Saturday, February 7. 2009What Do "Customers" Want From Their ISP? (1)...John Linton ...apart from a consistently fast, 100% reliable internet connection at no cost? I rambled on about 'unified communications' yesterday more in terms of corporate users but with the view that young 'residential' users had adopted and adapted to more of the 'unified communications' aspects of today's telephone and data services far more quickly than any business user. That 'subject' had been on my mind for quite a while as we move towards a 'different' communications offering for business users and also for residential users over the next period of time. Since we started Exetel we always understood that high speed/100% reliabilty/low cost (no cost was never going to be achievable for us) were the three prime criteria or becoming successful in the Australian internet provider maket....and, of course, we recognised that every other sensible internet provider understood those primary requirements to have a viable service. We knew that, sooner or later, we could achieve each of the three primary objectives on a consistent basis and that the only differentiator would become price which we could never expect to win with against companies such as Telstra or Optus when the market stopped growing - which is pretty much now. Why couldn't we win? Because Telstra has the lowest cost base for simple comunications services that we would have to buy (directly or indirectly) and Optus would always have to offer lower pricing than Telstra until the early teens of this century. So, eventally, it would always come down to how it might be possible to compete with Telstra once 'natural growth' stopped and it could no longer rely on the 'inertia' and 'stupidity' of its customer base to maintain any sort of 'premium' pricing. The obvious answer is, as everyone with eyesight to read Telstra's "marketing hype" or has received their "special offers" would know is that Telstra will/already has cut the prices of their internet services to 40% - 60% below their "published prices" so that they can "win back" other ISPs customers without slashing the prices they are charging to their current customers. It doesn't really matter if that crude description of how stupid customers get to remain paying high prices for the same sevice that new customers pay much less for is an exact description of Telstra's approaches to the Australian ADSL marketplaces over the past two+ years or not; but you either get the point or you don't. So Telstra and Optus defacto discount their current customer's high prices (who are locked in to long contracts) to "win back" customers of other communications providers relying on a market share number increase to take care of both revenue and profit erosion. No real problem; sleazy but 'legal' - it's been done since the beginning of commerce - its called wielding maket power and some poor souls in the USA a long time ago passed some laws (the Sherman Anti-Trust Act) in a vain attempt to prevent such things happening. Of course, like the Volstead Act, it was never ever going to work - with the possible exceptions of Standard Oil and US Steel I suppose if you want to nit pick. So, we always considered that we would have to find a way of competing on something other than price if we were to remain in the residential business. It didn't take too much 'brilliance' to work out what that needed to be and how to go about putting it in place. It was and is going to be an awful lot harder to actually do it. Like any second year marketing student doing a maketing course you have to make a list, and after checking it twice, you have to have a series of advantages over the companies you think will be your competitors that are sustainable over many years. These advantages not only have to be sustainable they have to be 'uncopyable'. Not so easy when you come right down to it. So how would you go about it? I would welcome your input in determining how a small company like Exetel can compete with Telstra and Optus and those companies most predatory 'marketing practices' over the next five years? I will 'publish' my list and my reasoning tomorrow. Trackbacks
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In a way being an ISP/Communications company such as Exetel is not that different to being a retailer.
Retailers all over the country are butting heads against the two big W's (Westfarmers/Woolworths) and I would argue that a lot of their practices and market control make Telstra look like a pet cat. You are lucky in that you have more options at hand due to the nature of your product than a mum & dad hardware store when a Bunnings moves in down the road. Comment (1)
True enough but I wouldn't have thought that there were any 'mum and dad' hardware stores in 2009.
Just as I wouldn't have expected there to be a black smith. By the way, I'm not complaining about the situation with Telstra's "marketing practices" - I tried to make it clear that I always knew there would come a time, and about now, when, just as for the past 4000 years, they would occur and we would need to have changed by that time. Comments (3)
In terms of competing against Telstra, Optus, or any other ISP for that matter... I know it's a terrible cliché to apply Sun Tzu's Art of War to business, but it's always worth a read...
http://www.chinapage.com/sunzi-e.html Comments (2)
As an agent, I'll try to guess why many customers want or don't want Exetel.
