Posted: 01/2000

Tender Loving Customer Care
Telcos Warm to Customer Relationship Management
By James R. Dukart

The most important element in today’s competitive carrier network cannot be
found in a CO or purchased from a hardware or software vendor. That element, in
fact, cannot really be purchased at all. That element, plainly and simply, is
the telecom customer.

Many carriers try to build competitive advantage through new network
buildouts, advanced service offerings or state-of-the-art technology, but it
turns out good old-fashioned customer care may steal new technologies’ thunder.
A recent study by Andersen Consulting (www.ac.com),
for instance, showed that customer relationship management (CRM) excellence can
account for up to 50 percent of the difference in return on sales between low-
and high-performing companies. Dale Raaen, global managing partner in Andersen’s
communications practice, says caring for and maintaining customers should take
top priority for any telco that wants to compete in today’s market.

"People seem to know it is intuitively important to have good customer
relationships," Raaen says, "but we can now show that there is a
financial impact. Companies have been searching for the business case for
customer relationship management, and now we have it."

That business case, he says, is based on the results of Andersen’s study,
which surveyed the CRM practices of 42 communications companies–long distance,
local, wireless and cable firms–collectively representing 72 percent of
industry revenues in North America. Andersen compared the return on sales of a
company with average CRM performance scores with those that had
"top-tier" CRM scores, and found that the firms that appeared to care
more for their customers were rewarded with an average 16 percentage point
increase in return on sales. For an average $2 billion communications company,
Raaen says, that means stepping up CRM efforts could result in an additional
$320 million in sales. "Clearly," he says, "efforts to enhance
CRM capabilities can make a tremendous contribution to a company’s overall
success."

Julianna Nelson, senior analyst in Internet and e-commerce strategies
research at International Data Corp. (www.idc.com),
says forward-looking companies are beginning to understand the importance of
CRM, particularly in fields as hotly competitive as e-commerce and
telecommunications. "Many companies view customer relationship management
like a child views eating vegetables: You don’t like it, but it’s good for
you," Nelson says. "Companies that want to increase revenue need to
integrate support and management into their cost of sales."

Contribution of CR to Return on Sales (ROS)

Eat Your Vegetables

Raaen says creating top-tier CRM requires a focus on people rather than
technology. One key to improving CRM, he says, is better hiring, training and
development of marketing, sales and service staffs. The communications industry,
he says, traditionally has underfunded and understaffed the marketing function,
believing that new technologies would create new clients automatically. Sales
and service personnel, he says, often lack knowledge about new product
offerings, and may find it hard to keep up with a bevy of new service offerings.
Startup companies in particular, he says, must pay attention to this, as they
are often growing so fast they leave their own employees behind on the learning
curve.

An example of a telco that has done well in this regard, Raaen says, is
Sprint PCS (www.sprint.com). Sprint, he
says, spent a great deal of time and expended considerable effort in recruiting
and educating sales and service personnel prior to the launching of PCS and
wireless web services. "They paid a great deal of attention to the people
side of it," Raaen says, "and that means better customer service for
clients trying the new services."

Another thing that telcos need to look at in terms of CRM, Raaen says, is the
importance of effective partnerships. Again, he cites Sprint as a winner, saying
the company’s partnership with Radio Shack (www.radioshack.com)
to roll out wireless web handsets and services is a good example of choosing a
partner who can help the company perform customer service functions while
furthering sales.

Raaen, in fact, says Andersen found that a relatively small number of CRM
capabilities differentiate the very strong from the weak performers in the
communications industry. The areas that companies should focus on, he says, fall
into three general categories–marketing, sales and service. On the marketing
side, companies should focus on improved product pricing, increased customer
information sharing, stronger strategic alliances and better execution of
marketing plans. In sales, the keys are developing the skills of sales
personnel, creating fair and rewarding sales compensation plans and attracting
and retaining the best sales talent. On the customer service side, Andersen
found that building effective billing systems, attracting and retaining the best
service talent and effectively measuring customer service effectiveness were the
ways to improve CRM performance.

CRM Application Market Forecast

Telecom is Ripe for CRM

Peter Hunt is director of sales to the telecom industry at Pegasystems (www.pegasystems.com),
a CRM systems provider based in Cambridge, Mass. For the past 15 years
Pegasystems has focused on the financial services, health care and insurance
markets, but Hunt says the telecom market is ripe for improved CRM systems and
services. "When we look out over the telecom industry, we see many
similarities," Hunt says. "Like financial service companies, they have
numerous transactions, and the nature of the product is sort of bland and
difficult to differentiate. We have also learned that they have at least the
level of complexity and the same mess of stovepipe applications we have found in
financial services."

