February 14 2007 was an important date. From then onwards, broadband providers have to by law offer any customer who wishes to migrate to another service a Migration Authorisation Code (MAC) within five days.
This is not good news for the broadband providers, some of whom have allegedly made it quite difficult for disgruntled customers to leave, as it moves the telecoms industry one step closer to the situation we already see in the energy market, wherein canny customers are able to switch regularly from one provider to another in order to get the best deal available.
The bulk of small businesses that have a need for broadband already have this service. As the various providers fight it out amongst themselves for new customers, they focus on the one thing that differentiates them: price. As a result, broadband services are getting cheaper for everyone.
However, do small businesses really want an ever-cheaper service, especially if that means the level of service deteriorates at the same time?
Whilst Ofcom is quite rightly forcing broadband providers to stop making migration difficult, a recent survey by uSwitch.com has shown that the level of customer satisfaction with their broadband service is decreasing, so perpetuating the likelihood of churn.
Quality vs quantity
Cutting costs whilst scrimping on service is not generally regarded as the smartest way to develop a business proposition, and particularly in the small business market where communication – or the lack of it – quickly feeds into business disruption, service levels are extremely important.
At one extreme, the small business that relies on one of the ‘free’ broadband propositions – which are increasingly popular in the home market – only has itself to blame if it thinks that will get a decent service and not have to pay for it. But what about those who do pay for broadband?
Communication services work at two levels: functional and emotional. Firstly there is the functional level of ‘does it actually do what it is supposed to?’ Many of us will have seen how our broadband services have been ‘upgraded’ to ‘up to eight bps’ bandwidth, but how many of us have noticed an actual speed increase? My eight bps service actually works at two bps, which is the same as it was before it was upgraded. At least it works and I’m not being charged extra so I’m not really that bothered. But it does mean that next time my provider says they’re going to offer me something extra, I’ll be just that little bit more sceptical.
Passionate view
Is this important? Well, yes, because in my case I’m quite ‘passionate’. In Information Arts’ parlance, ‘passionates’ believe that communication tools are extremely important because they think that communication is very important.
They spend a lot more than the average person communicating (in their business or at home), whether this is by mobile phone, broadband or any other method. They read more (and more widely) than other types of person, and as their name suggests they can get quite animated when they want to make a point.
Our research shows that as a group they tend to be much less focused on price than other types of consumer and much more focused on ease-of-use, service and quality. In the small business market, passionates make up two in five of all small business leaders.
So here’s the rub. Nearly half of small businesses are not that focused on the price of their broadband, and aren’t that excited about prices going down, but they are the first to notice poor quality; long waits in the call-centre queue, call-centre reps who don’t know what they’re talking about. Because communications are so important to passionates, they’re the least tolerant of the service issues that most broadband providers think are acceptable. As a result, they are the group most likely to churn.
Priceless customers
An important fact to consider, whilst allowing these people to migrate, is that they often spend much more than the average customer so providers are generally losing their higher value customers. However, this is not because they are migrating to a lower priced provider but simply because they are fed up with the consistently poor levels of service they have received from their current provider. The fact that the new provider will probably offer the same poor level of service simply sets everyone up for continuing churn.
In essence, broadband providers now find themselves in a position where Ofcom has just ordered them to make it easier for those customers most likely to migrate because of poor service, to do so. As these often high value customers are quite likely to find the same poor service provided by their new provider they are very likely to migrate again, just as we see happen in other markets where competing on price is seen as more effective than competing on customer service.
Our research consistently shows that price is of prime importance to just one in five small business people. Getting it right is what matters to everyone else.
