Is the industry ready for new Ofcom end-of-contract regulations?
New Ofcom regulations are due in February 2020 aimed at removing the end-of-contract trap. But are service providers ready to embrace the opportunity presented?
Read this insightful article below by Teresa Cottam of Omnisperience.
They don’t listen, they don’t see and they don’t communicate with you. It’s a frequently-repeated customer complaint about service providers. We call it the three frogs strategy. But new regulations from UK regulator Ofcom are being introduced in February 2020 which should drive the final nail in the coffin of this frustrating customer strategy. The regulations will force broadband, phone and TV firms to notify customers when their contracts are coming to an end, as well as inform them about the best tariffs. But are service providers ready, willing and able to make the change?
We’d argue that service providers worldwide need to think about what this means for their business, while B2B service providers need to get ahead of the issue and reflect on how it impacts customer expectations.
New regulations are being introduced in February 2020
The new regulations being introduced in the UK, resulted from research by Ofcom that found that more than 20 million customers had gone beyond the terms of their contract and could be overpaying as a result. Ofcom discovered that customers with dual play landline and broadband bundles were paying 20% more on average when they were out of contract, and those with triple play bundles of landline, broadband and pay-tv were paying 26% more.
This is mainly because deals are offered on a promotional basis for 12 months, with charges rising after this if customers forget to renew their contracts and opt into a better deal.
Ofcom’s new rules are aimed at remedying this situation and mean service providers will have to inform customers at least 10 days before their contract is due to expire to remind them they need to look for new deals. The notification will have to include any changes to the service and price paid if the customer does not renew but remains on the same contract, as well as the required notice period, and the best deals currently offered by the provider.
Ofcom also introduced new regulations in July 2019 which means customers are now able to switch mobile provider by sending a single free text message.
New research reveals service providers still not communicating with customers
However, new Ofcom research shows just how ill-prepared service providers are for this change. The regulator found that over the last 12 months, 7 out of 10 UK customers hadn’t heard from their service providers about the status of their contract. The pattern was broadly similar across all sectors, revealing an industry-wide problem.
Proportion of UK customers that hadn’t been communicated with in previous 12 months about their contract:
– 71% of broadband customers
– 70% of mobile customers
– 74% of fixed line customers.
Omnisperience argues that by complying with just the basics of the regulations, service providers will be putting themselves at a huge disadvantage.
Imagine. You are one of the 7 out of 10 UK customers that have not heard from their service provider for 12 months and thus have no discernible relationship with them, and certainly no loyalty towards them. You will now be prompted that your contract is about to end and it will be easier than ever for you to shift service provider in order to chase the best possible deal. What are you going to do?
This is a very dangerous situation. Service providers not only risk losing customers to rivals, but also face elevated customer renewal and acquisition costs as lost customers will need to be replaced and renewing customers will need to be bribed to remain as a result of a zero-trust, zero-loyalty relationship.
A change of mindset is required
The solution to this challenge is obvious, if somewhat alien to many service providers. To mitigate the risk, they will need to work harder to build a relationship with their customers during the term of their contract, taking the focus away from price comparisons and discounting and placing it on value and engagement. They will also need to shift from a mindset of acquisition, which drives churn because it offers the best deals to new customers, towards one of retention where loyal customers get the best deals. Such as shift is in line with customer expectations, because it places value on loyalty and the longevity of the relationship.
John Hoggard, Principal in Utilities & Telecom at Quadient, apparently agrees with us. He says: “The biggest area of customer experience communications providers must focus on is proactivity. Simply put, people now expect service providers to really know them, and contact them with the right information, in the right way, at the right time…there is a real opportunity to improve customer communication throughout the duration of a contract and encourage them to remain loyal. Ultimately, customer loyalty will make the difference between success and failure.”
While Soft-ex’s Grainne Magfhloinn reminds us that service providers already have a perfectly good tool they can utilise to build loyalty – their bills. She says: “Personalising and simplifying digital billing communications enhances the customer experience by ensuring customers receive accurate and easy-to-follow bills. Proactive notifications on prorated charges, campaign roll-offs and end-of-contract notices, all generate better customer engagement and loyalty”. Magfhloinn argues that transparency provided via interactive billing and personalised offers (based on previous usage or preferences) will deliver positive results in customer retention levels. “Self-serve billing analytics, accessible by user-friendly dashboards, means that service providers can build that all-important customer trust, highlighting that there are no hidden costs or inaccurate charges, leading to longstanding relationships,” she comments.
Omnisperience View: What this means for B2B service providers
While this regulation focuses on consumers, rather than businesses, B2B service providers need to be mindful of what is happening in the B2C space. Many sole traders, homeworkers and SME customers are on consumer contracts, not business contracts, and will thus be within the remit of this regulation. These represent some of the most valuable customers you have because they tend to consume more and be prepared to pay for it. What’s more, with the continued consumerisation of enterprise services, it is inevitable that business customers will expect the same level of proactive experience they are receiving as a consumer customer when they are in their ‘business persona’ and buying B2B services. Rewarding loyalty, communicating more effectively, and being proactive are not rocket science but business 101, and essential for any B2B service provider who wants to be successful in 2020 and beyond.
Service providers beyond the UK also need to be mindful and examine what is happening (and why) – building it into their own strategy, customer experience and offerings.