Are Satsified Customers More Loyal? Maybe Not.

Are “happy” customers “more loyal?” It might be hard to say. Satisfied customers--it often is believed--lead to loyal customers, which in turn leads to profits. 

Customer satisfaction typically is thought of as a predictor of customer buying intentions and loyalty, propensity to desert one provider in favor of another, account longevity, revenue per relationship and financial performance. That is perhaps one reason so many executives take stock in the net promoter score, a measure of customer satisfaction, in telecom and other industries. 

“Customer satisfaction is a leading indicator of company financial performance,” says the American Customer Satisfaction Index. “Stocks of companies with high ACSI scores tend to do better than those of companies with low scores.” 

But the relationships are not always so clear. 

“What we’ve found is that the relationship between loyalty and profitability is much weaker—and subtler—than the proponents of loyalty programs claim,” say Werner Reinartz, Professor of Marketing at the University of Cologne, and V. Kumar, executive director of the Center for Excellence in Brand and Customer Management at Georgia State University’s J. Mack Robinson College of Business.

source: Harvard Business Review

“Specifically, we discovered little or no evidence to suggest that customers who purchase steadily from a company over time are necessarily cheaper to serve, less price sensitive, or particularly effective at bringing in new business,” they argue. The researchers find “no evidence” to support such claims.

In fact, some would argue, some potential buyers should be actively discouraged. In the colloquial, “there are some customers you do not want.” 

source: Harvard Business Review

I’ve never been completely convinced that satisfaction and loyalty are related in a linear way, though. For starters, satisfaction and loyalty have different reference points. 

“Customer satisfaction is a self-reported measure of how much customers ‘likes' a company and how happy they are with goods purchased or services obtained from the company,” says Mark Klein, Loyalty Builders CEO. “Customer loyalty, on the other hand, is a company-calculated metric of likelihood to purchase again or not defect to a competitor.”

Also, customers can “like” a product and yet buy a competitor’s offering, without having any change in a “satisfaction” score. “Just because they’re happy with their current brand doesn’t mean they won’t switch if a lower price is offered elsewhere,” notes Actionable Research. 

Loyalty is what firms want, and satisfaction is seen as a proxy for loyalty. That might not generally be the case. 

But some question net promoter score relevance and predictive power, as popular as NPS is in many firms. “Two 2007 studies analyzing thousands of customer interviews said NPS doesn’t correlate with revenue or predict customer behavior any better than other survey-based metric,” two reporters for the Wall Street Journal report. “A 2015 study examining data on 80,000 customers from hundreds of brands said the score doesn’t explain the way people allocate their money.”

Of all the criticisms, lack of predictive capability might be the most significant, since that is what the NPS purports to do: predict repeat buying behavior. 

“The science behind NPS is bad,” says Timothy Keiningham, a marketing professor at St. John’s University in New York, and one of the co-authors of the three studies. “When people change their net promoter score, that has almost no relationship to how they divide their spending,” he said. 

Others might argue that social media has changed the way consumers “refer” others to companies and products. Some question the methodology. 

As valuable as the “loyalty drives profits” argument might be, it is reasonable to question how well the NPS, or any other metric purporting to demonstrate the causal effect of loyalty or satisfaction on repeat buying, actually can predict such behavior. 

Some argue that “satisfaction” might not predict very much. What might have predictive value is “totally satisfied” customers. Mere “satisfaction” is not predictive of loyalty, in other words. 

Xerox, for example, discovered that Its totally satisfied customers were six times more likely to repurchase Xerox products over the next 18 months than its satisfied customers. Merely satisfying customers is not enough to keep them loyal, in competitive markets. 

In other words, “satisfied customers” can, and will, defect. Totally satisfied customers tend not to churn, and tend to buy more from any supplier. 

source: Harvard Business Review

It might be hard to find anyone who believes there is no relationship between customer satisfaction and business outcomes. But the relationship might well be more complicated than we suppose. 

Vodafone Makes Huge Commitment to Gigabit HFC in Germany

In the fixed networks access business, most of the price competition arguably has come through wholesale access to the network, using various forms of network unbundling or simple resale, and not facilities-based competition. 

Just as arguably, most of the innovation has come from facilities-based competition. Mobility provides the most widespread example, but there is a growing amount of fixed network innovation from firms using hybrid fiber coax instead of traditional telecom industry platforms.

