Multiplay services

Winning and Losing in the Multi-play Market

Report sponsored by BT Wholesale Directed by Gareth Deere of Ipsos MORI

November 2006

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Key questions we aim to answer

Which multi-play services deliver the highest value to customers?

Which elements are most appealing to potential switchers?

How do I defend my customer base and acquire new customers?

Will my brand stretch across platforms?

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Methodology

635 consumer interviews

Fieldwork conducted in September 2006

All current end-users of multi-play services: that is they all have broadband internet, a mobile phone subscription, Digital TV in the household and a landline telephone subscription

The study was conducted online. Quotas were set to provide a national sample for our target audience

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Current average spend on multi-play services from any supplier

Current monthly spend on TV, broadband and

landline

Current monthly spend on TV,

broadband, landline and mobile

Sky TV Customers £72 £93

Orange/Wanadoo customer – mobile or broadband

£57 £77

BT Landline customers £58 £77

Cable customers – broadband, landline or TV; NTL, Telewest or Blueyonder

£57 £76

Overall average monthly spend

£56 £75

Base: all (635)

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Our choice model package components

Broadband speed16 Mbps (£20)8 Mbps (£10)2 Mbps (£5)Not part of bundle

Television packageAll digital channels including sports and movies (£40)All digital channels not including sports and movies (£20)Free channels only, not part of bundle

Landline telephoneFree calls anytime plus 25% off calls to mobiles (£20)Free calls evenings and weekends (£10)Not part of bundle

Mobile telephone500 anytime any network minutes plus 250 texts (£40)100 anytime any network minutes plus 50 texts (£20)Not part of bundle

ProviderCable: NTL/TelewestLandline/ISP: BTMobile/ISP: Orange/WanadooSatellite TV: SkyRetailer: TescoMobile operator: Vodafone

Bundle discounts10%20%30%

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Broadband a must have although speed not so important

No brand seems to own multi-play

Base: all (635)

Low

100 anytimeminutes, 50 texts

500 anytimeminutes, 250 texts

None

Free evening andweekend calls

Free anytime and25% off mobile calls

None

Free digitalchannels only

All digital channelsbut no sports or movies

All digital channels,sports and movies

None

2Mbps

8Mbps

16Mbps

None Vodafone

Tesco Sky

Orange

BT

NTL

High

Price 48% Broadband 22%

more preferable

less preferable

more important less importantTV 12% Landline 10% Provider 6% Mobile 2%

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For analysis we compare two packages

A. Base Package at £13.50 per month2 Mbps of broadband

Free digital channels only

Free evening and weekend calls

No mobile phone

No discount

B. Full package at £84 per month16 Mbps for broadband

All digital channels including sports, movies

Free anytime calls to landline and 25% off

mobile calls,

Mobile phone 500 anytime minutes with 250 texts

30% discount

Versus

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Not all about price, upgrade in service levels can drive value

% who would switch to multi-play offer from

one supplier

% who would stick with a la carte arrangements

Base Package at £13.50 per month2 Mbps of broadband, free digital channels only, free evening and weekend calls, no mobile phone, no discount

17% 83%

Full package at £84 per month16 Mbps for broadband, all digital channels, with sports and movies, free anytime and 25% off mobile calls, mobile phone 500 inclusive anytime minutes, 250 texts, 30% discount

47% 53%

Base: all (635)

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The impact of different elements…

Different elements added into base package (2 Mbps of broadband, free digital channels only, free evening and weekend calls, no mobile phone, no discount)

% who would switch

% difference compared to

base package

% who would stick with current

arrangements

Price – 30% discount on base package at £10.50

27% +10% 73%

TV – upgrade to all digital channels + sports and movies at £49.50

23% +6% 77%

Broadband – upgrade

to 16Mbps at £27

21% +4% 79%

Mobile Tariff – 500 inclusive call minutes and 250 texts per month at £49.50

20% +3% 80%

Landline – Free anytime inclusive minutes and 25% off calls to mobile at £22.50

17% 0% 83%

Base: all (635)

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Taking out broadband significantly reduces attractiveness of proposition

Full package but no broadband

% who would switch

% difference compared to full package

% who would stick with current

arrangementsNo broadband but all digital channels including sports and movies, free anytime landline calls and 25% off calls to mobiles, 500 inclusive mobile phone call minutes and 250 text messages, 30% discount – cost £70 per month

19% (-28%) 81%

Base: all (635)

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5541

48 52 51

4559

52 48 49

0%

20%

40%

60%

80%

100%

Skycustomers

Orangecustomers

BTcustomers

Cablecustomers

Vodafonecustomers

% who would bundle % who would stick with a la carte

Around a half would take out bundle offer in preference to a la carte arrangements

Full offer - £84 per month

12

25

512 11 8

30

3636 41 43

4559

52 48 49

0%

20%

40%

60%

80%

100%

Skycustomers

Orangecustomers

BTcustomers

Cablecustomers

Vodafonecustomers

% who would switch to package with current provider % who would switch to package with a different provider

% who would stick with current arrangements

Sky customers most likely to single source multi-play services, also most likely to stay with Sky

Full offer - £84 per month

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Loyalty Optimizer™ Framework

Loyalty Index and segments: First understand how loyal and valuable your customers are and which groups may offer either an opportunity or a threat

Loyalty diagnostics: Then understand what the key areas are that influence loyalty and value

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The Ipsos Loyalty Index combines attitude and behaviour to provide a robust measure of Loyalty

