O2 Masters Personalization
By: Ed Finegold
Billing World and OSS Today
September 2007
Competition for mobile subscribers in the United Kingdom is brutal. Roughly 60 million people live in the U.K., about 50 million of them in England, according to the British Office for National Statistics. Seven facilities-based mobile operators compete in Britain, as well as a huge range of resellers and MVNOs. The fact that O2 is the leading operator in this market should come as no surprise, given that its roots are based in incumbency, as it was formerly BT's mobile arm. What is surprising, however, is that O2 had to change its ways significantly in order to retake the top spot, after losing it to more nimble and customer-savvy competitors.
When price competition had run its course, and everything that could be given away was gone, O2 recognized that its success would be based on achieving an emotional sense of loyalty from its customers. Engendering such loyalty required creative marketing and promotional initiatives; new employee incentives; and a completely new data architecture that would support personalizing every marketing campaign, rate plan and customer care interaction. It especially required the personal initiative of certain individuals who bought into the idea that O2 could change radically, and for the better.
Offering a Fair Deal
The way O2 used to market would be familiar to most U.S. mobile customers. Rate plans were confusing. Promotions weren't targeted, so messages often went to customers who were ineligible or already subscribed to the service. Customers weren't rewarded for loyalty, or for spending more each month. In the end, O2 competed on price and giveaways like free weekends, and over time its customer base and margins eroded. The company says the average rates it could charge dropped 20 percent, and it fell to fourth in the market in customer loyalty, as measured by churn.
The novel idea O2 initially turned to in personalizing its services and becoming more customer-centric was to ensure that each customer was guaranteed the best plan and knew about it. The company decided that offering its customers good service for a fair deal made sense, and that if customers were informed of how good their deal was, they'd be more satisfied and loyal. The company even ceased offering new customers better rate plans than existing customers, instead ensuring that all had access to the best plan possible for their usage.
As the new ways of doing business took hold, O2's philosophy shifted toward building better value relationships. Customers are encouraged to re-subscribe, for example, with improved rate plans plus "treats"-free services like text messages or international calls to specific destinations, offered on a personalized basis according to usage patterns. Within 18 months of instituting its "best plan guaranteed" policy, O2 climbed from fourth to second in customer loyalty. In the past four years, the company has achieved better net growth than any of its U.K. competitors.
Beyond the Rate Plan
Guaranteed best rates and add-ons, over time, were complemented with a multi-channel approach. For example, O2 now sponsors a new entertainment venue in south London dubbed "The O2." In addition to the positive brand recognition it generates, O2 gives subscribers special access to tickets and other VIP upgrades as loyalty rewards.
The multi-channel approach also made O2 tap into Web 2.0 forces that help to drive technology adoption. Mark Imrie, head of CRM and online capability for O2, explains that the company learned its lesson about offering technologies out of context with MMS. "MMS was a technology-led service that was rushed to market," he says, "but it failed because of a poor customer experience." Rather than pushing technologies, Imrie explains, O2 wants to drive services that make sense for people. He says that MMS usage, for example, grows when it's the basis for a social networking type of service that allows like-minded users to enjoy socializing with a larger community, rather than just sending messages peer-to-peer.
The current focus, says Andy Day, director of CRM for O2, is on personalizing the online or self-serve experience. O2 has invested heavily in this area, he says, because it feels a bit behind where it would like to be. The company is looking to give subscribers-both commercial and consumer-far more visibility into plans, rates, loyalty programs and service offerings. It wants to offer personalized service dashboards online that are tailored to users based on their preferences and on "propensity modeling"-predicting customer preferences based on history and other data points. With this approach, O2 believes it can better engage each subscriber across the entire customer life cycle.
Realizing Personalization
O2's move to boost personalization and high-touch care is enabled by deliberate management approaches and a sophisticated IT infrastructure. The two cannot be considered separately, because the right incentives must be in place in order to encourage employees to take on big-risk, big-reward initiatives.
"The change to customer-centricity is driven from the top end," says Neil Wharmby, Bill Analyzer product manager at O2. For example, the employee bonus structure was changed. The operator's 10,000 employees once could earn 1,000 each if it achieved a certain number of adds in a given year, but now the bonus is based on staying first in customer satisfaction. Similarly, all employees earn bonuses based on key performance indicators shared across groups, and all KPIs must be met for everyone to earn a bonus. This sets the stage for cooperation rarely found among fiefdom-oriented organizations.
