Tuesday, February 2. 2010Too Many People Are Buying Exetel Services.....John Linton .......and it's making a nonsense of our short and medium term business planning. The recent 'phenomenon' of a rapid and ongoing surge in people selecting Exetel as their broadband provider is going to pose some quite severe and unwelcome problems for us as we move into the 'real' months of 2010. While it may seem strange under any circumstances to 'complain' about business increasing it is in fact a quite real issue for a business of any size - but I'm only concerned about our own business. My first issue is to find out why this is happening and the most obvious answer is that the pricing we started to put in place in November and completed in December is far too 'cheap' and is attracting the 'wrong' types of new customer...and yes, for all those people who read this musing and conclude that I am denigrating 'all' customers by that phrase try a remedial English reading course so you don't understand those few words to mean that....the delete key on my email client is wearing out. Every commercial entity has some sort of customer analysis software that provides management with the ability to look at their customer base as a whole and, via the wonders of modern data base software, by pretty much any characteristic or demographic they choose and by whatever multiple sort conditions they can dream up. So, with very little effort I can look at Exetel's total customer base in terms of such things as gross profit per customer, usage in any particular time slot by customer, number of recommendations, time with Exetel and pretty much anything else you would want to know or can dream up either as a one off enquiry or as a 'standard' repetitive report. I did some examination yesterday and I didn't like what I saw. Our plans for ADSL for 2010 have been based on a set of highly competitive marketplaces with constantly better 'deals' being offered by Telstra et alia via sneaky 'direct marketing' tactics that avoid examination via the ACCC. We made the assumption that as Telstra got squeezed it would find ways of buying new customers as its older customers ran out of the incentives offered when they locked themselves in to long term contracts in the past and less of them would fall for those tactics when Telstra approached them to resign a new contract. We figured that companies such as TPG and iinet would struggle to keep their shareholders happy by meeting their promised growth numbers and, within their much greater financial limitations, also try new promotions while attempting to keep their current customers paying their bloated plan fees - in the case of iinet. We saw Telstra's huge ADSL2 advantages being used to significantly reduce our 40,000 plus ADSL1 customers because we couldn't see how any customer could continue to buy ADSL1 services when they had to pay more for them than for an ADSL2 service. Similarly we could see the rapid reduction of land line prices (not in actuality but by including 'free calls') as further eroding our ability to provide the Optus included wire line plans. There were many other considerations which all added up to the 'impossibility' for Exetel of growing our broad band business very much - if at all. Therefore our 2010 broadband business was based on a 'graceful decline' over the coming months with that rate of decline slightly accelerating over the last six months of the calendar year. That may still be the case as the months go by because I haven't seen anything happening anywhere in the places I look that tells me anything different. I am looking forward, with even more interest, to Telstra's half year results and those of the other companies I can understand something from what they report. Our November/December price decreases were aimed at trying to ensure the decline of our ADSL customer base was kept to as shallow a curve as possible and the only notionally profitable residential customer revenue we lost would be more than compensated for by adding twice the amount (in the early months of 2010 growing to four times the amount later in the year) of business revenue which was also much more profitable in terms of gross contribution and required much lower support and provisioning costs. A simple plan - and elegant in its simplicity with a symmetry of something approaching beauty in the financial numbers it delivered - nothing like maintaining a modest revenue growth while the associated profit doubles over a shortish period of time. With business users predominantly using the network from 7 am to 7 pm it also provided an elegant engineering scenario going forward with very little or no additional bandwidth required. It was based on Exetel moving towards a much higher proportion of its revenue coming from business users which provided a much higher profit per revenue dollar ratio and far less overheads in terms of provisioning and support.....something we have been putting in place since early 2009 and planned to accelerate in 2010. But the December, to a lesser extent, and now the January take up of ADSL has very clearly signaled that, for reasons we now need to discover, that our assumptions and perhaps our ADSL pricing are not remotely correct and if they continue we will have to make some not insignificant changes. Getting a plan so terribly wrong is really disappointing.
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What is "the wrong type of new customer" that you are now attracting ?
