Service, not pricing, winning formula for telcos

India has had a fabled growth in its telecom sector and it is the world’s second-largest telecommunications market. The industry continues to grow at a rapid pace and contributes substantially to country’s Gross Domestic Product. With new players stepping into the industry, the market is only going to grow and with time, all players in the segment will try to differentiate and adopt unique strategies for growth.

However, given the current market dynamics, the approach taken by the marketers is of investing in a price-led strategy to gain customers in a price-sensitive market. While customers are the beneficiaries of intense competition amongst the telcos, it is not a happy situation for an industry sitting on a debt burden. The fresh spectrum auctions will further increase the burden on players and the price war at this time will further hamper the recovery of the industry.

In 2009-10, when new 2G operators disrupted voice telephony tariffs to 1 paise per second, the incumbent operators were forced to match tariffs but playing the price game hit their bottom lines so hard that it took them two years to recover.

The current price war will, at best, attract extremely price-sensitive customers, who typically account for the lowest average revenue per user in the industry. High average revenue per user (ARPU) customers are unlikely to move as they are more experience driven and seek value. In a country where internet speeds are still very slow, a comparatively pricing-led strategy may win customers early on but only good service will ensure the long-term loyalty of users.

There are multiple reasons why a customer moves to competition. Patchy network, inadequate sales support and lack of innovative products are reasons for a switch in customer loyalty. There are multiple attributes and dimensions to every product/service and customer segments act and react to these attributes differently. While no one can discount the importance of pricing in a hyper-competitive environment like telecom, it cannot be your only strategy.

In this hyper-sensitive price market, players significantly need to invest in understanding their customers. Tailor-made products and services mapped to customer profiles are the need of the hour.

It is inevitable that a churn will happen because of the aggressive pricing strategy but it is for the telcos to decide whether they want to invest in the customer who will easily sway to price movements in the market or the loyal customer who will still stay with them but demand more value out of the relationship.

Marketers will have to think out of the box to deliver value to various customer segments. Loyalty programs, bundled offerings, rationalising tariff structures are some of the areas which will help in retaining customers. All this will form part of the remodelled customer retention strategies that telcos will have to work towards.

The crux is that the telecom players need to take conscious decisions on how do they deliver more value to the customer to get a bigger share of their wallet.

The writer is chief marketing officer, Aircel