O2 also recognizes that customer satisfaction numbers can be misleading, especially within closed industries with lackluster competitors. So it also benchmarks against services like Amazon.com and iTunes, where the customer experience is extremely strong, and satisfaction typically high.
On the IT side, O2 is reining in what were massive and disparate data sources, all of which could improve customer intelligence. It turned to Aperio CI to help develop a solution that would produce results immediately but also would support the shift to customer-centricity across multiple organizations.
Teaming with Aperio CI
Aperio CI and O2 use an extremely robust and secure network of dedicated leased lines to transfer data between O2 in the U.K. and Aperio in New York. In this location, Aperio CI is currently processing roughly 2.5 billion call records per month for O2 and pulls various data in from more than 100 sources. It culls information regarding customer usage, propensities and other behaviors for targeting marketing campaigns, rate plans and other interactions.
Aperio's capabilities have also allowed O2 to take on data normalization and integrity checking, to pull its data sources together in a practical way. Rather than integrating or migrating all of the data, Aperio can glean what's necessary for supporting the customer experience and put that into one common source for systems like online customer portals, marketing campaign development, and call center agent desktops.
One solution that O2 built on top of these new capabilities is called "Vision," which aims to improve visibility into customer usage and experiences; to predict customer propensities; and to identify potential churns that could become loyalty opportunities. Vision is a highly customized version of Cordiant's strategy manager, an IT tool used in many industries to support marketing and customer interactions, integrated with the data and information Aperio CI processes and generates.
The solution enables, for example, using propensity models that constantly monitor the success of various campaigns. If something works well on the inbound calling side, it can be pushed into outbound calling as a campaign right away. This has allowed O2 to consolidate its product offerings with one, common set of underlying data and has provided tools that can learn from cross-product experiences. In other words, rather than looking at distinct services as silos, it looks at an entire product offering and how it performs for specific groups of customers. Looking at the various enablers or stimuli, the system can suggest propensities, bundles and other factors to help target offerings to specific groups more effectively, based on real market data that can be collected essentially in real time.
Vision has further benefited O2 in two key ways. First, it allows much faster introduction of special campaigns and offerings. O2 instituted its "treats" loyalty rewards within six weeks of engaging Aperio, simply by improving visibility into which customers were most valuable and thus deserved a reward.
Second, the Vision application is clear, simple and intuitive, putting all of the needed information for a specific customer right on the desktop. This simplicity greatly reduces agent training-but even more important, it drives sales. Though Vision was implemented with the idea that call center agents should be customer care-oriented first, leaving sales aside, it has driven sales with its high touch capabilities and strong customer intelligence. O2 claims that Vision contributes an extra 20 million per year in sales because of the contextual customer interactions it has enabled.
On the Campaign Trail
Vision has enabled not only improved customer interactions after the fact, but also has enabled extremely targeted marketing and loyalty campaigns. O2 used to run disparate platforms, generating disjointed campaigns and major execution problems. Customers would receive promotions for services they already had, but at a better price they could not get; or promotions were poorly timed, highlighting events or opportunities that had already passed.
Now campaigns are all centralized in a database that allows marketers to build reusable components that can be mixed, matched and adjusted. Campaigns can be pushed out consistently to any specific channel, or all of them simultaneously. The system also checks campaign planning and history to avoid poor timing, overlapping promotions and offers to ineligible customers, and to cease irritating customers with repetitive offers. O2 currently can run 80 distinct, targeted campaigns per month from the broad-brush level down to service-specific campaigns based on actual usage and propensities.
From a technical perspective, according to O2's architects, the key to making this set of capabilities work is the underlying data. Various data inputs, anything from price points to subscriber usage histories, change constantly. If the data in the background isn't maintained, and the data model isn't refined constantly, then over time the value of the analytical capabilities, campaign management and so forth are undermined. O2 is working with Aperio to simplify data models, naming conventions and allowable queries. The real key, say the architects, is just having all information in one place so it can be massaged, refined and analyzed constantly, even as the solution is developed.
Reaching Out to the Customer
O2's new capabilities enabled it to develop and launch two customer-centric products. Typically when people think of a mobile product or service, they think of rate plans, SMS or ring tones. But O2 has learned that keeping customers informed and in control helps to drive loyalty and sales, so in this case it has created products to help customers both in the call center and online.