Behavioural Measures

Share of Behaviour

Number of Products Held

Attitudinal Measures

Brand Preference

Repurchase

We need BOTH

• Length of Relationship

• Recent Change in Behaviour

• Brand Preference

• Likelihood to Continue

• Length of Relationship

• Recent Change in Behaviour

• Brand Preference

• Likelihood to Continue

The Loyalty Index

Loyalty is a combination of attitude and behaviour

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The Loyalty Index & Loyalty/Value Segments

Loyalty Index

Val

ue

Loyalty Index and Value: key indicators for customer relationship strategies

Core Customers

Low Value ContentedCustomers

Low Value VulnerableCustomers

High Value VulnerableCustomersSegment size : 20% Segment size : 35%

Segment size : 15%Segment size : 30%

Value measures the total expenditure in the sector, for the considered brand

Median spend is used to determine high and low value

Our Loyalty Index is a composite indicator mixing past behaviour and attitudes

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Overall UK Broadband market Loyalty Score = 51

Loyalty Index

Val

ue

Core Customers



High Value VulnerableCustomers

Segment size : 20% Segment size : 19%


Two thirds of the UK broadband market are relatively low value, suggesting strong price competition

Loyalty segments – UK broadband market

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Three quarters of UK landline customers arehigh value, reflecting legacy of BT

Overall UK Landline market Loyalty Score = 52

Loyalty Index

Val

ue

Core Customers






Loyalty segments – UK Landline market

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Overall UK TV market Loyalty Score = 57

Loyalty Index

Val

ue

Core Customers






Loyalty segments – UK Digital TV market

Digital TV customers most loyal,reflecting lack of choice

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Roughly a quarter each segment for mobilephone, reflecting healthy competition

Overall UK Mobile market Loyalty Score = 51

Loyalty Index

Val

ue

Core Customers






Loyalty segments – UK Mobile phone market

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Now that we understand the customer base in terms of loyalty and value AND we understand who can and cannot be moved we look at how to influence these

The key dimensions of loyalty are:

We can look at how important each area is in driving loyalty and disloyalty

Loyalty diagnostics: Understanding what drives loyalty

RelationshipRelationship ExperienceExperience OfferOffer BrandProminence

BrandProminence PricePrice

Best InterestsThey feel like a friend

Treats FairlyI trust [BRAND] and believe they will treat me fairly

QualityThis [CATEGORY] offers consistent quality.

SatisfactionOverall how satisfied are you with [BRAND].

Relevance THIS [CATEGORY] is appropriate and fits my lifestyle and needs

Differentiation[BRAND] has unique or different features or a distinct image that other [CATEGORY] do not have

FamiliarI am familiar with and understand what this [CATEGORY] is about

Popular/Highly Thought of by Many

The [BRAND] is a popular [CATEGORY]

Willing to payCosts more than I expected/am willing to pay

Costs more than others in this category

Comparison to Competitors’ Prices

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Brand

Offer

Experience

Relationship

Price

Building blocks of loyaltyMobile Phone

23%

30%

10% 16%

21%

Broadband

31%

29%

10% 14%

16%

Digital TV

32%

25%

4% 12%

27%

Landline

23%

31%

6%20%

20%

“Relationship” most important building block for mobile and landline, experience for “Broadband” and

Digital TV

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Drivers of Loyalty

Satisfaction with the service and perceptions of quality are drivers of loyalty whilst trust and affinity are barriers to loyalty

Brand =14%

Offer =16%

Experience =31%

Relationship =29%

Price =10%

Barriers to Loyalty

Familiarity

Popularity

Differentiation

Relevance

Satisfaction

Quality

Trust

Affinity

Willingness to pay

Comparison

Overall contribution of building block

Total UK Broadband market summaryThe importance of each Building Block and Mega Driver in explaining Loyalty

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Drivers of Loyalty

Lack of trust, affinity and differentiation arebarriers, perceived quality a main driver

Brand =16%

Offer =21%

Experience =23%

Relationship =30%

Price =10%

Barriers to Loyalty

Familiarity

Popularity

Differentiation

Relevance

Satisfaction

Quality

Trust

Affinity

Willingness to pay

Comparison


Total UK Mobile Phone market summaryThe importance of each Building Block and Mega Driver in explaining Loyalty

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Drivers of Loyalty

Relevance and familiarity drive loyalty (likely to be a result of BT) whilst trust and affinity are barriers to loyalty

Brand =20%

Offer =20%

Experience =23%

Relationship =31%

Price =6%

Barriers to Loyalty

Familiarity

Popularity

Differentiation

Relevance

Satisfaction

Quality

Trust

Affinity

Willingness to pay

Comparison


Total Landline market summaryThe importance of each Building Block and Mega Driver in explaining Loyalty

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Drivers of Loyalty

Relevance is a key driver of loyalty – thisis likely to relate to relevant channel packages

Brand =12%

Offer =27%

Experience =32%

Relationship =25%

Price =4%

Barriers to Loyalty

Familiarity

Popularity

Differentiation

Relevance

Satisfaction

Quality

Trust

Affinity

Willingness to pay

Comparison


Total UK Digital TV market summaryThe importance of each Building Block and Mega Driver in explaining Loyalty

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Four steps to capture market share in the multi-play market

For acquisition:

1. Accentuate a value based proposition

2. Broadband - the lead service

3. Consider options for premium TV

4. Build a multi-play brand

For retention:1. Build and engender

trust and a feeling of closeness with customers

2. Focus on reliability of service provision

3. Keep customers informed of your competitively priced bundles

4. Maintain a differentiated brand to shore up existing customers

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Thank you

For further information [email protected] 020 7347 [email protected] 07850 760106

Multiplay services

Business

contented

core customers

vulnerable

free digital

digital channels

free evening

play services

building block