extensive research on the world’s most successful companies, Accenture collaborates with clients to help them become high-performance businesses and governments. The company generated net revenues of US$21.58 billion for the fiscal year ended Aug. 31, 2009. Its home page is www.accenture.com.