Vodafone, for example, predicts a massive expansion of its gigabit speed fixed network broadband services in Germany by 2022, using the HFC platform, not the more-traditional fiber to home platforms. 

source: Vodafone

Vodafone also notes that HFC gigabit platforms are expanding across Europe as well. One tends to see more innovation from suppliers using different platforms (mobile and HFC) in large part because those platforms offer the ability to differentiate service.

source: Vodafone

Wholesale basically restricts competition to price, with network capabilities essentially the same for all suppliers, who, by definition, are using the same network. Sometimes, using a different platform also allows a supplier to disrupt industry pricing because the cost basis is qualitatively different. 

At scale, a facilities-based approach also allows better “owner’s economics,” compared to a leased facilities approach. The same trade-off occurs for hosted voice versus owned switch business voice or cloud computing as a service versus owned computing facilities. At low volume, leasing often makes more sense.

At scale, owned facilities often offer lower total costs.

PTC Academy Online Training Sept. 14-30, 2020

The PTC Academy now offers an online and virtual training course featuring the same content as our live events, and also now comes with 1.2 Continuing Education Units provided by the International Association for Continuing Education and Training. The IACET is an accredited continuing education provider.

Attendees also receive a PTC Academy Certificate of Completion. 

 

The course will be held between 14 September and 30 September, roughly every other day for about 90 minutes, 0900 SGT (Singapore time zone) Here is the registration information. 

At the completion of this course, participants will understand:

• Key business model changes in the telecom industry since deregulation and privatization

• Business models and revenue drivers in key industry segments

• The ways OTT apps and services shape provider strategy

• How the telecom ecosystem has changed since deregulation and Internet emergence

• How cloud computing and data centers shape the connectivity business

• How C-level executives can satisfy key stakeholders and constituencies while growing revenue

• Thinking like a top executive about revenue, competition, cost, innovation, and social responsibility

• Tips for making the transition from mid-level to C-suite

• How changes in regulation, consumer demand, technology, and the Internet shape the connectivity business

Why Some Execs do Not See 5G as a Fix for 4G, or Wi-Fi 6 a Fix for Wi-Fi

Deloitte recently conducted a survey of 415 executives deploying either 5G or Wi-Fi 6, to find out “why are you doing it?” Some 57 percent of respondents report that their organization is currently in the process of adopting 5G and/or Wi-Fi 6, while another 37 percent plan to adopt these technologies within the next year.

Right now, as you would suspect, 4G and Wi-Fi 5 are the mainstays. But respondents expect 5G and Wi-Fi 6 to be mainstays in three years. 

source: Deloitte

Those executives view 5G and Wi-Fi 6 as a force multiplier for other innovative technologies including AI, IoT, cloud, and edge computing. Indeed, 95 percent of respondents believe 5G and Wi-Fi 6 will be important to unleash the value of cloud computing. 

About 83 percent of respondents believe wireless will enable the internet of things, the same percentage that believe edge computing will rely on advanced wireless. 

About 91 percent believe analytics for big data also depend on advanced wireless. The vast majority of enterprises surveyed say they are targeting a blend of scenarios with their adoption of advanced wireless networks.

source: Deloitte

Both indoor and outdoor usage, stationary and mobile devices are expected. Respondents expect to connect employees, machines, and customers. Employee use cases include workplace communications such as messaging and file sharing; device management; collaboration (video, augmented reality, virtual reality, remote workplaces), analytics and virtual network support. 

Machine support for sensors and analytics for machine-generated data also will be key. Autonomous vehicles, robots, unmanned aerial vehicles or delivery vehicles are other machine networking use cases. Asset tracking, safety and assembly processes also are expected to be enabled by 5G and Wi-Fi 6. 

Customer behavior analytics (shopping, buying, price trends, recommendations, location-based apps); security and fraud prevention (biometrics, location checking and blockchain); asset tracking; enhanced customer experience and supply chain efficiencies are expected. 

source: Deloitte

“5G is not just a faster and more reliable access technology, but also the genesis of a new communications network architecture,” Deloitte argues. 

What you might find surprising is that 5G and Wi-Fi 6 are not said to be important because the current networks are failing or troublesome. 