One product, borrowing from the underlying capabilities Aperio enabled, is its Bill Analyzer. O2 product manager Neil Wharmby envisioned the product in a late-night epiphany. He was tasked with improving O2's online, end user solutions. Up to that point, customers were only being given usage data on CDs or by flat file with limited reporting capability. Wharmby wanted to find a way put customers in charge of their own activities online.
Working with technical consultants Dave Ellis and Pauleen Gunner, along with folks from Aperio, O2 developed Bill Analyzer and released it initially in January 2003. It allows users to go online, pull down standard reports or create custom views, and use the information for any purpose-whether managing a household budget, or a large enterprise controlling hundreds of subscriptions.
The customer, or contact center agent, sees a complete profile of services, options, and current campaigns and promotions to opt into, along with detailed billing and usage information. The product also offers a feedback loop to O2's marketers so they can monitor customer reaction to particular campaigns. The application has been through seven releases, with each upgrade based on direct feedback from customers and internal users to the product engineering teams.
Customers can use Bill Analyzer to test out different plans and options, and see their actual final cost. O2 has found that being open with this kind of information, along with policies like best plan guarantees, helps to eliminate the usual suspicions of wrongful billing or overcharging, and greatly reduces mistrust in the customer-operator relationship. The company has conducted studies showing that this approach cuts churn significantly, as evidenced by its own turnaround. Wharmby says that within a month of launching its new online capabilities, O2's major competitors all attempted to follow suit.
Related to Bill Analyzer is Bill Manager, a tool O2 uses in its contact centers and extends to customers, that allows for extremely detailed and flexible reporting to facilitate subscription and cost management for customers with two or more accounts. Offering similar but more robust capabilities than Bill Analyzer, Bill Manager allows larger O2 customers to have a completely tailored plan created for them.
"You might have an international company that wants better international rates, or a local business that just wants to make local calls," explains Wharmby. "Bill Manager helps us to tailor those." An account representative can use Bill Manager to run 12-month historical reports, examine the customer's usage and make a custom offer based specifically on the customer's type and amount of traffic. The customer can then access the same Bill Manager tool online to examine the same information and validate that what O2 is offering is accurate.
Personal Initiative
Ultimately, it is O2's ability to understand customers, satisfy their propensities and communicate value to them that's making all the difference. All of the added treats and throw-ins are useless if customers don't understand what they are and how they can be earned. None of these offerings could be targeted properly if O2 didn't have the data infrastructure in place to enable complete customer visibility in all of its interaction channels. And none of the infrastructure would be in place if it weren't for an organization that creates specific incentives to encourage its people to work together to take better care of customers.
The kind of personal initiative shown by people like Wharmby, Day and Imrie-not to mention dozens of other key managers and architects who work on this program-is critical to the success of any OSS/BSS program at any carrier. O2 has rewarded its employees for sticking their necks out. Wharmby, for example, received an all-expense-paid holiday to Disney World for his family as a reward for his success with Bill Analyzer. "I don't know many companies that would do that," he says, "but when a business rewards an employee for doing something good that helps everyone, it builds a great deal of loyalty."
What's perhaps most impressive about O2's return to the No. 1 spot is that it was accomplished without cancellation penalties or automatic contract extensions for plan changes. In the United Kingdom, where there's too much competition to allow for the strong-arm tactics seen in the States, loyalty must be earned.
About Aperio CI
Aperio CI is regarded as a leading provider of advanced analytics solutions that empower service providers to maximize revenue and profitability. Aperio CI applies proprietary software applications and techniques to a client"s complete transaction records, creating a detailed view of customer usage and/or purchasing behavior. By integrating that model with a comprehensive database of market and competitive intelligence, Aperio CI enables its clients to develop and execute innovative and targeted marketing programs that acquire new customers, retain existing ones, increase customer satisfaction and ensure more profitable performance. Aperio CI is based in the New York area, and maintains offices in New Jersey, Atlanta, San Antonio and has an affiliated entity in the United Kingdom. For more information, please visit www.AperioCI.com.
For more information, contact:
Lynn McAuley
Aperio CI
+1 (631) 468-4014
lynn.mcauley@aperioci.com
Glen Zimmerman
Netezza
+1 (508) 382-8267
gzimmerman@netezza.com