As Telcos Transition to Techcos, is an NPS Score Still Relevant?

This is part 1 of a 2 part article on Net Promoter Scores so don’t miss part 2 later this week!

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These are sobering facts from TM Forum, a global alliance of telco and tech companies.

With low connectivity growth, today’s telcos rely heavily on retaining customers and winning over new acquisitions from competitors. This means that a good customer experience is now necessary for survival. The Net Promoter Score (NPS) is one metric that has consistently proven its value in measuring customer satisfaction. 

But is there a clear link between customer satisfaction and revenue?
Should telcos still care?

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Understanding Net Promoter Score (NPS)

Net Promoter Score is calculated based on a powerful question: “On a scale of 0 to 10, how likely are you to recommend this company to a friend or colleague?”

Customers are then classified into three categories:

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The formula for calculating NPS is straightforward:

Percentage of Promoters - Percentage of Detractors = NPS Score

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A positive NPS indicates that a company has more promoters than detractors, generally seen as a sign of healthy customer loyalty. To find out if telcos still care, we need to dive into how customer satisfaction and loyalty relates to telco revenue.

Links Between Customer Satisfaction and Revenue

In 2017, T-Mobile became the #1 mobile carrier for customer service satisfaction and earned a record $40.6 billion in revenue.

The relationship between customer satisfaction, as measured by NPS, and revenue is well-documented. Higher customer satisfaction leads to lower churn rates, higher customer lifetime value, and more referrals. 

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1. Lower Churn, Higher Loyalty, and Retention: 

Customers who are satisfied with their telco experience are less likely to switch providers, leading to lower churn rates. This, in turn, increases the average customer lifetime value—a key driver of profitability in the telco industry.

Lower churn also saves a lot of money. One Canadian telco in 2017 revealed that it cost almost 50 times less for them to keep an existing customer than to acquire a new one, with retention costs of C$11.04 and C$11.74, respectively, while average SAC in Canada weighed in at a whopping C$521.

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2. Increased Referrals and Brand Advocacy: 

High NPS scores indicate a large base of promoters who are willing to recommend your telco brand to others. For example, an NPS of 60 and above suggests that your promoters outnumber your detractors 4 to 1.

These promoters have become genuine brand advocates who can drive great word–of–mouth marketing and organic growth, boosting future revenue.

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3. Outstanding customer experience: 

High NPS scores, like those of +60 and above, suggest that these companies deliver an outstanding customer experience that exceeds user expectations. This can be an excellent way to track if your team has been optimizing customer journeys correctly.

These tweaks can include intuitive user interfaces, reliable performance, helpful customer support, and consistently meeting user needs. For digital-only mobile operators (DMOs), this will refer to the entire digital customer journey.

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4. Competitive advantage: 

Maintaining such high NPS scores is a remarkable achievement in the highly competitive digital sector. It signifies that these companies have built a strong competitive advantage through superior product quality, user experience, and customer satisfaction.

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5. Improving customer targeting: 

Not all customer segments are profitable.

Research has shown that 1 in 5 customers could even destroy telcos' value. These customers who churn quickly still cost money to acquire, and having too many of these will cause your telco to lose money. 

NPS can be used to categorise and better understand your customer segments. Bain & Co mentions that “each category of customers (Promoters, passives, and neutrals) exhibits significantly different patterns of behavior, with corresponding effects on profitability that can be quantified with some precision.”

Segmenting customers based on their Net Promoter Scores could shed light on keeping valuable segments happy while better understanding what our detractors are experiencing. The optimisations we make to our offers and experiences then creates a virtuous customer satisfaction cycle and loyalty cycle.

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In short, great customer experiences lead to greater customer satisfaction. Greater satisfaction leads to loyalty, which saves your company acquisition costs and can increase revenue through word-of-mouth referrals. 

Building loyalty through excellent customer service is becoming a matter of survival for telcos in an environment where B2C user growth and B2C connectivity growth are low. But this leads us to a few more questions:

These will all be answered in part 2 later this week. Don’t miss it!

Are you worried about catching up to your competitors with much better NPS scores? 

Don’t let your NPS score drop. Make sure your book free SaaS demo or consultation to explore how we can help you maximize NPS and transform your customer experience today.