The telecoms sector- fixed and mobile – and subscription television – cable and satellite – now give consumers more choice than ever. As competition accelerates, and cable TV companies bundle phone services in to their packages and mobile phones replace fixed lines, loyalty to supplier becomes an increasingly important issue.
The Direct Mail Information Service commissioned research into consumer loyalty in the telecoms and TV sectors to examine the key issues behind loyalty.
Nearly two-thirds of consumers feel loyal to a telecoms company, including providers of mobile and fixed-line phones and satellite and cable TV.
Loyalty by age group reflects the distribution curve of this technology – rising to 71 per cent among 18- to 44-year-olds but dipping to 58 per cent for over 65s. The impact of free satellite dishes can be detected in the 72 per cent of the demographic groups D and E who say they feel loyal to their supplier.
BT and BTCellnet still command the loyalty of more than half of all consumers. Sky is the next most oft-named supplier, being mentioned by one in 14 consumers. But habit is a strong factor in loyalty to telecoms companies – 55 per cent of consumers say they are loyal to a company because they have always used them, while 50 per cent are loyal because it is easy to understand their product or service. The importance of brand awareness is shown by the 46 per cent who cite a well-known name as a reason for feeling loyal.
For men, being able to understand the product or service is more important than for women – 58 per cent compared with 44 per cent. Some 51 per cent of men say they are loyal because the company offers better products or services than the competition, compared with 32 per cent of women.
Men are also more likely to be affected by promotional communications – 35 per cent say they are loyal because the company ran a promotion, compared with 29 per cent of women – and 23 per cent say they belong to a loyalty scheme compared with 17 per cent of women.
There is a hierarchy of factors which consumers consider important in creating loyalty. Quality of service is closely linked to customer satisfaction, with problem resolution and satisfaction with the service the important elements behind loyalty. Perceived value for money and the belief that the current supplier provides the best product or service are reinforcing factors.
In this area, communications have little influence on loyalty. Consumers rate loyalty schemes and being sent information lower than in any other sector and well behind all other factors.
The real test of loyalty occurs when customers have the opportunity to purchase from a rival, or are unable to buy from their preferred supplier. Telecoms and TV face the second-largest risk of defection (behind financial services) with over a quarter of consumers potentially moving accounts. A decision to wait for the main company indicates real involvement with its product or service. There is a second level of loyalty where a customer who has defected switches back for the next purchase.
Strong competition between telephone, mobile and cable TV companies has led to a high level of direct mail usage in this sector.
Among those questioned about telecoms, three-quarters had been mailed – the second highest level of direct mail behind financial services. The type of mail used reflects the complexity of this sector. With cable companies offering TV and telecoms, and BT providing land and mobile phones services, information on new products and services dominates.
Special offers are widely used to encourage uptake and customers are also reminded of existing products and services which they may not have used or been aware of. Companies tend to send items once a quarter, but there is scope for greater use of monthly mailshots since the actual receipt level is below what consumers say is acceptable.
Direct mail is highly effective in increasing the propensity of consumers to repurchase – nearly six out of ten say that receiving direct mail makes them more likely to use the sender again. Very few say it has no effect on them, although a significant proportion are adversely affected – one in five say it decreases their likelihood to buy again.
Significantly, over four out of ten of consumers loyal to a telecoms company have bought as a result of being mailed.