Why is the telecom industry struggling with product success?

Why is the telecom industry struggling with product success?

Major telecom companies are struggling with low net promoter scores, showing flaws in their product strategy

Today, virtually all of the major global telecom groups are at crossroads. While new communication technologies are game-changers for the industry, the industry has seen a slew of product failures that stem from weak strategic planning at the core. The standard playbook used by telecom companies is almost redundant — especially when a new-generation technology goes mainstream. The recurring mistake is that rather than strategising to develop successful products that meet evolving consumer preferences, telecom companies continue to follow the traditional cycle of setting up networks, building cross-channel presence, and offering a suite of revised data plans. This highlights a fundamental flaw in their approach.

A new study published by Capgemini based on samples in the US and Europe noted that telecom company offerings in six out of nine countries are not in line with consumer needs. It found that 27 out of 48 mobile operators demonstrate a poor Net Promoter Score ranging between zero and negative. Nearly 58 percent of consumers are willing to switch over to a digital-only operator, while 44 percent of them might eventually shift to the likes of Google, Facebook, or Apple when they offer mobile services in the future.

This brings us to the question why telecom products fail in even mature markets, where apparently a lot of research and planning goes into the development of the products. Research by Huthwaite International, a leading training provider and behaviour change specialist, identifies fear of change and skills shortage as having a crippling effect on product success.

According to the Huthwaite study, telecom companies struggled to launch 5.58 new products in the last financial year. It reveals that 88 percent of telecom companies experience a new product failure every year — costing the industry millions of dollars. The study found that 42 percent of the industry’s senior decision makers believe the reason behind a product failure is consumers’ resistance to change. In addition, 30 percent of sales professionals associate a product failure to its specifications which are not in sync with consumer needs, while 29 percent of a sales force show resistant to change as a reason for poor achievement in selling new products.

Telecom companies overlook a major loophole within the sales force that points to an inconsistency in how sales professionals perceive selling. Nearly 43 percent of respondents considered the ability to sell a product’s solutions rather than its features to be the most crucial attribute, while 26 percent of them believe a seller’s inability to identify and address a buyer’s concerns is responsible for impeding sales. In both cases, a clear lack of strategy is what is causing wide-ranging product failures.

A plausible explanation to this problem is lack of systematic approach in sales strategy. Huthwaite’s findings showed that telecom companies with a systematic sales approach have an average growth of 30.5 percent, compared to 22 percent of those lacking it. Yet, 37 percent of respondents have not adopted a systematic approach to sales across departments — and 45 percent of them would invest in sophisticated marketing as an alternative to poor sales. The research showed that the sales forces’ prime focus is on selling a product’s features and not solutions.

Tony Hughes, CEO of Huthwaite International, said: “The telecoms sector is one of the most likely to see a huge amount of interest in new products initially, but with a quick drop off rate translating in few sales. By analysing the sales approach of such companies, we know that a systematic approach is especially important for the highly innovative telecoms market, with multiple product launches happening each year.” The telecom industry is anticipated to see major new product launches as telecom companies take on challengers amid tight revenue growth. But not getting the product and sales strategy right could lead to more product failures in the future. The right product and sales strategy is important as they have a major bearing on the net promoter score.

First published in International Finance

November 21, 2019 | Telecommunications