Telecommunications

Communications spending priorities, perceptions, expectations and attitudes of todays smarter consumer
New views from the 2011 IBM Global Telecommunications Consumer Survey

New views from the 2011 IBM Global Telecommunications Consumer Survey

The IBM Institute for Business Value conducted a survey of close to 13,000 consumers in 24 countries in both mature and emerging markets: Australia, Belgium, Brazil, Canada, China, the Czech Republic, France, Germany, Greece, India, Italy, Japan, Mexico, the Netherlands, Poland, Portugal, Russia, South Africa, South Korea, Spain, Sweden, the United Arab Emirates, the United Kingdom and the United States. The survey covered a wide variety of topics, including consumers spending priorities, usage and perceptions of products and services, information sources for products and services, attitudes toward communications service providers (CSPs) and purchasing values.

Consumers are more budget-minded due to economic conditions

The survey reveals that many emerging markets are bouncing back more quickly from the 2008 economic downturn than mature countries, with higher levels of consumer confidence and purchasing intent. A higher percentage of emerging market consumers expect to spend more in the next two to three years than their mature market counterparts in every category covered in our survey. In the mature markets, the net increase/decrease is negative for all but one category: the spending on electricity, gas and water usage. The key categories in which mature market consumers expect to cut spending the most are going out, purchasing electronic appliances and holidays.

Consumer Spending Changes 2011-2014

Emerging Utilities Food & drinks Transportation Mobile Telephony Clothing Holidays Mobile Broadband Pay television Elect. Appliances Fixed Telephony Going out Sports
-7% -10% 3% 2% 7% 6% 6% 16% 22% 21% 30%

Net Increase / Decrease

40%

Mature Utilities Food & drinks Transportation

Net Increase / Decrease

4%

-15%
average
-10% -14% -16% -18% -19% -19% -23% -24%

-3% -6%

Mobile Broadband Mobile Telephony Pay television Sports Fixed Telephony

+11%
average

Clothing Holidays Elect. App. Going out

-32%

Source: 2011 IBM Global Telecom Consumer Survey, Global N=12848 Question: Compared to previous years, are you likely to spend less, the same, or more on the following products / services in the next 2-3 years?

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The difference in consumer sentiment between emerging and mature markets is also reflected in spending on communication services. For example, 35 percent of emerging market consumers in our survey anticipate spending more on mobile telephony in the next two to three years, while 14 percent expect to decrease spending in this category (for a net increase of 21 percent as depicted in the figure). In contrast, 26 percent of mature market consumers expect to spend less on mobile telephony, versus 12 percent who expect to spend more (for a net decrease of 14 percent as depicted in the figure). In Greece, 61 percent of consumers expect to spend less on mobile telephony, while in Italy, Portugal and Spain the decreases are 39, 39 and 32 percent, respectively. This trend continues in the other communications categories fixed telephony and mobile broadband reflecting the impact of the European debt crisis in these countries.

Over-the-top communication has become key in both mature and emerging markets
Many consumers have switched to or increased use of over-thetop communication services as cheaper alternatives to traditional communication services. The trend of consumers increasingly using instant messaging, social networking, Internet video streaming and downloads, and Voice over Internet Protocol (VoIP) to communicate with each other is clearly visible in both mature and emerging markets. For consumers having Internet access, social networking has become a key communication channel, with 60 percent of consumers using it on a daily basis in mature markets, and 45 percent accessing social networking sites daily in mature countries. In South Africa, social networking is the number one communication channel in the under 25 age group, while in Sweden, social networking is ranked as the second means of communication in this age group.

Uses of Communication Services

Emerging
Email / Instant Messaging / Chat
85% 13% 2%

Mature
Email / IM / Chat
70% 22% 8%

Mobile (Voice, SMS/texts. MMS, etc.) Social networking sites Fixed voice (Landline or Wireline) Internet video streaming or download, including YouTube VoIP (e.g. Skype Google Voice)

84%

14% 2%

Mobile

66%

28%

6%

60%

26%

14%

Fixed voice

46%

38%

16%

56%

28%

16%

Social networking sites

45%

28%

27%

49%

41%

10%

Internet video streaming

28%

46%

26%

34%
Daily

38%
Weekly

28%
Occasionally

VoIP

13%

28%

59%

Source: 2011 IBM Global Telecom Consumer Survey, Global N=12848 Question: How often do you use the following communications services?

