Device insurance: An opportunity, not a problem
It’s no secret that the telecoms sector has been suffering from increasingly high churn rates and declining average revenue per user (ARPU). In July this year, says Kevin Gillan, European MD of SquareTrade UK customer satisfaction index, revealed that the telecoms sector had the second lowest score in customer satisfaction, with the wooden spoon awarded to the transport industry.
Customer loyalty in the telecom sector is also hard to come by, with many consumers opting to join the network that offers them the cheapest contract for the device they want when the time comes for them to upgrade
Operators need to work harder to build trust and play a more decisive role in the current digital ecosystem. Most operators already know this, they get it, and in some cases they are working on digital transformation strategies to increase agility, improve convenience and establish relevance. And while operators look to digital services as a new revenue stream and to solve issues of customer retention, another solution may be found in insurance.
Capitalising on customer-device affinity
Our devices are quickly becoming our most prized possessions. They are the gateway for digital interaction and inclusion, they hold our digital content and many of us feel lost without them. They are also increasingly expensive.
Yet with the average price for the latest device on the rise, it may come as a surprise that while consumers are willing to pay a premium for the latest handset, only about 5% of all devices sold in Europe are sold with device protection. This is in spite of the fact that the ever-increasing popularity of glass screens is making our devices more fallible (1 in 4 smartphones is likely to break within the first 12 months of ownership).
Traditionally, device protection has been the responsibility of OEMs, with operators uninterested in burdening themselves with the additional expense that comes with device care. However, manufacturer warranties are limited, and do not cover accidental damage. When coupled with recent findings that people are holding onto their phones for longer, this would suggest many consumers are underserved in terms of device care and repair.
This omission of responsibility by the operators is part of the overall challenge they face to retain customers and increase customer satisfaction. Yet when a customer with a broken, non-functioning phone represents a significant churn risk, a lack of a comprehensive device protection offering seems like an own goal.
The fact is, customer affinity with their device is much more powerful than the relationship they have with their operators. As such, operators are becoming increasingly anonymous, brand loyalty and recognition is low and NPS scores even lower.
Customer retention starts with achieving differentiation through the customer experience they provide, and with fierce competition operators have never been under greater pressures to generate new revenues. Operators can act on that challenge if they make it their mission to improve customer experience by reuniting customers with their expensive devices in quick time.
Operators must make insurance a strategic priority
Our reliance on our mobile devices means that nothing is more frustrating to customers than being without their device for prolonged periods of time. But customers that do not take out device protection on a 2-year contract must suffer the consequences if it gets damaged after only a few months – this frustration will ultimately be taken out on the operator and its inflexibility.
Operators can ease this frustration and reduce risk of churn by committing to ensuring devices are collected, repaired and returned or replaced in super quick time which in turn will dramatically improve operator brand value, improve their NPS scores and create real market differentiation. Technology has fuelled significant transformation in the insurance claims and approval process.
Device owners can now benefit from same-day repairs or overnight replacements, contributed to by machine learning-led instant claims approvals, quick diagnostic tests and minimised manual intervention. This instantaneity is what todays customers demand and expect, and when applied to device insurance it has the potential to change the customer service element of a mobile operator’s offering.
Device protection also sits perfectly within the operator’s revenue model and strategy. Currently, almost all device protection plans are sold at the point of sale, i.e. when a customer purchases or upgrades to a new device, and operator retail stores remain a key channel. Incorporating device protection into a phone plan therefore makes sense, not only for the operator but also the customer.
With high margins (north of 30%) operators can also reap significant rewards from incorporating device insurance into their service offering. Insurance also adds a component to the customer journey that was previously missing, establishing a sense of an ongoing relationship between the operator and customer. In some instances, the device lifecycle can increase to between 24-30 months with the addition of device cover.
Faced with waning brand loyalty and squeezed margins, operators are undergoing a minor identity crisis. Now more than ever they need to differentiate themselves in an effort to attract new revenue. Operators need to abide by a new mantra of engaging with customers digitally, at a time of their choosing.
Taking responsibility for the protection, repair and replacement of customer devices can have a powerful impact on NPS and CSAT scores, revenue and retention rates. Through device protection operators can demonstrate that they are “customer first” and committed to establishing longstanding customer relationships.
The author of this blog is Kevin Gillan, European MD of SquareTrade