The Social Customer Service Blog

Stephan Delbos on February 1, 2016

Why Telco Is Now A Commodity, And What To Do About It

Telco is the new cotton. The industry is now in the midst of a shift that's bigger than the switch from landlines to mobile. It's bigger than the invention of the T-shirt. Heck, it might even rival the cotton gin. This shift, from competition based on price to competition based on customer experience, is already changing the way telcos do business.

Commodity competition = price

Commodities, like cotton, are the same from brand to brand. Whether you’re buying your cotton from Custom Cotton or Christina’s Cotton, you’re getting the same product. In the commodity economy, price determines what customers buy. Cheap is king. Cue the price wars.

It's precisely the same with telcos. Because the basics of telco service are the same from brand to brand, give or take a free smartphone or MB of data, until now the main way for telcos to compete has been price. Think of the plan you have. Why did you choose it? Nine times out of ten it's because the price was right. But therein lies the problem. 

Dilbert Explains Price Wars

Competition based on price is great for customers seeking a bargain, but it’s not so good for customers seeking an experience. And whether they're consious of it or not, customers increasingly want experience and exceptional customer service. Cheap and fast are appeals from the dot com era, but for the digital age  an age where Wu Tang releases only one copy of their album and where 5 minutes can matter more than 5 dollars  it's not all about the money. It's about the experience.  

Not only do companies lose profit as prices come down (unless an influx of new customers temporarily buoys them), they eventually reach a point when they simply can’t lower prices any further and remain in business.

Competing on price = dead end

Sprint the fourth largest telco in the US recently announced they would offer any competitor’s data plan for half the price. Their effort will likely pay off, to a certain extent. Customers are always interested in saving money. But what’s interesting, and what shows the direction the industry is headed, is how Sprint’s competitors reacted.

Sprint Cuts Bills in Half

In response to Sprint’s new lower prices, both AT&T and Verizon have begun to offer increased data packages. Where Sprint is competing on price, AT&T and Verizon are competing on customer experience. It’s not that one will necessarily be more successful than the other in the short term, but what’s important to note is the paradigm shift in the way telcos do business. Such an audacious offer as Sprint’s is impossible for the competition to top, if they’re competing on price alone. But that’s a dead end. Customer experience is a new way forward.

Prices can only get so low for so long. Backed into a corner by Sprint’s low prices, other competitors have no choice but to get creative.

The end of competition? Not exactly

If competing on price is a dead end, what are brands supposed to do? Learn from experience. But I don’t mean their experience, I’m talking about the customer’s. What we’re now seeing from AT&T and Verizon, and what we’ve previously seen from T-Mobile, is a shift that has already taken place in online industries, like Airbnb.

When brands can no longer compete on how much customers pay for their product, they can still compete on how customers use their product. That’s a good thing too, because 81% of customers are willing to pay more for excellent customer experience. Experts predict customer experience will overcome price and product as the key brand differentiator by 2020. So here are three ways you can move beyond the price wars:

  • Learn more about your customers and how they use your product or service. The right software can help you gather relevant information so you can know your customers better.
  • Treat each customer like an individual and respond to his or her specific needs. Today's customers want more than good prices, they want fulfilling experiences. 
  • Learn what makes your product or service truly unique and focus on that. Anyone can offer low prices. What's special about what you do?

Brand Embassy is a customer excellence platform that will give you an edge on competition by helping your company provide the best customer experience possible  at scale  on any digital channel. Using an advanced algorithm to pair each customer with the best customer service agent according to language, interests, previous queries and much more, Brand Embassy humanizes the way you interact with your customers. Request a demo today, or check out our website for more information.

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