Sustainable telecoms businesses can only be built through 'turning customers into fans,' according to Jose Maria Alvarez-Pallete Lopez, executive president of the world's fifth largest operator, Telefonica Latin-America.
Speaking at a forum on 'Delighting the customer (and gaining new ones)' at ITU Telecom World, Lopez outlined how Telefonica had expanded 25 years ago out of its home country of Spain and into a global company with 200 million customers in 22 countries.
Telefonica, he said, had invested $70 billion in Latin America and through a network of 400,000 point of sale outlets had added 59 million customers in the last four years - '1.2 times the population of Spain' - and its Internet business there was currently handling 100,000 net ads each day.
The key to the company's growth, he said, was customer satisfaction, and he identified a three-phase 'customer lifecycle' that had been at the core of the strategy. 'In these kinds of markets, where growth is huge, the first phase in the acquisition phase is prepaid customers, and prepaid is crucial in attracting the customer through a proposition based on price and coverage,' Lopez said.
'Then you need to make them grow in your network and your services, then improve the migration to post-paid and focus on the client needs to increase their value, and finally you will see that you need to turn them into fans.'
Some 80% of Telefonica's new Latin American customers, he said, were prepaid, but churn rates for these clients was 50% higher than for post-paid. At the same time, average revenue per user (ARPU) for post-paid customers in the region was four times that of pre-paid.
'Churn is the highest value-destroying part of our business, and when the client starts to demand much more from us we are encouraged to offer a higher-value proposition,' Lopez said. 'Churn is related to ARPU, and if you are able to make a client grow in ARPU, his churn will diminish.'
He said there was a major difference between prepaid clients and the post-paid 'fans' who were Telefonica's main asset. 'Some customers look for discounts, they complain, they are critical, but the fans come to you, they forgive and they are your best advertising and they stay with you all the time,' he said.