Why they join Exetel... 1 - Pricing 2 - VoIP 3 - Speed 4 - Local support if needed (Agent) 5 - Cash / Cheque payment (approx. 15-20% of customers won't do DD out here.) 6 - Mobility 7 - Limited risk of excess usage fees. .. and why those that don't want Exetel... a - Scared of small companies b - Don't want to change email address c - Think "Homeline Ultimate" is a good thing d - Have bundled services and scared that changing ISPs will break some other giveaway they may have but don't understand. e - Want a Single Bill f - Fear of an excess usage fee. g - "My Hour" offerings And for those that leave Exetel: ! - Scared of small companies. @ - Can't use the computer anyway, always fiddling with the line or not paying phone bill. # - Too much money, not enough usage. $ - Bank charging $30 extra per DD. % - Buy an over-the-shelf Wireless Broadband product. --------------------------- My comments on the above: 2 - I think there's a significant market for just VoIP as a service. I've sold quite a few to those that won't change ISPs, but often have to use MNF for that. 4 - Local support (on site) is something Agents can do of course, but how you market that I don't know. Much of your target market is probably those who already know what they're doing, but a lesser skilled market might need a hand. 5 - A challenge. Out of the 20 or so that use me as a proxy for payments, one or two are tedious payers only responding when I log in to their account and change their password - but then I'm not sure they ever check email. However, if you can find a way to make this work safely, there's about 15% more customers that might be available to you - those who are protective of their bank accounts. (As a warning for agents, my monthly proxy DDs are now over $1,000. This adds turnover but little profit. It may adversely affect your tax or GST requirements if you reach a significant volume.) 7 and f - Many people don't know what a megabyte is and so are scared of excess usage fees - especially after Telstra horror stories. I usually explain it as one web page averages 1/4 of a megabyte, YouTube videos up to 10 Megabytes, most emails are tiny. a and ! - Well, 70,000 is a reasonable number, and 5+ years is a reasonable time, so in time this problem should solve itself. b - I always suggest they get a gmail address rather than anything else, because it works the same way as an ordinary address, has the best junk filtering I've ever seen in a free product, and you can take it with you even if you decide Exetel is not for you. (If they can't get the address they want I create a forwarder to the address they get @gmail, from @auzzie.net) I know some ISPs like to use the email address as a lock-in since it clearly works well, but it can also become a negative for the customer as well. c - HomeLine Ultimate is best explained as paying for 600 phone calls a month whether you make them or not. d - Harder to fight the bundled services fear as it's hard to know exactly what that means. I guess it may depend on if it's possible to demonstrate that the Exetel service will be cheaper than what they have now even sans bundling. e - Well, for ADSL1 at least a single bill is not possible. But you can get pretty close. f - Excess usage fees - $3 per GB is much less than $150 per GB. Explain this and most are happy. Having some truly capped plans might still be helpful in 2-5% of cases, my estimate. (That is a plan that slows to such an extent that even leeching doesn't break Exetel's bank and is tolerated.) g - "My Hour" and other such free call offerings are hard to compete with, especially in the mobile phone department. If a customer is fixated on this it's hard to win as they feel they have already won. @ - As a customer = Do Not Want (Well, maybe OK as a wireless customer, but it's debatable.) # - I've had a few who don't see the value of paying $30 a month if they rarely if ever use it. Of course, wireless is the suggestion I make, but in both cases where this has happened recently, one went to Telstra prepaid wireless after I demo'd Exetel wireless, the other (@ above) I think broke their computer again $ - The one who went to Telstra prepaid wireless claimed her bank was charging her $30 extra per DD transaction on her account. She called to ask if I could change her DD details, I called back to no answer, tried again when I remembered to two days later and she'd gone Telstra. % - I've hired out wireless sticks to about 10 customers so far so they can try the service. In most cases they're happy, I order one for them, and a week later it's installed. However, one went to Dodo, and another two to Telstra after using the stick. Unfortunately due to limited cash flow of being a tiny business around $25k per year profit (but I'm happy!), I'm not always able to sustain meeting the demand and to be able to have a stock of sticks available. (My waiting list is currently 5 to trial.) Thus I risk losing them to the three other major players Optus, Virgin and Dodo. (Virgin in particular has some pretty good pricing for the average user.) Rant / whinge aside, in the HSPA marketplace it's going to be a challenge with such visibility and availability of other wireless providers for Exetel to compete. Maybe your agents are still one of your key assets here, or else some future relationship with a traditional retailer. On the plus side, since most of these competing modems are locked to Optus, you still have a latent opportunity to convert some of them after they've already bought the hardware - but admittedly next to the Virgin offers it'd be fighting over comparatively small change in some cases. Sorry I don't have one simple answer on how to compete If it's anything like the computer repair business, it's all word of mouth anyway; but perhaps the Harvey Norman profit level requires the Harvey Norman advertising spending? Cheers, Mike Comments (2)
Thank you for spending so much time doing my job for me.
