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2012 Telco Innovation Study South Africa

This report is solely for the use of client personnel. No part of it may be circulated, quoted, or reproduced for distribution outside the client organization without prior written approval from Innovation Agency. This material was produced by Innovation Agency based on client interaction; it is not a complete record of the discussion.


In the highly competitive market that organisations in South Africa find themselves, a means of differentiation is of paramount importance. Innovation is seen as one of the primary drivers in achieving this differentiation. This study investigates a number of aspects surrounding the level of innovation being achieved by organisations, as perceived from a localised end-user perspective. The study also looks at the level of customer satisfaction with their telecommunications provider (Telco); and what would entice a customer to switch from one Telco to another. The market research conducted highlights which Telcos are perceived to be the most innovative in the industry. Further analysis delves into why this is so. The study also serves to create a greater awareness around the concern that Telcos need to be responsive to customers’ emotional needs. The core purpose underpinning this initiative is a strategy for managing the information acquired and turning it into insights that empower customers in new ways.


This report provides insight on the study conducted during 2011 and 2012. This is an administered survey conducted during various programs and workshops offered by InnovationAgency. The survey was administered in a controlled manner. Survey questions were designed to be opened-ended in nature, and served to gauge individual perceptions around the level of innovation achieved by institutions from an end-user perspective. Respondents were not given information and/ or definitions of the survey questions. Data collected was grouped and analysed and keywords created as a means to graphically represent the results of study. The 2012 Innovation Study consisted of 388 respondees.


Innovation study questionnaire  Which Telco is the most innovative? Why did you rate the Telco as the most innovative? What lessons can be learnt from innovative Telcos? Have you switched Telco in the last 12 – 18 months? Why did you switch Telcos? Why have you not switched Telcos?


§  Respondent demographics

35%

Age distribution

30% 25%

Male   58%  

Female 42%

20% 15% 10% 5% 0%

20 - 24 25 - 29 30 - 34 35 - 39 40 - 44 45 - 49 50 - 54 55 - 59

Gender split

25%

Asian 19%

20% 15% 10%

White 50%

Black 20% Coloured 11%

Population group

5% 0%

Income distribution


2012 Banking Innovation Study Results Most innovative Telco Reason for rating the Telco innovative Lessons from innovative Telcos Switched Telco in the last 12 – 18 months Reason for switching Telco Reason for not switching Telco


§  Most innovative telco 8ta entered the market with an aggressive pricing strategy to rival the bigger players, but has yet to gain significant market share. Newcomers into the space will probably find it difficult gaining market share, in a market dominated by the Vodacom, MTN and Cell C. Vodacom is perceived to be the clear leader in innovation followed by MTN and Cell C.

45% 40% 35% 30% 25% 20% 15% 10% 5% 0% 8ta Redbull mobile iBurst

Telkom Virgin Mobile Neotel

Cell C

MTN

Vodacom


§  Reason for rating a telco innovative Telco’s continue to widen their distribution network to also offer products outside of their core Telco offering such as store vouchers and furniture, together with the cellphone package Mobile operators have been increasing their capex in technology and infrastructure to meet growing demand in mobile internet usage, which saw growth to 44%, from 27% in 2010 (WorldWideWorx, 2011 Cellphone Usage Report). “Products” are at the top of the list for rating a Telco innovative, ahead of “Customer service” and “Technology”.

Products/ packages Marketing Customer service Growth of business Technology Network Time to market Mobile service Leaders Flexible/ adapt to changes Tariffs/ charges Targeted market Innovative Offer more Perception Partnership established Challenge the status quo Reliable/ stable 0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%


§  Lessons from innovative telco The prominence of customer centricity in the study implies that customers are looking for products and services to suit their specific needs. Customers are also signaling for more innovations from their Telco’s. This may be signaling greater differentiation by customers, from their Telco’s. The top lesson that respondents gave suggests that company brand positioning and how well they are known clearly influences customer perception.