Comment (1)
It would be difficult for me to sum that up in a few words/sentences.
Essentially someone whose net return to Exetel is negative. Comments (11)
Tricky. As a one man business I have the same problem sometimes when there are more customers than I can handle.
My solution (for now) was to drop web design and e-commerce site building as it was the one thing I consider myself worst at. I'm a little puzzled if the 'wrong kind of customer' could equal 'loss-making customer.' If one or more products are too cheap then I guess you can up the prices on them to a more reasonable level and have some loss of customers as a result. However, that won't ultimately solve the underlying problem. Perhaps in the worst case (and I know the other agents are going to hate me for saying this) you need to freeze new orders (on some or all services) until you can plan a solution to the 'growing too fast' problem. My only warning there being that the general public might interpret that as "Exetel's going broke" or some other nonsense, so be prepared for that. My only other thought for a partial solution would be to get agents better involved if that can reduce your space and personnel requirements; but to counter that I'm guessing that there's also hardware provisioning issues for the network that are not so easily outsourced. The pros for this idea being less support costs for Exetel and a greater local business feeling for those customers with agents to contact for help; the cons being a loss of some control of support quality as not all agents are going to be equal; and presumably the majority of customers don't have agents. Good luck with it all, John Closing thought: How long before for every Telstra van there is an Exetel van? Comment (1)
Loss making customers come about when you work on averages and plan to make around $1.00 or less per service.
It is very difficult, at least as far as I have found, to make that work for 100% of customers while still meeting the objective of selling services at the lowest cost of any provider in Australia. Comments (11)
John,
Why not aim to make say $2 or $2.50 per customer? It sounds like a large cause of your issues is that it does not take much for a customer to eat up $1 of profit and become loss making. If you made a minimal increase to that, it would give you much more breathing space while still selling services at a minimal cost. A $1 or $1.50 increase to your plans would surely make little to no difference to the end user or signup rates but certainly reduce the problem of loss making customers. Comment (1)
We could do that - but it goes against our base principles of being in business in the first place.
Comments (11)
In terms of this growth making things problematic, is that to do with lead-times for provisioning of backhaul and similar from suppliers or other factors (or some combination of both)?
Comment (1)
Chris,
Residential services are more difficult to provision than business services because of the customer connectivity factors but also for other reasons. The 'mix' of residential customers is also far more unpredictable than for business customers. In the current case the significant surge in new residential applications coupled with the unpredictable demographic has been difficult to deal with and we have decided to put a brake on it in the first crude way available by raising the activation fee which, usually, works to slow new orders. Comments (11)
Is it every new customer that is causing these problems, or is it just the 'loud' ones.
As you continue to grow (especially in the retail market), the total quantity of annoying customers will grow too, but the percentage of your total customer base will probably stay around the same. Maybe it's about about time to delegate this type of difficult client to someone else? Is it really worth your time to handle them personally? Comments (3)
I have never been a good choice to deal with 'loud' customers.....however I do reply to all personally addressed emails.
I have intended for quite some time to delegate a lot more than I already do but I haven't succeeded in doing that - one of the great joys of recruiting graduates as the main stream of your personnel is also one of the great sorrows - but patience solves every problem eventually. Comments (11)
But surely a large quantity of those graduates now have 5+ years of experience in Exetel by now.
Of course, I would probably be reticent to delegate complaints handling to someone else because it is such a shit job to do in the first place. Comments (3)
My reason entirely - no-one would want to 'talk' to the type of people I routinely deal with other than with a gun or blunt instrument.
However - that is the world we now live in. I will retire in a month or so from that and some other aspects of the day to day operations of Exetel - 6 years is far too long for someone of my age to be involved in minutiae and it will be a great relief not to have to see what the human race is capable of in terms of some of the individuals it produces. Comments (11)
Sounds like a good first step to regaining part of your sanity.
