Business Benefits of the Total Customer Experience: Mapping NPS to Revenue

Report for Oracle

Business Benefits of the

Total Customer

Experience: Mapping NPS

to Revenue

August 2013

Dr. Mark H Mortensen (Principal Analyst) Ref: RXA72

.

1 Introduction

Measuring and managing the customer experience (CX) has been an increasingly important aspect of Communications Service Provider (CSP) operations as the CSPs vie for the most valuable customers and work to increase sales to all of their customers. Towards this end, many CSPs have tied managers’ – or even all employees’ – compensation to customer satisfaction measures.

Customer satisfaction is measured in a number of ways, but the traditional method has consumers rating their satisfaction on a scale from 0 to 10. Recently, “Net Promoter Score” (NPS) has enjoyed great popularity. It is a simplified method that takes the fraction of “promoters” (roughly, consumers with a 9-10 satisfaction rating) and subtracts the fraction of “detractors” (roughly, consumers who rate 0 to 6). Thus, NPS can go from -100 to +100.

But although, in general, increased customer satisfaction can be positively correlated with business success, little research has been done to answer the question “What is the quantitative business effect of increasing customer satisfaction?” This paper provides an answer to this question. It also maps the benefits of three of Oracle Communications’ premier offerings to improve the operations, lowering costs and improving the customer experience – the Rapid Order Design and Order Delivery (RODOD), Rapid Service Design and Order Delivery (RSDOD), Intelligent Policy and Charging (IPC) and C3 solutions.

Business Benefits of the Total Customer Experience: Mapping NPS to Revenue | 3 0.0% 10.0% 20.0% 30.0% 1 2 3 4 5 6 7 8 9 10

2 What makes customers rate their satisfaction as they do?

In the survey, consumers were asked to provide their overall satisfaction rating with their CSP, the results of which are shown in Figure 1.

Figure 1: Customer satisfaction distribution from the 2013 FBB Connected Consumer Survey, converted to a 10 point scale [Reference: Analysys Mason, 2013].

They were also asked to provide individual ratings on the major components of customer satisfaction. An analysis of the results leads to the conclusions shown in Figure 2. It shows the relative importance of increasing the rating of the components towards the overall satisfaction.1 One of the key findings from the analysis was the fairly remarkable consistency of customer satisfaction drivers across varying service domains. Customer Service, as shown in the diagram at 32%, represented the single most important driver of customer experience scores. Note that customer service, includes all aspects of the CSP’s interactions with the customers, as represented in the Oracle CX diagram on the right..

Figure 2: The five major components of customer satisfaction and their relative effect on overall customer satisfaction [Reference: Analysys Mason and Oracle, 2013].

1

A description of the analysis method, using linear regression techniques, is available on request.

3 How does customer satisfaction relate to revenue?

There are three main ways that consumer satisfaction relates to revenue: the retention of the consumer, the amount that that consumer spends with the operator, and the amount that the consumer influences others to spend. The study was able to quantify the first.2 Consumers were queried as to their intention to churn and then correlated with their overall satisfaction, as shown in Figure 3. As an example, moving a customer from a satisfaction rating of 6 to a rating of 8 reduces the probability of that customer churning by 40%.

Figure 3: Intention to change service provider within the next six months, by overall customer satisfaction [Source: Analysys Mason, 2013]

Now, knowing the number of customers in each satisfaction level, as shown in Figure 4, allows churn reductions to be calculated if a CSP is able to move customers to higher levels of satisfaction.

Figure 4: The distribution of consumers that plan to change service provider across different overall satisfaction scores [Reference: Analysys Mason, 2013]

Practically speaking, there are two ways of implementing this:



Building operational excellence – removing the things that dissatisfy customers i.e.,

moving them from dissatisfied detractors (ratings of 1 to 6) to at least neutral passives

(ratings of 7 or 8). For a 10M subscriber CSP, moving all dissatisfied customers to

neutral would reduce churn by 44%, leading to a revenue addition of $212M per year.

2

Anecdotal evidence indicates that the second effect is about 10% of the consumer’s spending while the third is still an unknown.

3

Business Benefits of the Total Customer Experience: Mapping NPS to Revenue | 5

A more realistic program would aim at moving 5% to increase the NPS score by 5

points. This would have the effect shown in Figure 5, reducing overall churn by 18%.

Figure 5: A 5% increase in NPS from fixing operational problems [Reference: Analysys Mason, 2013]



Delighting already satisfied customers – moving them from neutral passives (ratings

of 7 or 8) to delighted promoters (ratings of 9 to 10). If all could be moved, it would

mean an additional $128M per year revenue from a reduction in churn of 24%. A

more realistic program would aim for an NPS score increase of 5 points through

moving passives to promoters, as shown in Figure 6, reducing overall churn by 3%.

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 1 2 3 4 5 6 7 8 9 10

Building operational excellence

• Touches 27% of customers. • Moving lowest 5% of customers

to passives increases NPS score by 5 points (on the NPS -100 to +-100 scale).

• Reduces overall churn by 18%.

Customer Satisfaction Score (1-10)

Fracti

o

n

of Cu

stom

e

rs

(%

)

Delighting Customers

passives to promoters increases NPS score by 5 points.

• Reduces churn overall by 3%.

Customer Satisfaction Score (1-10)

4 Oracle’s key solutions attack both problems

Oracle’s key BSS/OSS solutions provide the functions necessary to both fix current

operational problems as well as delighting customers, but with different focus areas, as shown

in Figure 7.



Oracle Communications Rapid Offer Design and Order Delivery (RODOD) and Rapid

Service Design and Order Delivery (RSDOD) focus on enhancing the “ordering

experience” by working to build operational excellence into the service delivery

process, ensuring that the increasingly complex orders are delivered to the customer

flawlessly. They are also the foundation of strategies to delight the customer by

supporting the delivery of consistent interactions and information across multiple

contact channels.



Oracle Communications Intelligent Policy and Charging (IPC) solution is focussed on

usage experience, by service providers to efficiently design, deliver and monetize

personalized smart offers.



Cross Channel Customer Experience (C3E), the multi-channel commerce and care

solution provides personalization of the offers to the customer and a set of consistent

interactions as customers “channel hop” across multiple sales and information

channels during the initial and subsequent sales interactions.

Figure 7: Key Oracle support

systems solutions for

Business Benefits of the Total Customer Experience: Mapping NPS to Revenue | 7

NPS Drivers Solution Capabilities

• Flexible bundles and personalized offers

• Seamless order capture and status management across channels

• Ability to change the order once placed, but before delivered, without operational disruption.

• Single call / touch ordering of bundles services

• Zero configuration offer introduction

• Central Order Management

• Intelligent Order Change Management

• Future dated order handling

• Ensuring order completeness

• Standard handling, tracking, and reporting of orders that “fall out” of the automated provisioning process.

• Verifying availability of all order components before confirmation

• Tracking the delivery of all components

• Checking and ensuring all prerequisites amongst order components

• Flexible order capture

• Pre-integrated, industry conformant order flows

• Manual and automated task management

• Order status visibility & management

• Inter & intra order dependency management

• Technical Service Qualification

“De li ght the Cus tom e r” “Build oper a tional e x c e ll ence ”

The Rapid Offer Design and Order Delivery (RODOD) solution, in particular is focused on operational excellence, providing key functions for driving greater NPS scores, as shown in Figure 8.