Hunt says telecom companies today are "clamoring" for ways to
differentiate themselves, and says providing the best customer service may be
the factor that matters most in the minds of consumers. In the telecom world, he
says, companies need to get past the mentality that customer service is only
about providing accurate and timely billing and become more proactive on
enhanced products and services.

"There is more to working with your customers than just telling them
what their bill is," Hunt says. "You need to be able to provide
service beyond their expectations, and have the ability to bring applications
and products to market, and to the customer’s attention, more quickly."

Though Pegasystems is just entering the telecom market, Hunt points to two
recent wins for the company he says illustrates where CRM is going in the
telecom field. One is a contract to provide advanced CRM capabilities in the
call centers of Orange Communications S.A. (www.orange.ch),
a mobile telecommunications company based in Switzerland. Orange, he says, will
have the ability to manage the entire life cycle of its customers from initial
account setup to billing, problem reporting, network coverage and handset issues
through its nationwide call centers. The company also will roll out an extranet
to allow Swiss mobile phone dealers to activate new phones at the point of sale,
and all services will be provided in English, French, German, and Italian.

In North America, Pegasystems has been selected by America Online Inc. (www.aol.com)
to deliver its customer contact center solution, automating inbound customer
care requests such as billing inquiries and membership changes, and also
automating cross-selling and upselling capabilities. The company also has signed
on a CLEC based in the southeastern United States, which Hunt will not name,
that supports approximately 10,000 customers at more than 90 points of presence
(POPs) and with 100 call center representatives. As with America Online, Hunt
says the CLEC will be using Pegasystems’ solutions to increase productivity on
inbound calls as well as promote cross-selling and upselling of services.

Cross-Sell and Upsell

Cross-selling is, indeed, one of the ways carriers can use CRM to not only
satisfy current customers, but drive new sales and increase revenue. Ed Tirello
is managing director and analyst in utilities and telecom at Deutsche Banc Alex.
Brown (www.vault.com). He says in the past,
the overriding idea for call centers was to do time-motion studies and work to
minimize the time agents spent on the phone with a customer. Now, he says,
telcos and utilities are waking up to the fact that customer contact is a way to
promote not only core services, but also advanced and ancillary services such as
home alarm monitoring, combined utilities billing, even servicing home
mortgages.

"The heart of the company is the call center," Tirello says.
"Everyone should be using the call center to move new and different
services. The basic products will make you a living, but the add-ons will make
you a bundle."

Another way CRM systems can help companies make Tirello’s "bundle"
is through intelligent call routing, based on selective customer criteria. Arial
Systems Corp. (www.arialsys.com) sells a
turnkey intranet system called ArialView that helps customer service
representatives (CSRs) match customer calls with company employees who have the
appropriate background or expertise to respond to the issue or complaint.
Dominic Sorresso, vice president of sales and marketing for Arial, calls the
product "part-catalog, part-communi-cations gateway" and says it
yields productivity gains by eliminating phone tag and trial-and-error hunts for
the right resources. With telecom services becoming increasingly more of a
commodity, Sorresso says, companies that can differentiate themselves through
speed and accuracy of response to customer requests will prosper.

In terms of upselling, Sorresso points out that ArialView also can tag a
customer according to the level of support that client either needs or requests.
"For your best customers, you can provide a customized directory of the
people that deal with their account on a regular basis," Sorresso says.
"You can help them get right through to who they need."

Sorresso says another trend in telco CRM is that more of the mundane customer
service tasks such as address changes, account status requests and trouble
ticket-tracking will be handled on a self-serve basis using the web, freeing up
call center agents for more productive tasks. "I don’t have to have a bank
of agents responding to the more rote type of activity," Sorresso says.
"Agents will be able to focus on the more unique kinds of interactions, the
ones that require a particular solution."

Analysts and observers, moreover, also agree that CRM in the
telecommunications industry is just getting started.

"The CRM landscape within the telecom industry is still in its
infancy," says Pegasystems’ Hunt. "Many [telecom companies] think it
is just a fancy way of adding to the billing process. As we direct specific
attention to the telco space, the education process will seep in and companies
will seek out the advantage. This will raise the bar across the board and it
will soon be simply the cost of doing business. It will no longer be, ‘Just let
me make sure my bills are going out correctly.’ We will see many more companies
taking the next step to a more customer service-centric organization."

James R. Dukart is a freelance writer based in Minneapolis. He can be
reached at [email protected]