You'll probably have to retire from ISP-land entirely to regain the rest Comments (3)
The laws of supply and demand graphs help decrease the new applications. But wouldn't that mean potential applicants could join iiNet (puke). I'll still recommend Exetel because though everyone pays $5 more... profits go to flora and fauna
An interesting part of the $5 increase in the NF plans is that I may dip down to NF/21NoTel from NF/22NoTel, because if I download less than 25GB/mo then it is cheaper. These days I've lost my appetite for downloading... going scuba diving instead. The underwater flora and fauna. Comment (1)
(*A lot of businesses don't realise that 90% of their resources are spent servicing 10% of their customers.*)
These figures are by no means accurate, but I'm sure you still get my point. And resources refer to time, money, effort, stress, etc. The solution is rather simple and that is to cull these customers and you will: 1. Have a lot more time to spend with your profitable and self-sustaining customers, and 2. Only affects a small number of customers, and 3. Have a lot less stress in the long term. However, the incorrect solution to this problem is by making all customers suffer on the basis of that 10%. This is because it not only affects those customers who aren't profitable (or take a lot of the resources), but it also affects those who are relatively self sustaining, potentially driving them away. It also has the problem in that those customers who are the problem in the first place will still continue to remain a problem in the future. Comments (3)
I agree with the initial premise.
I wish I knew of a better way of handling the situation. I think the real answer is that I shouldn't be involved in ADSL residential services in the future for Exetel. Comments (11)
There is a huge difference between knowledge and wisdom. Even knowledgeable people can make unwise decisions. But we learn wisdom from failure much more than from success.
Therefore, don't look at this experience as a negative. Look at it as a growing experience that will help shape your future decisions. And besides, you can never be too old. Surprisingly, you actually CAN teach an old dog new tricks! On a separate note, the solution to this problem actually lies within the problem itself. Well, first ask yourself, how did this problem come about?? ... Rather than reading what I say, think about it for a minute before continuing to read ... Use your own brain before continuing (this applies both to you, JL, as well as the reader) ... Well, the problem, I believe, is that there were too many changes in your plans in such a short space of time. With such a sudden shift, you are going to attract many different kinds of people. If you try and impose dramatic changes again, in an effort to correct the shift, then there could be even bigger consequences!! Therefore, the solution is to let things become an equilibrium. Let things balance out. The rate of new customers will eventually begin to decline, even without making any changes at all. By doing nothing, you are actually doing something! Only once things balance out, THEN you can impose small changes here and there to gradually reshape the company to how you envisioned it to be. Comments (3)
While you are quite correct is saying there were many changes whether there were too many is a moot point.
The perfect working day would be one where you could admire your handiwork from the past and have to make no decisions. Perhaps I should stop trying to analyse what is going on and just leave it all as it was yesterday rather than reacting to what I see happening? Comments (11)
Yes, you implemented the changes to see good things happen. But these things take time.
So just let things take its course now that you have made these changes and see if things get better. A reaction and changes now will mean more changes to your customer base, which will then mean MORE reactions and changes. Meditate on it for a while... Comments (3)
We know we're the beneficiaries in a saturated ADSL space; and your dark mood is noted
But please... hang around.. at least until the "8 gbps*" dream is realised --whatever its timeframe. *blogged tuesday, december 15. 2009 - http://johnl.blogs.exetel.com.au/index.php?/archives/3422-The-Problem-With-Networks........html Comments (2)
Hi John,
Its probably not a majority proportion of your customers, but there are alot of us that cant get ADSL2 still. I'm stuck on ADSL1 due to a rim unit. Believe me! If i had the choice, I'd be on your naked plan without a wink! Being a relatively new customer, while the quotas and offpeak times are great, I'd much prefer to lose some of this for a bit more stability. Best of luck in getting it right for 2010 Comment (1)
Surprisingly ADSL1 still makes up over 50% of our customers and we regard ADSL1 customers as very important.
Comments (11)
I'd be interested to know - of those 50% - what portion of that is to those that have ADSL2+ available in their area?
Comment (1)
We have no way of knowing and have never bothered to run a check by exchange.