Marketing Customer centricity Customer service Encourage innovation Growing the business Risk management Lead Technology improvement Flexibilility/ adapt to changes Challenge the status quo Products Keeping it simple Target market Price strategy Look for opportunities Continuous improvement Consistency Competitiveness Company strategy 0%

2%

4%

6%

8%

10%

12%

14%

16%

18%


§  Switched telco in the last 12–18 months The introduction of number portability does not seem to have added to the number of customers switching Telco, suggesting that there may be more reasons for customers not switching. Less than one eighth of the respondents had switched Telco, despite the introduction of number portability.

Yes 12%

No 88%


§  Reason for switching telco Results indicate that there may be more than one reason that drives customers to switch. The increase in price competition together with the decision by the communications regulator to force Telco's to lower their interconnect fees has resulted in greater choice for the customer not just in terms of products but prices too. “Products” was the top reason for rating a Telco innovative, however “Customer service” was the top reason given for switching Telco's.

Customer service Company controlled Better offer Cost issue Technology Contract ended Wanted to try something new Appealing Products/ packages Network Needed the change Made errors Convenient 0%

5%

10%

15%

20%

25%

30%

35%


§  Reason for not switching telco Results also indicate that customers may find it hard to differentiate the offerings from the different Telco’s. The results of this question may be used as a gauge of customer satisfaction levels with their Telco's. The results also suggest that customers choose to stay with one provider for more than one reason, but service levels were the most important.

Satisfied with Telco Customer service All the same Company controlled No reason to Locked in contract Too combersome With multiple Telcos Convenient Products/ packages Cost issue Network Marketing Loyal Lazy to switch 0%

5%

10%

15%

20%

25%

30%

35%


Trends 2007 - 2012

Most innovative Telco Reason for rating a bank innovative Switched Telco in the last 12 – 18 months Reason for switching Telco Reason for not switching Telco


§  Most innovative telco 60%

50% Vodacom MTN

40%

Cell C Neotel 30%

Virgin Mobile Telkom iBurst

20%

8ta Redbull mobile 10%

0% 2010

2011

2012

Vodacom has seen the biggest drop from 2012 levels, whilst Cell C has risen since 2010 levels. Telkom has not been recognised for innovation despite being the oldest provider within the group. Vodacom continues to hold the lead position in this category, despite dropping from 2010 levels. Shifts in position were more apparent among the top 3 mobile operators – Vodacom, MTN and Cell C – with the rest of the group relatively stable in the 3 years.


§  Reason for rating a telco innovative 45% 40% 35% 30%

Products/ packages Marketing

25%

Customer service Growth of business

20%

Network 15%

Technology

10% 5% 0% 2010

2011

2012

“Products” as a reason for rating a Telco innovative has remained at the top position may be indicative of how innovation is viewed as a tangible commodity. “Customer service” looks to be steadily gaining ground, despite being a distant 3rd in this category.


§  Switched telco’s in the last 18months Number portability does not seem to have had a huge impact in customers switching Telco’s. The number of respondents who had switched Telco’s remains relatively small from 2010 levels.

12% 9% 14%

86% 91% 88%

Yes No


§  Reason for switching telco’s 45%

40%

35%

30% Customer service Company controlled

25%

Cost issue Technology

20%

Network Products/ packages

15%

10%

5%

0% 2010

2011

2012

“Products/ packages” was the number one reason for rating a Telco innovative and “Customer service”, however, was the number one reason given for switching Telco’s. Respondees switching Telco’s as a result of their employers has had a sharp increase during the 2011 to 2012 period.


§  Reason for not switching telco’s 40%

35%

30%

Satisfied with Telco

25%

Customer service All the same 20%

Company controlled Locked in contract

15%

Too cumbersome Loyal

10%

5%

0% 2010

2011

2012

“Products/ packages” was absent as a reason for not switching Telco’s, despite being the top reason for rating a Telco innovative. More and more customers indicated to being “Satisfied” with their respoective Telco’s.


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2012 Telco Innovation Study