Article

Tackling Taiwan's mobile market

Taiwan's mobile operators can no longer take their customers for granted.

Par Serge Hoffmann, Jacqui Rowlands and Vinit Bhatia

First published on juin 11, 2009
min


Taiwanese love mobile phones—after all, Taiwan was the first country in the world to have more subscribers than people—they just don't love their mobile service provider as much. It's true: despite all the efforts that the country's top three mobile service providers put into wooing subscribers, mobile-phone users are not charmed. In fact, according to a recent Bain study of nearly 400 mobile-phone users in Taiwan, the more people visit their mobile company's—Chunghwa Telecom, TaiwanMobile or Far EasTone—store, the less they care for their service provider. When asked how likely they were to recommend their mobile operator to a friend or family, in all three instances, more subscribers said they would not, compared to subscribers who were willing to put in a good word. That's a serious issue in a saturated market of 25 million people, with more than 100% mobile penetration. In such markets, companies have limited options to increase revenues. They can either retain customers and convince them to buy more, or they must attract new customers by stealing the competition's customers. Either way, success in such a market hinges on one single factor: customer loyalty. The company which fails to wins its customers' hearts very soon feels the pinch. It finds it harder to retain customers, existing customers spend less and worse, whatever the company spends on marketing and advertising goes to waste as there is simply no good word-of-mouth support from existing customers. But what happens when all the major competitors suffer the same malaise? In such circumstances, simple customer satisfaction surveys are not enough to do the job. Very often, consumers rate themselves as "highly satisfied" just before switching brands. A much more robust measure of the customer experience is the Net Promoter® Score (NPS)—a truer measure of customer loyalty. Customers are asked to rank on a scale of 0–10, how likely it is that they would recommend the company to a friend or colleague. Scores of 9 and 10 are what the company is ideally looking for—these customers are "promoters" and help build market-share through recommendations. Moreover, according to Bain's global experience with NPS, promoters tend to spend more and stay longer with the brand they like to promote. Scores of 8 and 7 are tricky—these are "passive" customers who may or may not support the brand they use. But the most worrisome are the scores of 0-6—these customers are outright "detractors." They are the first to switch and the last to say something good about the company. A company can get a measure of the customer loyalty it generates by knowing its Net Promoter Score: the percentage of promoters less the percentage of detractors. When seen through this lens, loyalty, it turns out, is a relative concept. To gain market share and build revenues, companies don't need to make sure that every customer loves them equally—they just have to ensure that they stay ahead of the competition. This is particularly true in Asia's fast-growing economies in the past, where service companies often prospered at their customer's expense—but now, as these markets mature, companies have to focus on retaining and attracting customers through better service. Bain's 2004 survey of credit-card issuers in Korea, for example, showed a dismal picture: no Korean credit-card company earned a positive Net Promoter Score and the NPS for the industry overall was minus 36%. In three years, the situation changed dramatically. Six major card issuers improved their performance and the industry's average NPS rose to minus 6%. Most important, leaders began emerging. Three companies-Hyundai, BC Card and Samsung—had more promoters than detractors. For Taiwan's leading three mobile providers, who between them account for more than 90% of the market, there is hope: any one of these companies can emerge as a market leader if it focuses on two key steps to build customer loyalty. First, the company that is most likely to emerge as a winner in Taiwan, will be the company that understands the customer experience best, from end-to-end. This means right from the time the customer first comes in contact with the company—perhaps through the mobile service operator's advertising—to the time the customer signs up, mobile operators have to worry about the quality of experience they are providing. The impact of such effort is quite tangible. Bain experience across countries and across industries shows that NPS is usually a great indicator of growth in the market: companies that lead in loyalty are more likely to gain market share. Apple, for example, built intense customer loyalty for its i-Pod by focusing on the entire customer experience from advertising, to retail to getting help. In 2007 Apple's i-Pod had a 14% greater share of the 1GB mini-players market than its closest rival. Moreover, an Apple customer is willing to pay more for an iPod than for a Sony product with the same specs. The second equally critical task for a company hoping to lead a market is to provide superior customer experience at each "touch point"—moments that matter to customers—so that it constantly creates promoters. Often this is not about expensive marketing initiatives, but thoughtful insight into what appeals most to customers. Singapore-based United Overseas Bank (UOB) for example, focused on the needs of its best customers, when it wanted to gain market share in Singapore's mature credit-card market. UOB's market research revealed that its cardholders were more likely to remain with the bank, if the UOB card came with bonus perks. Instead of adding costly benefits indiscriminately, UOB launched and steadily upgraded its dining privileges program-offering discounts at a wide range of restaurants in Singapore. UOB's one small step led to large strides in competitive gain: cardholders rewarded UOB with Singapore's highest NPS of 14% versus an industry average of minus 9%. For mobile companies in Taiwan, providing a superior experience will come later though-first, these companies need to focus on the pain their customers are currently undergoing. The Bain NPS study showed that one reason why all three companies had so many detractors was that the customers were unhappy across a spectrum of services. Some customers complained about the quality of roaming services, many deplored the poor service when dealing with billing issues, others complained about the high price of plans and a few even had difficulty in renewing contracts. In the case of one company, subscribers were most unhappy with the customer service at the company's own store. Clearly, Taiwan's mobile operators can no longer take their customers for granted. Instead, by resolving customer issues and putting effort into pleasing them by giving them what they really want, mobile operators can squeeze growth out of a stagnant market. Like UOB in Singapore, they can even declare war and aim for market leadership—all it takes is being more in touch with the customer. An inside tip: the survey revealed that the more a mobile operator made efforts to interact with the customer, the more promoters the operator had. The message is simple: showing a little love to customers can go a long way to ring in revenues. Serge Hoffmann is a partner in Bain & Company's Hong Kong office and a leader in the firm's global Telecom, Media and Technology practice. Jacqui Rowlands is based in Sydney and is a manager in the firm's Asia-Pacific Telecom, Media and Technology practice. Vinit Bhatia is a partner based in Bain's Hong Kong office. In addition to his primary industry focus in telecom, he is the co-leader of Bain's Private Equity practice for Greater China.