Comments (11)
I expect that for "that 50%" a majority will actually have TELSTRA retail/TESLTRA Wholesale 'ADSL2+' "available" in those exchanges
--* that certainly is the case for myself and is supported by some fact that Telstra has approaching Two thousand reasonably populated 'ADSL2+ exchanges' which is five times a significant number of exchanges upgraded than does currently TPG then Optus have made 'active', ref: http://www.adsl2exchanges.com.au/providerstats.php But per usual, pricing is abominable in Telstra, untenably-and-purposively restrictive for those 'underserviced ports'- which our premium carrier understands well.... and contrast that next to the hugely populated 512k-to-1.5Mb 'yesterday's' plans --ports upon which CONSUMERS CAN BE PROVIDED SOME REALISTIC QUOTA (LEVEL) for under 60.00/mo refreshingly, we find '121'Gbytes@*1.5Mbps available in TL-C2 for just $55.00/mo on Exetel's ADSL1 (none of the other suppliers appear very keen on ADSL1 --at least Exetel has made room for us). Comments (2)
So you think business customers will be better than residential eh lol.
Let me tell you those residential customers have some operations called businesses.sometimes huge businesses. If i am upset on the home front i will not consider you in my business font. Look after all your customers you never now who hangs around whirlpool looking for home connections that might own huge biz accounts for themselves as well. Comment (1)
Mr Linton
Your "open" type blog here reminds me of Markus Frend's blog - honesty can be quite scary.. as bad as sudden changes always are for the population. VERY interesting reading. My $2 worth: Your overall "nice" plan/goal seemed to be one thing and the execution another. THAT is confusing. Like explaining Communism to a Chinese, when compared to "capitalist" Australia or Canada, with their true people-minding social structures and the true dog-eat-dog system in China. Not sure how you could do it technically, but you are currently in three very different markets: 1. Leeches. 2. Poor people. The real mass. 3. business. I'd split them up completely. The (your) future actually is going to be pretty grim anyway. As it will be, for everyone else next year. I don't know about your "business" side operation, but it will not be the winner it currently is - "grass is greener" now, but New World Economics is going to have massive impact shortly. Think about it: What destroyed America wasn't anything magical or mysterious - it was simply training your future competition. My Chinese friends in Asia thirty years ago couldn't believe it. The USA was simply giving away its technology, its edge, its ONLY edge? Creating massive educational shortages for its own at the same time? Yep. It is a great and nice and economical thing to be training the brightest young people in Sri Lanka. Exetel seems to be doing it very Western-style. But, that is your 3 years or less competition you are preparing. Who - (being the brightest in their country)are rapidly learning from your errors. The key to keeping the natives/competition down a century ago was the need for capital - and infrastructure. The Internet has put paid to all that. The New World Economy with its soon to be worldwide cheap super-fast communications from anywhere to anywhere, is going to be a world that only the very poor in the West have experienced before. Simple example: I've just rented a VPS for 30 bucks that can handle millions of hits per day and enormous traffic load and expandable capacity at cents per lead. Just a few years ago a fraction of that capacity was $20,000 per month. A real Sysop - if you could find one - was $100,000 per year. Or $400 per hour casual. Technology today means I can do it myself. Sorry to point out the big black elephant in the room.... but it is getting restless. Here I have no answers - I'd really like to hear some survival techniques for us soon to be redundant "Westerners". Peace! Or Else! Comment (1)
I do understand that everything in the technology business changes all of the time - I have been involved with technology since 1961 when there were only a handful of computers in Australia.
Our move to Sri Lanka for back office processing and system development and shortly sysadmin was a necessity as Australians had already priced themselves out of those jobs - we now have 45 employees in Columbo - if we hired in Australia we could only afford 12. My clear view of the future is that high priced services (such as data or telephone lines) are doomed and that only the lowest cost communications services will survive - Exetel's strategy since its inception. We have 'practiced' surviving on tiny margins for the past six years and watched dispassionately as every other start up company that entered the business after us (and quite a few before) went broke - we understand those imperatives. I'm happy to switch our emphasis to business customers not only because that is 30 plus years of my previous experience but because Telstra et al have ripped of business customers even more than they have ripped off residential customers and the potential is much greater. Doubtless I could be wrong about all of those things - I am increasingly wrong these days. Comments (11)
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