New views from the 2011 IBM Global Telecommunications Consumer Survey

The survey results also indicate that usage of Internet video streaming and downloads continues to grow. Globally, 78 percent of consumers with Internet access stream or download videos from YouTube, YouKu, Catch-up TV and other video sites once a week or more. The usage of video streaming and downloads appears to be higher in emerging countries than in mature ones, with over 55 percent of consumers surveyed in India, China and the United Arab Emirates accessing usergenerated video, music video clips and the like on a daily basis. The results confirm that high-bandwidth applications continue to grow. The survey also reveals that mobile growth continues to outpace fixed line, including broadband. In particular, high media users claim to access a variety of rich content services via their smartphones, tablets or other mobile devices. For CSPs, this means that further investments in capacity and 4G capabilities must have commensurate pricing to ensure sufficient return on capital. Business designs and pricing plans to compensate for higher consumption are needed.

Billing transparency and accountability are also issues. Around one quarter of consumers surveyed indicate they have problems understanding their invoice or believe they dont receive that for which they pay. Japan, South Korea and Brazil have the lowest scores on billing transparency. Only 47, 59 and 59 percent, respectively, of consumers in those countries said that they understand their invoice most of the time. The same countries also have the lowest scores on billing accountability. Sweden scores the highest, with 85 percent of consumers believing that the invoice is accurate most of the time. Though consumers perception of CSP services is relatively poor in many countries, most consumers do not engage with their CSP on these issues. Globally, 54 percent do not complain to their provider when experiencing network quality problems. The lowest score is for the United States, where 71 percent do not complain to their CSP when being disconnected from the network during a conversation, a voice call or Internet session. As key reasons for not complaining, consumers globally said that it is too much hassle to get through to the call center (45 percent) or that complaining will not make any difference (44 percent). The third reason consumers gave (29 percent) is that they have to wait too long to reach someone in the call center. In emerging countries, 30 percent of consumers said they believe networks are unreliable anyway and that they always expect the service to be variable.

Most consumers do not engage with CSPs on services issues

In the context of consumer experience, it is more relevant to know about consumers perception of network availability and reliability than what is actually measured. Survey results indicate that these perceptions are less positive than might be expected. Globally, 23 percent of consumers surveyed said that they often cannot make voice calls using their mobile phone, and 14 percent frequently experience disconnections during a mobile call. Forty percent often cannot connect to the Internet through their mobile phone and, once connected, one in six consumers is frequently disconnected during the Internet session. Perceptions vary across countries.

IBM Global Business Services

While consumers might not be connecting with their providers, they are definitely connecting with other consumers. Globally, 77 percent of consumers surveyed tell friends about poor experiences with their provider, with the highest rate in China (93 percent). Eighty-one percent said they avoid providers with whom their family and friends had a poor experience, with the highest rate in Sweden (94 percent). The unwillingness to report dissatisfaction is troubling for CSPs, since they obviously cant solve problems unless they are aware of them. Providers should be more active in understanding services issues, make it easier to interact with call centers, and troll social networks to investigate sources of dissatisfaction.

CSPs are losing control

This trend of consumers sharing their experiences with each other is characteristic of the current age of consumerism. They use a variety of technologies to communicate and find information on communication products and services. While the most preferred source for information is Internet search (67 percent globally), recommendations from family and friends is next with 54 percent. The next most popular sources are Web sites of communication providers (37 percent) and social media (33 percent), with social media (blogs, discussion groups, knowledgesharing sites and the like) being preferred over CSP Web sites in emerging countries. Globally, social media is also ranked number three in the below 25 age group (47 percent). In India, China, the United Arab Emirates, South Korea, Japan, Brazil, Greece and Poland, social media is ranked as the number two source of information - and in South Africa even as number one - for this age group.

Reasons for NOT Complaining

50%

40%

Mature Emerging
44% 30% 47% 40% 36% 27% 12% 5% 6% 8% 36%

30% 20% 10%

17%

7%

7%

0% Telco networks unreliable, variable service expected Dont believe it makes any difference Too much hassle to get through the Call Centre Have to wait too long in queue to speak Call Centre

My Provider charge to calls to Call Centre

My Provider is unable to resolve my problems

Dont know how to contact my provider to complain

Source: 2011 IBM Global Telecom Consumer Survey, Global N=12848 Question: Why do you NOT complain to your service provider when you are disconnected from the network during a conversation, a voice call or internet session?

New views from the 2011 IBM Global Telecommunications Consumer Survey

Sources of Information for Communication Products/Services

Internet search Recommendations /advice Social media Websites of communication providers Traditional advertising E-mails/promotional offers Retail stores Shopping portals/auctions
8% 13% 19% 23% 17% 19% 22% 31% 28% 45% 35% 51% 51%

16%

70% 66% 64%

Emerging markets Mature markets

Source: IBM Institute for Business Value Global Communications Consumer Survey 2011. Question: What are your preferred sources of information when you are looking for communications products and services?