More than 80 percent of respondents are “satisfied” or “extremely satisfied” with a range of traditional performance characteristics of their current wireless networks,

Likewise, 80 percent of respondents are “satisfied” or “extremely satisfied” with the security of their networks and data, ability to control and customize their networks, interoperability, scalability, technology maturity, and ease of deployment. 

Nor is network age an issue. Some 75 percent of respondents say their networks are less than three years old. 

Instead, they are hoping to “unlock competitive advantage and create new avenues for innovation in their operations and offerings.” About 57 percent of respondents believe their company’s current networking infrastructure prevents them from addressing the innovative use cases. 

About 87 percent believe their company can create a significant competitive advantage by leveraging advanced wireless technologies.

It perhaps is mildly surprising that so many enterprises envision investments in 5G and Wi-Fi 6 at a time when the current networks actually are working well and are newly-deployed. 

To be certain, people and organizations buy “solutions to problems” expressed in concrete software, hardware and connectivity products. In this case, there are no apparent failures to counteract. 

The new investments are not being driven by performance issues, coverage, reliability or other network shortcomings, but by hoped-for business advantages the existing networks cannot support.

Utility Regulation of Broadband?

 It never is entirely clear to me what proponents of regulating broadband “as a utility” have in mind. You might recall that we once regulated telecommunications as a “utility,” with limited market entry and price controls. Over a process of decades, starting in the mid-1980s, U.S. regulators slowly began to loosen those regulations, which originally were put into place as telecom was seen as a “natural monopoly.”

Natural monopolies, it is argued, must be regulated because only one supplier can exist. In such cases, market competition cannot act to restrain predatory behavior. But there is no such consensus anymore. Mobile and fixed communications market have been proven not to be natural monopolies, at least in the U.S. market. 

As often is the case, good intentions can be thwarted by inappropriate policies that actually create the opposite of intended benefits. You might recall that under monopoly regulation, business communication prices were quite high, to subsidize consumer services, which were moderately priced if not characterized by innovation and creativity. 

Prices fell, and usage rose as competition was introduced for long distance services, even before passage of the Telecommunications Act of 1996, which substantially deregulated the fixed network business. A look at AT&T revenues between 2000 and 2013 illustrates the point. 

Revenues from the deregulated fixed networks business dropped about 50 percent. Mobility nearly tripled. Cash flow from fixed network operations was slashed nearly two thirds. Mobility, historically unregulated, boomed and prices fell. As always, the changes have many drivers. Demand changed as consumers preferred new services. 

source: Deloitte

The same happened in other markets, as deregulation lead to lower prices, higher innovation and much-higher usage, with a huge amount of new investment. Global prices have fallen because of competition. 

To be sure, some prices--such as for consumer fixed network voice service--have risen. That is because the actual cost of service cannot be subsidized any longer by profits from long distance service. That being the case, retail prices must reflect actual costs. 

What is never clear to me is why some regulators and policy advocates think matters would be better if we reversed course and returned to monopoly regulation of fixed network services. That would doom a business with declining revenues and slim to no profits to further decline, were prices to be regulated. 

Unable to raise prices, ISPs would logically allow service quality to degrade, reduce costs, continue to downsize employment and slice investment, as profits would be very difficult to earn.

Has Pandemic Really Slowed 5G?

There is a tendency to input causation whenever there is correlation, and permanent changes caused by big--yet transitory--phenomena.We never act as though any single volcanic eruption or hurricane will “forever” change business and life in the affected area. Rather, our assumption is that life will return to normal over a period of months to years.

And yet it is most common to hear arguments that global life and business will never be the same after the Covid-19 pandemic, even as life already is returning to normal levels and behavior in many countries that are further along the recovery curve. 

An analysis of the way 5G is being used to ameliorate pandemic problems might be interpreted as conventional wisdom suggests, namely that the pandemic has slowed down all economic activity and 5G roll outs. 

In fact, the report suggests slowdowns and accelerations both have happened, the World Economic Forum suggesting that fixed wireless efforts have accelerated. One might have made that case before the pandemic, though. 

source: Maximize Market Research

Likewise, some infer and believe that bandwidth consumption patterns are permanently altered by the pandemic. That might be the case, but not for the “because of the pandemic” reason often cited. Every next-generation mobile platform since 2G has resulted in higher mobile data consumption. 

So we should not be surprised to hear that per-user mobile data consumption has increased 300 percent since 5G was commercially launched in South Korea. That is what we should expect. It has almost nothing to do with permanent changes directly caused by the pandemic, though people forced to stay at home from work and school have boosted their video streaming hours. 

