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Can Cable Change Its DNA?

Will Jones
11/21/2013
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A few years ago, retiring Time Warner Cable CEO Glenn Britt joked that cable companies were like "monopolies in rehab." The comment was funny and drew laughter, but I could not help think how accurate that statement actually was.

In fact, cable companies like Time Warner Cable Inc. (NYSE: TWC) that once dominated the residential video market and played by their own rules have been trying to grow in more competitive residential and commercial markets with a variety of products. Can they continue to change their DNA from being "cable company"-centric to becoming customer-centric and meet the growing demands for better customer service and experiences? More importantly, can they do it in a way that drives revenue and profitability in the commercial market?

As a percentage, commercial cable revenues are growing by double digits year over year. At the end of 2012, these revenues were roughly $7 billion out of a $140 billion opportunity, so there is clearly room to continue this attractive growth.

However, barriers remain in the path of this growth. Compared with the incumbent local exchange carriers (ILECs), cable companies are relatively new to the commercial market and are forced to steal market share from their competitors to drive growth. Additionally, this market is a land of product parity, making it difficult to claim a unique advantage. Given these barriers, it is imperative that cable companies continue to strive for differentiation to burnish their reputations as viable commercial providers.

I have worked with some innovative marketers in the industry who recognized early on that segmenting the market is necessary to find and attract the businesses that are open to switching and that will deliver the highest value (e.g. spend, ARPU). Contrary to what some might think, businesses are not always looking, or even able, to switch providers. In fact, only 20% to 30% of the market is open to switching providers over the course of a year, so it becomes crucial to ensure that the right businesses are being targeted.

Through these segmentation efforts and other research, we have learned that customer experience is becoming more important to these high-value business segments and is on the cusp of becoming a point of differentiation. Businesses' buying decisions are now more strongly influenced by a provider's ability to offer a better experience. They want their service interactions to be "low effort" and their providers to be "easy to do business with." They have higher expectations for experiences, such as shorter installation times, better communication on service interruptions and outages and the ways they are billed, just to name a few.

There are other, equally important attributes, such as "has fast internet speeds" and "has a reliable network." However, there is also a growing perception that most major providers are generally reliable and offer fast speeds. These attributes, which were once points of differentiation, may now be turning into table stakes.

The big question is: How do you make money delivering a great customer experience? Most CFOs like to ask: "What is this project saving me or how much money is it making me? Otherwise, why are we doing it?"

There are ways to deliver a better experience to your customers while managing the revenue and cost delta (i.e. margin). Obviously, marketing a "great customer experience" will help create differentiation and assist in converting prospects to customers, driving sales. But there are other impacts on revenue besides operational costs. For example, improving and shortening the installation process will lead to recognizing billable revenue quicker while also decreasing cancels. By improving first-call resolution, the number of follow-up calls to customer care should decrease, resulting in operational savings because there is a cost every time a customer service rep answers the phone.

These are just two examples. But there are numerous other areas where you can effect operational change to deliver an improved experience and, when done correctly, you can begin to positively affect such KPIs as revenue, churn, and a variety of other revenue and cost measures. The bottom line is this: A commercial strategy that focuses on customer experience can provide a blueprint for not only driving top-line growth, but also show where to make profitable operational change.

The intangible in all of this is that most employees want to do the right thing and serve customers well. But they cite a lack of resources and training as reasons why they fall short. Will management listen to their customers and empower their employees to deliver a truly improved experience? Will cable companies become "rehabilitated"? The degree of their success may just depend on all that

— Will Jones, President, True Arc Solutions


Interested in learning more on this topic? Then come to a Light Reading Live event that takes place Wednesday, December 4, 2013, at the Westin Times Square in New York City. Back by popular demand for the seventh straight year, The Future of Cable Business Services 2013 is a one-day conference that will examine the progress that cable operators are making in the roughly $140 billion US business telecom services market and the challenges they face in keeping up the momentum. For more information, or to register, click here.


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willtj3
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willtj3,
User Rank: Light Beer
11/26/2013 | 4:20:58 PM
Re: Customer perceptions
You are correct, Dan.  There is a large negative halo effect from the residential side that has made gaining credibility with businesses that much tougher.  

However, their service has been improving in an industry where the major competition does not deliver a good experience.  Also, in their favor is that they have made significant penetration in the SMB market that is helping them improve their reputation and shake that stigma.  Peer recommendations (e.g. word of mouth) are still one of the most important decision influencers in the commercial telecom space so by actually delivering against these rising customer expectations they will become more closely associated with this important experience attribute, change perceptions and create differentiation.

The other important factor is the performance of the residential side.  Depending on the cable co they typically serve 60% or more of the consumer market and this market is made up of business owners, IT decision makers and influencers, etc.  The residential side created this negative halo and their ability to change experience perceptions on this front will be critical to the commercial side's ability to gain credibility.  Some cable cos have launched sub brands or are rebranding around new product and/or services in part as a way to reinvent themselves around experience while steering clear of old negative perceptions associated with their legacy brand.
DOShea
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DOShea,
User Rank: Blogger
11/24/2013 | 10:49:55 AM
Customer perceptions
Even if the cable TV companies are making strides in changing their DNA, the tougher job might be actually changing customer perceptions. Bad cable service is something everyone still likes to complain about, even if it is in fact getting incrementally better.
willtj3
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willtj3,
User Rank: Light Beer
11/22/2013 | 1:58:41 PM
Re: Who's doing it?
Thanks, Alan.  Given the bad customer experience stigma attached to cable cos as a whole they have some challenging work in front of them.  Especially since customer expectations are continuing to rise.

The good news is the last couple of years we have seen more attention to this area from cable cos.  Changes are being made not just in customer care groups but in sales, marketing and product functions as well.  There is now more messaging around shorter install times, more customer friendly appointment scheduling, one bill for all your services, etc.  On the back-end customer service centers are adding tools and training that enable reps to better serve their customers.  Installation processes are being redesigned to light up services quicker. We expect to see more of these types of changes as cable cos realize the positive financial impacts they create.

Cox in particular has been making noticeable strides to deliver a better experience and the results are showing not only in revenue numbers but in satisfaction studies like the JDPA U.S. Business Wireline Satisfaction Study; where they are typically at the top.  They have been out in front of this for a while and have been very public about how integral "delivering a better customer experience" is to their commercial services strategy.  

Incidentally, Phil Meeks, former SVP of Cox, is now COO of TWCBC.  I am certain his expertise in this area was not lost on TWCBC when they decided to bring him on board and I would look for them to really accelerate their efforts on this front.  

 

albreznick
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albreznick,
User Rank: Blogger
11/21/2013 | 10:26:56 PM
Who's doing it?
Provocative column, Will. So I'm wondering what you're seeing cable companies doing in the market right now in response to these shifts. Can you point to any examples of cable cos actually changing their DNAs? They would make great case studies.
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