The implications of these results are profound. Consumers are increasingly less interested in CSP Web sites, traditional advertising, e-mails, promotional offers and retail stores. Rather, they prefer to proactively exchange information about CSPs with friends and family or gather it via Internet search or social media sites. CSPs need to question the continued spending levels for these traditional channels and find ways to exploit social networks without destroying their neutrality. As consumers encounter new products, services and experiences on virtually a daily basis, many consumers fell less loyalty toward their brands. CSPs have invested heavily in loyalty and customer satisfaction programs to increase customer advocacy.

Advocates tend to drive the highest impact on shareholder value. As the survey confirms, they tend to remain customers longer and buy more services and therefore tend to generate more profit. They also are more likely to tell friends about their positive experiences. However, results from the survey seem to indicate that CSPs customer satisfaction investments have not produced the positive results desired. Customer advocacy levels are still quite low. Globally, only 18 percent less than one in five are advocates, and a majority of customers some 60 percent are antagonistic towards their CSP. In other words, three out of every five consumers have negative opinions about their communications providers.

IBM Global Business Services

Percentage of Advocates and Antagonists by Country

80% Japan 70% Australia South Korea Canada Global average Brazil Portugal Poland Italy Netherlands China Global average

% Antagonists

60%

Belgium Spain

50%

Germany

Mexico United Kingdom United States France Russia Greece

South Africa UAE India Sweden

40%

Czech Republic

30% 0% 5% 10% 15% 20% 25% 30% 35% 40%

% Advocates
Source: 2011 IBM Global Telecom Consumer Survey. Global N-12848 Question: How often do you use the following communications services?

The low advocacy level contrasts with, for instance, the retail industry, where it is close to twice that of the telecommunications industry. In this industry, globally more than one third of customers are advocates.1
Note: 1 Building advocacy in telecommunications - How CSPs can improve customer loyalty in a connected world.IBM Institute for Business Value.

Mexico Retail Telecom 52% 24%

Brazil 51% 17%

US 39% 20%

UK 34% 20%

Germany 33% 16%

Canada 32% 13%

Italy 25% 17%

France 26% 21%

China 20% 3%

Sources: IBM Institute for Business Value Global Communications Consumer Survey 2011; Schaefer, Melissa and Laura VanTine. Meeting the demands of the smarter consumer. IBM Institute for Business Value. January 2010.

Customer loyalty is closely related to trust for instance, trust in a CSPs ability to manage identity and personal information. More than 87 percent of advocates - compared to 74 percent of antagonists - indicated a comfortable level of trust in their CSP, with 34 percent identifying their CSP as most trusted and 53 selecting somewhat trusted. We also asked consumers to rate their trust in CSPs in comparison to other organizations with which they are regularly dealing, such as banks, insurance providers, healthcare organizations, Internet information providers (e.g., Google), social-networking sites and government/ local authorities. The results are very country specific. In the United Arab Emirates, CSPs are positioned as number one on the list of most/moderately trusted companies. In Russia, the Czech Republic, Greece, Mexico and China, CSPs are number two. In the Netherlands, CSPs are ranked number seven.

Conclusion
One clear message from this survey is that despite investments in customer experience and customer relationship management initiatives, the industry has not achieved its customer-related goals. As competition increases and communication markets become saturated, competitive advantage requires a distinctive customer experience that goes beyond satisfaction and creates real value for the customer. The bar for service excellence has been raised higher than ever. And CSPs need to realize that the experience they offer can be a competitive differentiator. Todays consumers are in control and they are driving changes across the industry. They are using social networking and online tools to discuss their experiences with and opinions of different providers. To understand the consumer, CSPs should effectively collect customer data from a variety of sources including social media and channel it in the right direction, gleaning insights and taking actions based on these insights.

Copyright IBM Corporation 2011 IBM Global Services Route 100 Somers, NY 10589 U.S.A. Produced in the United States of America October 2011 All Rights Reserved IBM, the IBM logo and ibm.com are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both. If these and other IBM trademarked terms are marked on their first occurrence in this information with a trademark symbol ( or ), these symbols indicate U.S. registered or common law trademarks owned by IBM at the time this information was published. Such trademarks may also be registered or common law trademarks in other countries. A current list of IBM trademarks is available on the Web at Copyright and trademark information at ibm.com/legal/copytrade.shtml. Other company, product and service names may be trademarks or service marks of others. References in this publication to IBM products and services do not imply that IBM intends to make them available in all countries in which IBM operates.

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