That will change as they go back to work and school. 

It is likely more accurate to say that the pandemic and forced stay-at-home rules accelerated some already-occurring changes, ranging from a shift to video streaming from linear TV, more gaming, more work from home and online shopping. Pushing volume “up and to the right” is a permanent change, to be sure, but not a new trend; simply an acceleration of what had already been happening. 

We might ultimately be surprised that many predicted permanent changes did not happen in a way we will be able to capture quantitatively. Though the Great Recession of 2008 caused a massive change in economic activity, it was not “permanent.” Activity more than rebounded. The internet bubble burst of 2001 caused massive asset value changes. But valuations of new and surviving firms rebounded. Smooth out the data by looking at a decade or two worth of data and one can detect no permanent change. 

Neither 5G or other ongoing trends will be immune from that reversion to mean.

CBRS is "Mobile Plus" Spectrum

As U.S. auctions of 3.5-GHz Citizens Broadband Radio Service have gone through 47 rounds of bidding, we now have a better idea of buyer estimation of the value of priority access licenses. To wit, those PAL licenses already are valued very close to 2-GHz mobile spectrum, and the auctions are not over yet..

At a high level, that suggests buyers see CBRS has having as much value as 2-GHz mobile spectrum. And, as was the case for the early 2-GHz spectrum awards, that is the ticket to market entry on a facilities basis for new competitors. Both Sprint and what became T-Mobile US were launched on the basis of new 2-GHz spectrum allotments. 

CBRS also will be supported by best effort spectrum access without a license, on the pattern of Wi-Fi. How big a revenue opportunity that activity might create is another question. Some internet service providers will undoubtedly explore the use of unlicensed CBRS to support rural internet access. That is something many wireless ISPs have done before.

But CBRS also is expected to support at least some private networks as well. Such private networks offer value to users and operators, but no often no direct revenue upside for the network operator.

Of course, there are many in the value chain who are not in the "connectivity as a service" role. All such private networks will create demand for infrastructure, maintenance, upgrades, design, perhaps connectivity and other services supporting other parts of the ecosystem. Consider radio instrastructure.

A 2019 report on the indoor market opportunity for CBRS, from Maravedis and EJL Research predicted that the CBRS radio node market will grow from revenues of about $3 million to $100 million by 2024, “driven primarily by private LTE deployments.” Keep in mind that is a prediction about mobile-type radio infrastructure used to support indoor market communications. 

Other estimates of CBRS radio capex illustrate the fact that--interesting as it is for some parts of the ecosystem--CBRS represents a very-small percentage of total mobile radio spending. According to Mobile Experts, CBRS CBRS radio infrastructure spending will not hit $1 billion in annual spending for five years or so. 

That makes CBRS an interesting and important market for some, not for all, on a global level. 

source: Dell'Oro Group

Other parts of the CBRS value chain represent various amounts of new sales activity as well, but it might be fair to note that many opportunities which are transformative or important for some suppliers (access system administrators, infrastructure, software, integration and consulting) might not prove especially large for connectivity service providers.

The value of CBRS obviously is a non-zero number, though, and the value often will come in the form of avoided cost, not direct incremental revenue. Cable TV operators are expected to benefit primarily from avoided mobile wholesale capacity costs.

Some internet service providers, though, may be able to use CBRS to support their internet access businesses, using CBRS for fixed wireless access. System integrators, network designers and consultants might in some cases see meaningful revenue upside as well. 

Of course, not all CBRS spectrum will likely be used using PAL. As with Wi-Fi, CBRS spectrum also includes “best effort” access without a license. For some use cases, best effort access might be sufficient, especially for many private networks. 

Also possible are many collaborative ventures where a PAL license holder might be willing to allow use of its license for a big private network, in some business arrangement. That might be interesting for large areas such as port facilities where a mobile operator can expect little financial return for providing direct service. 

In some cases, some apps or use cases might benefit from licensed access with less risk of signal interference and therefore unpredictable or less predictable performance. Collaborative networks (private on the premises but connected to the public network; private network but with rights to use PAL on the site; private network built and maintained by a public provider) might make sense in those cases. 

The point is that the new commercial value of CBRS networks will have a wider range of value drivers than has been typical for mobile spectrum.