Taiwanese love mobile phones—after all, Taiwan was the first country in the world to have more subscribers than people—they just don't love their mobile service provider as much. It's true: despite all the efforts that the country's top three mobile service providers put into wooing subscribers, mobile-phone users are not charmed. In fact, according to a recent Bain study of nearly 400 mobile-phone users in Taiwan, the more people visit their mobile company's—Chunghwa Telecom, TaiwanMobile or Far EasTone—store, the less they care for their service provider. When asked how likely they were to recommend their mobile operator to a friend or family, in all three instances, more subscribers said they would not, compared to subscribers who were willing to put in a good word.

That's a serious issue in a saturated market of 25 million people, with more than 100% mobile penetration. In such markets, companies have limited options to increase revenues. They can either retain customers and convince them to buy more, or they must attract new customers by stealing the competition's customers. Either way, success in such a market hinges on one single factor: customer loyalty. The company which fails to wins its customers' hearts very soon feels the pinch. It finds it harder to retain customers, existing customers spend less and worse, whatever the company spends on marketing and advertising goes to waste as there is simply no good word-of-mouth support from existing customers. But what happens when all the major competitors suffer the same malaise?

In such circumstances, simple customer satisfaction surveys are not enough to do the job. Very often, consumers rate themselves as "highly satisfied" just before switching brands. A much more robust measure of the customer experience is the Net Promoter® Score (NPS)—a truer measure of customer loyalty. Customers are asked to rank on a scale of 0–10, how likely it is that they would recommend the company to a friend or colleague. Scores of 9 and 10 are what the company is ideally looking for—these customers are "promoters" and help build market-share through recommendations. Moreover, according to Bain's global experience with NPS, promoters tend to spend more and stay longer with the brand they like to promote. Scores of 8 and 7 are tricky—these are "passive" customers who may or may not support the brand they use. But the most worrisome are the scores of 0-6—these customers are outright "detractors." They are the first to switch and the last to say something good about the company. A company can get a measure of the customer loyalty it generates by knowing its Net Promoter Score: the percentage of promoters less the percentage of detractors.

