The telecom industry’s traditional sales and distribution (S&D) channels are being subjected to turbulence due to a number of factors, which we had covered in the first part of this blog series. Coupled with financial pressures and degrading TRS figures, these factors have compelled telcos to rethink their S&D strategy.
While telcos cannot do away with the omnichannel logic that drives S&D today, they must navigate the inevitable shift in the channel mix with agility, while carving symbiotic strategies with their new channel partners. Here’s how they can achieve these outcomes.
Omnichannel sales calls for integrated distribution
With the rollout of new service categories and the growing use of communication services, telcos have catered to different personas with an omnichannel strategy. However, the logic that drives the lucrativeness of these channels is changing rapidly. See how below.
These consist of brand-owned stores (aimed at selling services in Tier-1 and Tier-2 towns), and two-tiered distribution frameworks to reach low-teledensity areas. While brand-owned stores are losing relevance (especially for digitally-literate customers), relationships with distributors are still crucial to reach feature phone users despite their high commissions.
Direct-to-customer digital channels like web apps and mobile apps are the most lucrative channels as they are associated with near-zero commissions. These channels can fulfil the role of sales, onboarding, support, and marketing, and typically incur marginal technology maintenance overheads. Direct digital is also playing the role of brand-owned stores, while providing more convenience and monetary incentives in the form of cashbacks or other benefits to the customer.
These include digital payment banks and UPI apps, and are associated with lower commissions than distributors and retailers. However, they may be more convenient for customers who are unwilling to install a telco’s mobile app, and therefore form an important part of the modern S&D strategy.
As digital channels improve the margins for telcos, high-commission channel relations are turning into an S&D inefficiency that must be mitigated. To this end, telcos are building digital apps that eliminate all intermediaries and offer ~4% commissions to agents. Finally, customers will become telcos’ new channel partners as P2P distribution gains traction.
AR and VR
Finally, platforms like the Metaverse are emerging as avenues that offer new possibilities for engaging customers. Therefore, AR and VR channels will enable telcos to curate compelling experiences to market services like smart home networks while arming them with a slew of customer insights that will be used to inform the overall S&D strategy.
A new S&D strategy to support channel agility
In light of the upcoming developments, the current S&D approach of telcos requires a significant readjustment. Shifting sales to direct digital is highly profitable, not only because it brings the highest margins, but also because it enables them to build and maintain relationships with customers – something that traditional channels are unequipped for.
Today, siloed multichannel results in revenue leakages (through inactivated products and lack of traceability), and impedes the scalability of data-driven strategies. What’s more, it results in an inconsistent experience across channels, which can deter customers from staying with an operator, especially as eSIM gains wider adoption.
Towards an integrated digital S&D platform
To sum it up, omnichannel will be the de facto standard, but telcos must break down the silos between channels and strive to retain customer relationships. The latter will be especially crucial to avoid becoming invisible to customers.
This S&D strategy will be driven by a digital core, which enables telcos to achieve visibility into each channel. Such an integrated S&D platform will help telecoms to transition from a customer journey to a customer relationship paradigm, in which customers can be funnelled from high to low-commission channels with the right incentives and data-driven insights.
Finally, digitally-enabled relationships with logistics partners will help telcos withdraw their physical presence, and bring ecommerce-like convenience e.g. home delivery, same day delivery, etc. to new customers. Onboarding and KYC could be performed digitally, whereas bank mandates could eliminate late payment penalties and make relationships with the customer more predictable and amiable.
Outsourcing S&D: your new channel partners
While channel partners will remain highly relevant in the S&D landscape of the future, partner relations will evolve beyond their transactional nature. Here’s how they’ll change for each customer category.
Enterprises are increasingly adopting cloud and edge computing, and deploying IoT networks at a breakneck pace. Both of these technologies require networking services both inside and outside the enterprise walls. To this end, operators are partnering with cloud providers and device manufacturers to offer bundled services to enterprises. Cloud marketplaces will therefore be a distribution hotspot for enterprise customers.
For individual users
Partnerships with device manufacturers will remain relevant for smartphone, smart homes, and smart car technology buyers. However, up the stack, OTT players may become a more important point of sale especially as they form deeper relationships with end users when compared to device manufacturers.
Finally, supermarket chains will facilitate an early withdrawal from physical presence for telcos, and ecommerce players will enable them to distribute physical SIM cards and dongles at low operating expenses.
For public entities
As public entities and governments undertake smart city initiatives, strategic ties with consultants, device manufacturers, cloud providers, real-estate players and IoT platform providers may help them win contracts that may otherwise be handed to public telecom companies.
In an increasingly digital and connected reality, telecom players have much to look forward to. However, if the past decade is anything to go by, a bigger market doesn’t automatically implicate better revenues and profitability.
However, by calibrating their S&D strategies to an evolving digital ecosystem and building strategic ties with their new channel partners, telcos can significantly improve their margins and win first-party data to build better customer relationships.