I really apreciate it. Comments (3)
You're welcome Exetel helps me, so glad to help back.
I should add as an afterthought, fax as a small drawcard for some businesses, and wireless as an attractant for those who want to leave dialup but don't want to touch their existing phone company setup. I will also clarify that part of the reason for cashflow issues at my end is purchasing $120 yagis and $160 dishes. These represent a significant expense compared to ADSL modems On the plus side with these, you can sometimes compete with the satellite providers in regional areas - a smaller market opportunity for sure but a market none-the-less. Comments (2)
We are trying to source yagi aerials at a sub $A30 price at the moment.
Comments (3)
As far as championing your business to the masses goes, I'm going to suggest something that is anathema to you... (re)engage more directly in the Whirlpool community.
I know full well your opinion of Whirlpool and its membership. But there is no dispute that the site is Australia's leading forum for broadband discussion. It attracts the early adopters and tech savvy who in turn inform and advocate for family and friends. It's where a lot of word of mouth begins and perpetuates. Case in point: Internode. The reality is that Internode have an insignificant market share of 3%. But on Whirlpool they are the centre of the universe. This is due to the high level of participation of management and senior staff. It gives customers and potential customers a sense of familiarity and almost "ownership". It reinforces the "tribal/club" aspect of which ISP you're with and "barrack" for. Think of all the benefits this blog has brought you. Whirlpool can act in the same way as a medium for advocacy. Unfortunately, yes, you will have to suffer the fools there. But the benefits will outweigh the costs. Of that I'm sure. Comments (2)
Aggressive marketing advertisement is the best way to promote your company but waiting for the next generation to grow up and understand value might work.
Exetel is an awesome ISP for users who understand what they are doing with the internet both for information and entertainment.Yet there are lots of people who only use the service for occasional web browsing where off-peak might turn them off. Yeah,PAYG is an awesome plan but most customer wants a plan where it is hassle free where little explanation is needed to get them online and stay online every month. Devise a plan where no peak and off-peak might be able to turn in more customer for Exetel Comment (1)
Agree. A plan similar to PAYU, with say 6Gb, and no peak/offpeak, on all speeds. Also a 6Gb + offpeak plan on all speeds. You have this last one for ADSL2, and for 512/128 but not for 1500/256 or 8192/384. Especially the 1500 plan, a $10 jump from the entry 512 to 1500 is a lot, especially when there is also a doubling of the peak data. If you could offer the same data but the higher speed, this is handy for VoIP users who want to be able to use the phone and computer at the same time. VoIP works fine on 512, but better on 1500 if computer usage continues throughout the call.
A lot of country users (and many city users, including myself 3km from the CBD!) can't get ADSL2, and HSPA is not yet stable enough to be a phone replacement. It may in the future, but it isn't yet. Also, whilst I understand you want to say goodbye to Telstra, but your plans to stop ADSL1 connections in a few months will significantly slow your growth, mainly due to the limitations of Optus' ADSL2 network. It may be widespread, but its DSLAMs are quite often full so ADSL1 is the only viable option (again, HSPA is not yet stable enough for a VoIP/phone replacement - especially in areas where ADSL is limited and therefore you have a huge number of customers on single tower!). I think this decision is about 2 yrs too early, and I really hope you reconsider it at this point. Comment (1)
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