According to the findings of KPMG’s global telecom study, Consumers & Convergence 2007, launched today at the FT World Telecoms Conference in London, the notion of bundled multimedia packages generating ‘stickiness’ (customer retention) - through all-in-one convenience and unified billing is unfounded. The data reveals that what consumers think of as convenience and ease of use, may differ from what their service providers think.
Of the 4,400 consumers surveyed by KPMG in 16 countries in Asia, Europe, and North and South America, 57 percent indicated attractive pricing is the most important driver in the decision for signing a bundled service contract. In the UK this figure rises to at 83 percent.
Only 12 percent of global respondents acknowledged convenience as a factor, falling to only 5 percent of UK respondents. Additionally, of those who do purchase bundled service packages, three-quarters do so primarily to take advantage of lower pricing.
Moreover, 56 percent of survey respondents indicated that even if only one of the bundled elements they subscribe to was offered cheaper or better by another carrier they would readily break contract and switch to another carrier (60 percent in the UK). Only 15 percent of respondents indicated that their current service package was ‘sticky’ and they would not consider switching, (17 in the UK).
“The implication of consumer price expectations for converged services has to be alarming for service providers, because it cuts to the heart of the strategies carriers are using to attract and retain customers—the triple- or quadruple-play of services,” said Sean Collins, Chairman of KPMG’s Communications and Media practice. “Providers are bundling to maximize customer convenience to increase customer growth and loyalty, and their customers aren’t buying it.”
However, there are some Country variations within these findings. Customers in developing countries, particularly India and China, see convenience and enhanced customer experience as important drivers for subscribing to bundled services– the same number of respondents in China (28 percent) saw “reducing the hassle of signing up” as a benefit, as those who cited the price of the bundled offer.
Collins commented: “The less developed infrastructure and lower levels of competition are likely to be factors in this variation. In developing countries service improvements such as offering faster ways of registering and streamlining administrative processes will be adding real value to consumers. This difference in consumer outlook is an important consideration for telecoms companies looking to develop business models within different markets.”
The study also showed consumers globally are unwilling to pay extra for having additional multi-media services on their mobile phones. This is consistent with findings in last year’s Consumers & Convergence 2006 study. In fact, when asked how their usage of a particular site or application would change if the cost of that service were to rise (or if there were a cost imposed, if it were a free service), respondents voted with there feet, and in nearly every category indicated that they would switch – roughly 70 percent of the time (82 percent in the UK).
The categories included instant messaging, games, multimedia, blogging/networking, news access and shopping. Interestingly, the only category where consumers showed loyalty was games. Not only would less than half of gamers switch because of price, but more than 40 percent would not even alter their usage – indicating that a successful game is thus relatively ‘sticky’ product for consumers.
There are some notable differences in consumers’ willingness to pay for specific mobile content. Similar to last year, Asian consumers are more willing to see the mobile as a multimedia device. Nearly 30 percent of Asian consumers said that they would pay a slight premium for gaming, or multimedia services (music and video streams or downloads) from their phones—compared to 12 percent and eight percent of North Americans even willing to consider minimal payment for games and multimedia, respectively. These figures are slightly higher within the UK with 16.5 percent willing to pay a minimal amount for accessing games on their mobile and 10.8 percent for accessing multimedia services.
“This should be encouraging for Asian carriers, particularly as the iPhone age dawns in the region,” added Collins. “However, it is somewhat disappointing for those in North America marketing the iPhone or its imitators now.”
The study also showed that consumers do have preferred devices for specific activities, but generally the mobile phone is emerging as a central point in user experience because of its ease of use and ability to help the consumer navigate through multiple media experiences. More consumers use their mobile phones as a primary device for SMS messaging (80 percent) than for voice calls (58 percent), while other mobile phone activities such as instant messaging (8 percent), music playing (8 percent), and social networking/blogging/video sharing (5 percent) all saw the desktop/laptop computer as the primary device.
However, data showed small, but significant, pockets of converged activity are also clear in consumer responses: seven percent of all respondents feel their preferred music player is their mobile phone, and 11 percent feel that the best way to make a phone call is through their computer.
“Phones and communications devices, telecoms, TV and Internet service packages are increasingly multimedia,” continued Collins. “Individuals in the networked world expect to be able to migrate from one device or place to another and have a similar usage experience. The communications, IT and media ecosystem that is emerging continues to offer opportunity for established and new players alike.”