Referral Marketing for Telecom Companies Adds a Personal Touch

by Sean Ogino |

Referral Marketing for Telecom Companies Adds a Personal Touch

referral marketing for telecom

While telecom tech consistently advances, challenges for companies in this sector have never seemed so fierce. There’s severe competition, cord-cutting, ARPU going down, and high churn rates. Furthermore, as per Informa Telecoms & Media’s report, telecom operators’ traditional revenue through voice calls and SMS has been dropping due to enhanced functionalities from OTT players such as Skype, Google, and Whatsapp.

informa telecom survey

Mobiles came into existence to let people communicate via SMS and calls. But people essentially now discount those core capabilities these days. IDC’s 2013 survey suggests that while on their mobiles, people spend a mere 16% of their time on phone calls and the other 84% on activities like browsing the web, communicating by email, using social apps, watching videos or TV, gaming, etc. It’s quite self explanatory then why revenue from the traditional streams has dried up.

The above overlay of the telecom industry’s pain points means that any strategy designed to address them has to have cost-effectiveness as a top priority. It should be able to generate maximum impact with minimum expenditure. This is one of the reasons why referral marketing for telecom companies is a logical move, both for addressing churn and acquisition. After all, the telecommunications industry average conversion rate for referred customers is a massive 42 percent!

Referral Marketing for Telecom Companies Harnesses the True Value of a Loyal Customer

In his December 2003 Harvard Business Review article, Bain consultant Fred Reichheld said, “The value of any one customer does not reside only in what that person buys. In these interconnected days, how your customers feel about you and what they are prepared to tell others about you can influence your revenues and profits just as much.” It implies that the customer’s full value would include a measure of that person’s ability to bring in profitable new customers. And that’s why the old metric of Customer Lifetime Value (CLV) is getting replaced by Customer Total Value (CTV). Referral marketing for telecom companies lets teams systematize this concept and take full advantage of it.

A genuine referral generally converts into sales mainly due to the trust factor. Any kind of traditional advertisement contains a designed message, and is worded by a medium, which is owned by the seller. That’s why consumers generally like to interact with the people who are like them. Known as “Like Me” principle, as put forward by Raluca, it makes customers to follow and trust more to the customer created information rather than the seller created one. This is especially true for the telecom industry, where peer pressure generally acts as a decision maker in selecting the service provider. That’s the prime reason why, as we stated above, the average conversion rate for referred-in customers is a massive 42% in this industry. Surely, a referral program, thus, could help the telecom industry in achieving higher CTV.

Referral Marketing for Telecom Companies Channelizes Positive Customer Sentiments

According to customer behavior experiments, no matter what are the industry, product or service conditions, a satisfied customer is likely to share his positive experience with approximately 3 others. The telecom industry is no exception. Customers who have been happy with your service are really ready to refer your brand to their friends and other people in their vicinity.

The trouble is that most good referral intentions remain just that—good intentions. A poll that tracked the referral intentions and behavior of the customers in the telecom industry found that 81% of the telecom firm’s clients thought they’d recommend a company, but merely 30% actually did. Clearly, though there is a will among telecom customers to send referrals, there is a lack of robust referral infrastructure which will allow them to do so efficiently and regularly.

Additionally and unfortunately, there’s a fair amount of negative customer perception regarding the telcom industries. Referral marketing for telecom companies provides one way to counter that, as it systematically incentivizes and spreads positive sentiment. Plus, when those feelings of goodwill have a familiar face attached to them, it makes the business look friendlier.

H2O Wireless puts a very friendly face on its referral program.
H2O Wireless puts a very friendly face on its referral program.

Referral Marketing for Telecom Companies Broadens Revenue

Just like in every other industry, there are two main ways through which high revenue can be secured. The first is to raise the cost of the product/service and the second one is to enhance the frequency of repeat purchase or first time purchases from the customer’s end.

The first option is almost non-existent for the telecom industry as its territory is starkly marked with intense competition, which has escalated into a price war. We will see in the future that telecom companies will be offering their services at a much cheaper rate. In this realm, a higher price can throw a service provider out of the market almost instantly. This fear is not an unfounded one. The telecom industry has always topped the list when it comes to churn rate. Its customers are extremely price-sensitive, as their kinship with the service provider operates merely at the utility level. There is no emotional involvement. This makes it much easier for them to switch the current service provider for any other one who is ready to lower down his prices. In totality, a price hike is no option for the telecom industry.

Eventually, the telecom company is left with the second option, which is to enhance the frequency of repeat purchase or first time purchases from the customer’s end. A loyalty framework will give you the repeat purchases, but referrals can bolster first time purchases while also rewarding your devoted advocates. As explained in the first point, referrals get translated into sales. Moreover, average order values grow as referred-in customers spend 50% more than non-referred customers. As opposed to discounts to boost acquisitions or price hikes to increase revenue, a conversion through referrals is a much healthier option.

Indeed, there are many reasons to believe that referrals can actually act as a piece that can solve the hard-to-decipher marketing riddle of the telecom industry. Their worth becomes even more prevalent due to their flexibility both in terms of inner and outer structure. Rewards can be tweaked as per the need of the company. Besides, omni-channel referrals are surprisingly simple, and are a major need for many types of telecom providers .

If you’re interested in more information about Refer a Friend, take a look at our best practices white paper, “The Step by Step Guide for a Powerful Referral Program!” And check out the power of Sharing and Referrals and Social Login in our case study with Vivobarefoot–they’re seeing a 10:1 ROI and a 38% increase in orders!

Related Posts

Sorry, no posts were found.

[White Paper]
[White Paper]