The fight to keep customers is hotting up among networks after Vodafone became the latest to launch a loyalty scheme this month.
Operators are realising the importance of retaining customers in a saturated and competitive market and customer loyalty and retention schemes are growing in scale, becoming an integral part of their overall strategy.
This was all the more obvious when Vodafone followed O2 and Orange’s established offers and launched its ‘VIP’ scheme last month, giving customers access to live events such as festivals and London Fashion Week.
As a brand perceived by many to have lost its way, it is hoped Vodafone’s loyalty scheme will reinvigorate its image among the young in the face of tough competition from Orange and O2.
Orange was the first to launch a game-changing retention scheme when it launched its two for one cinema offer, Orange Wednesdays, in 2004.
Meanwhile, O2 claims it was the first to associate its brand with music. In 2007, the operator launched its Priority service, offering customers access to tickets before the general public. It also sponsors music venues, including the former Millennium Dome, The O2.
But how effective are these schemes at retaining customers?
O2 head of consumer mobile Jonathan Earle is confident that they are effective. He says: ‘What makes our music partnerships such as The O2 stand out is that they are not simply brand-building exercises. Through these partnerships we have delivered genuine value to O2 customers, and also music fans in general.’
And if done well, customer loyalty initiatives are about allegiance to the brand – they are a reason to stay.
Andrew Pearcey, head of Sponsorship at Orange, agrees. He says Orange Wednesdays ‘continues to deliver’ six years after its launch.
The results speak for themselves, adds Pearcey.
He says the scheme generates three million additional annual visits to UK cinemas, and has saved customers over £30m.
Pearcey adds that Orange Wednesdays’ popularity will grow further in the coming years with the addition of the Orange Wednesdays applications on the iPhone, Android and Ovi enabled devices.
It is a successful asset in ‘the goal to reduce customer churn’, he says.
Expensive to acquire
Operators are realising it’s more expensive to acquire customers than to keep them, so they will try everything in their power to retain them, says CCS Insight analyst Shaun Collins.
Different retention tools include devices such as the iPhone, retention promotions, as well reasons to stay with the operator beyond minutes, texts and megabytes, says Collins, adding: ‘So if you are asked why you are with Orange you can say Orange Wednesdays.’
As the mobile business becomes more commoditised, operators will look at other ways to differentiate their businesses.
Earle agrees that it has become more important to retain customers rather than to add them. ‘O2 has the lowest churn in the industry, demonstrating our commitment to retaining customers,’ he says.
And if an operator doesn’t have some sort of retention proposition it can’t look competitive, says Collins.
All the big five operator brands bar 3 have a retention scheme. However, 3 differentiates itself with its focus on value. Collins says: ‘3 thinks there is so much value in its proposition that it doesn’t need a VIP type offering.’
Meanwhile, Vodafone is revolutionising its business to become more attractive to the consumer, says Collins. ‘It (Vodafone) has thrived in the enterprise market but it is trying to get in with the consumer. Now it has the iPhone, VIP and an aggressive strategy to compete for the consumer.’
Reaching the brand is important, says Collins. Vodafone VIP is doing this as well as re-engaging with third-party channels. ‘They
will try to re-engage in the south east. They are now competing with Everything Everywhere,’ he adds.
But whatever Vodafone has been doing in the past, it must have been doing it well. The operator added the most customers of any network – even O2 – in the first quarter of this year.
Why? The iPhone, says Collins. ‘Everyone that wanted the iPhone got one, he says, adding: ‘Vodafone sold half of all iPhones sold in quarter one.
However, O2 says it has seen ‘no discernible difference’ in iPhone customer numbers since the device went multi-operator.
‘We always knew that the iPhone exclusivity was for a limited period but our relationship with Apple continues and will be an ongoing success. We have well over two million iPhone customers and they remain very important to us,’ says Earle.
But Orange, which was the first of the UK networks after O2 to sell the iPhone, is also recognising that for a share of the segments it can not go for film alone – young consumers respond well to music services.
And with a quiet Glastonbury sponsorship including its chill and charge tent, the operator already had some presence
in the segment.
However, it is now conducting a trial to offer discounted tickets to its customers.
‘From Orange’s consumer research, it is trying to find something to engage and Orange did Orange Wednesdays first,’ says
Collins. ‘These things resonate with consumers.’
Earle is quick to point out that O2 did music first, saying: ‘Music is in our DNA. It’s important to O2 because we know it’s important to our customers, and we perhaps have the strongest music heritage of any company through our support from grassroots music to platinum selling artists.’
And it has had huge effect. ‘It’s had a measurable impact on our business,’ says Earle. ‘For O2 customers that are aware of priority ticketing, our brand consideration rises to 51%, compared with 35% for those that aren’t. Which means it’s not only helping to increase loyalty and reduce churn – crucial in these economic times – but also in terms of acquiring new customers to O2.’
So O2 is the clear winner, says Collins. ‘First with the iPhone – you can’t underestimate how powerful the iPhone is – and people are choosing to remain on O2 [after the iPhone distribution was widened to other networks].
‘They are doing what Orange did in the 90s and giving people a reason to buy into what they do.’
Customer loyalty gets results, and the competition starts here.
Orange begins ticketing trial
Orange is poised to launch a discounted ticketing service for events such as concerts and comedy shows.
The operator will boost its association with live events with the pilot of Last Second Tickets from Orange in Leeds and Manchester, which sends users daily offers based on their profile. The trial will run until the end of August.
The move builds on Orange’s music association through its sponsorship of Glastonbury, as well as its Monkey Music tariff.
Users who wish to buy tickets can complete the transaction online or alternatively pay via their mobile phone bill if the ticket costs under £10.
An Orange spokeswoman said: ‘We regularly look for ways to help us enhance our customers’ experience of our brand. As a result, we’re currently conducting a trial with a third party to understand customer appetite for tickets to a broad range of events. A selection of our customers based in the Manchester and Leeds region have been invited to participate in the trial and will help us evaluate its potential for the wider Orange customer base.’
Operators’ key loyalty schemes
O2 Priority tickets
Vodafone VIP ticketing
Orange Wednesdays, trial of Last Second Tickets