When seen through this lens, loyalty, it turns out, is a relative concept. To gain market share and build revenues, companies don't need to make sure that every customer loves them equally—they just have to ensure that they stay ahead of the competition. This is particularly true in Asia's fast-growing economies in the past, where service companies often prospered at their customer's expense—but now, as these markets mature, companies have to focus on retaining and attracting customers through better service. Bain's 2004 survey of credit-card issuers in Korea, for example, showed a dismal picture: no Korean credit-card company earned a positive Net Promoter Score and the NPS for the industry overall was minus 36%. In three years, the situation changed dramatically. Six major card issuers improved their performance and the industry's average NPS rose to minus 6%. Most important, leaders began emerging. Three companies-Hyundai, BC Card and Samsung—had more promoters than detractors. For Taiwan's leading three mobile providers, who between them account for more than 90% of the market, there is hope: any one of these companies can emerge as a market leader if it focuses on two key steps to build customer loyalty.

First, the company that is most likely to emerge as a winner in Taiwan, will be the company that understands the customer experience best, from end-to-end. This means right from the time the customer first comes in contact with the company—perhaps through the mobile service operator's advertising—to the time the customer signs up, mobile operators have to worry about the quality of experience they are providing. The impact of such effort is quite tangible. Bain experience across countries and across industries shows that NPS is usually a great indicator of growth in the market: companies that lead in loyalty are more likely to gain market share. Apple, for example, built intense customer loyalty for its i-Pod by focusing on the entire customer experience from advertising, to retail to getting help. In 2007 Apple's i-Pod had a 14% greater share of the 1GB mini-players market than its closest rival. Moreover, an Apple customer is willing to pay more for an iPod than for a Sony product with the same specs.

The second equally critical task for a company hoping to lead a market is to provide superior customer experience at each "touch point"—moments that matter to customers—so that it constantly creates promoters. Often this is not about expensive marketing initiatives, but thoughtful insight into what appeals most to customers. Singapore-based United Overseas Bank (UOB) for example, focused on the needs of its best customers, when it wanted to gain market share in Singapore's mature credit-card market. UOB's market research revealed that its cardholders were more likely to remain with the bank, if the UOB card came with bonus perks. Instead of adding costly benefits indiscriminately, UOB launched and steadily upgraded its dining privileges program-offering discounts at a wide range of restaurants in Singapore. UOB's one small step led to large strides in competitive gain: cardholders rewarded UOB with Singapore's highest NPS of 14% versus an industry average of minus 9%.

For mobile companies in Taiwan, providing a superior experience will come later though-first, these companies need to focus on the pain their customers are currently undergoing. The Bain NPS study showed that one reason why all three companies had so many detractors was that the customers were unhappy across a spectrum of services. Some customers complained about the quality of roaming services, many deplored the poor service when dealing with billing issues, others complained about the high price of plans and a few even had difficulty in renewing contracts. In the case of one company, subscribers were most unhappy with the customer service at the company's own store.

Clearly, Taiwan's mobile operators can no longer take their customers for granted. Instead, by resolving customer issues and putting effort into pleasing them by giving them what they really want, mobile operators can squeeze growth out of a stagnant market. Like UOB in Singapore, they can even declare war and aim for market leadership—all it takes is being more in touch with the customer. An inside tip: the survey revealed that the more a mobile operator made efforts to interact with the customer, the more promoters the operator had. The message is simple: showing a little love to customers can go a long way to ring in revenues.

Serge Hoffmann is a partner in Bain & Company's Hong Kong office and a leader in the firm's global Telecom, Media and Technology practice. Jacqui Rowlands is based in Sydney and is a manager in the firm's Asia-Pacific Telecom, Media and Technology practice. Vinit Bhatia is a partner based in Bain's Hong Kong office. In addition to his primary industry focus in telecom, he is the co-leader of Bain's Private Equity practice for Greater China.