Sprint Nextel Corp. (S) has in the past been the butt of jokes when it came to customer care issues. This view was bolstered by repeated poor showings in customer care surveys as well as internal decisions that focused on using automated customer care options that seemed to just frustrate customers. These issues were forced center stage on a quarterly basis as the carrier regularly posted customer churn results that were more than twice of what it larger rivals were posting and dragged down Sprint Nextel’s postpaid customer base.
However, since current CEO Dan Hesse ushered in a new regime several years ago, the carrier has said improvements to customer care was a high priority. While these sorts of comments are often granted no more than lip service, Sprint Nextel has indeed managed to curtail its rampant churn numbers highlighted by 11 consecutive quarters of improved customer retention. This despite the fact that its iDEN operations have continued to leak high-value postpaid subscribers.
With fourth quarter numbers expected to be released in the coming weeks, Sprint Nextel’s chief services officer Bob Johnson recently talked with RCR Wireless News about the carrier’s focus on improving the customer care experience, and here is an excerpt of that conversation:
RCR Wireless News: What is Sprint Nextel’s view of current churn trends for postpaid?
Bob Johnson: What I hope is that if we do a better job on first call resolution, customer scores for care will go up. If those scores go up, churn goes down. For the third quarter we reported our best churn since the merger, [1.93%] in the third quarter. I am hoping we can share good news coming up about churn in the fourth quarter.
If I can use an analogy, I would like to think of this as a speed boat that we can just hit the throttle and we take off. But we were like an ocean liner that was off course. Then we turned the ship around and got it back on course, and now we are picking up speed. I believe our churn will gradually and continually improve to the point where we end up catching our competition down the road. How soon? I don’t know. I think you will see sustained and continued improvement much like our 11 consecutive quarters of quality metric improvement, which I think ultimately translates into churn reduction.
We have already seen evidence of the data supporting that as we saw in the third quarter. Churn is probably the single most important financial metric in wireless, so we are focused on it and think we are heading down the right path.
Our top box scores – a metric that shows positive word of mouth – over the past three years have improved 43%, and have improved every single quarter over the past 11 quarters as well. Our bottom box score – which are customers that are most mad at you and thus most likely to churn – we have reduced that by 65% over the past three years and it’s at the lowest levels ever. Those are two early indicators that I feel will support the fact that churn will continue to come down in an improved and sustained pattern.
RCRWN: What sort of challenges are you seeing with handling customer care in the prepaid space as compared with postpaid?
Johnson: We think we are in a great position with prepaid with our differentiated brand strategy. We think we have some real good momentum in that arena.
The economy leads to certain challenges with certain segments of the population. The recent economic downturn has created an increase in cost conscious buying decisions in mobile, and in this case perhaps more prepaid than postpaid. While the customer base side is still much bigger on the postpaid side, most of the recent growth has come from prepaid. We can’t fight that trend, so we want to be the leader and taking advantage of the trend.
I just recently inherited the care team for prepaid so am not an expert yet, but I can tell you that we have the same maniacal focus on execution for quality in prepaid that we have for postpaid.
One plan we have is the Shrinkage plan with Boost that battles the margin challenges in prepaid. The biggest margin challenge is churn in prepaid and with the Shrinkage plan we are generating loyalty by telling customers that the longer they are with us, the less they will pay. We think that is generating some improvements in churn, but is also a customer service benefit because it lowers the customers’ bill the same way our value pricing does.
RCRWN: Sprint Nextel previously put a lot of emphasis on voice automated customer care. What sort of challenges do you see in using both automation and real human in customer care?
Johnson: One way to reduce customer care calls, even if you don’t have a problem, is to let a customer take care of their own issues on a self-serve basis. We have been working diligently to improve self service in a couple of different ways.
One is with Steve Elfman, who in addition to having responsibility for our network and IT also looks after our website. Earlier this year we launched a new customer care initiative on our website that improved search and navigation for customers and it now allows customers to do more things for themselves through the new interface. It’s not that we don’t want to talk to our customers, but it’s for those customers that want to use a Web interface.
Similarly we redesigned our IVR and we actually received an award from J.D. Power saying we had the most improved IVR in the industry a couple of quarters ago, and that’s another self-serve mechanism. We use the model of banking. Who wants to go wait in line at a bank these days when we can do just about everything we need on a daily basis on the Web or over the phone? That’s what customer demands are and we want to accommodate those demands.
Anytime you want to call us and talk to a live agent we have that option through our IVR as well as links through our website. We are trying to give customers the choice and freedom to interact with us in the way they want. We are seeing the results. We have gone from having our customers call us twice as much as our competitors during the first quarter of 2008, to best in class now with about four calls per customer per year. Forget the size of the base; it’s all about the number of customer calls per year.
RCRWN: Do you expect to experience any sort of network interruptions that were seen during the Nextel rebanding and vocoder issues with the more recent network enhancement announcement?
Johnson: We’re not expecting anything but a better experience as we convert because the radio interfaces will be more dynamic and the backhaul will be more efficient and reliable. We don’t expect customers to notice anything at all and think customers will be happier overall with their interaction with our network.
I have been around this industry long enough to see businesses migrate from analog to CDMA at 800, to CDPD networks, to the iDEN 2.5G network, CDMA at 1900 and now 4G and I view this as the same thing. This is just an upgrade or evolution to our network; this is not killing off a network. This is taking the customer experience to the next level.
RCRWN: Is Sprint Nextel finding any customer service challenges with the roll out of WiMAX services?
Johnson: It’s actually going very smoothly. All we have really heard from our customers, and it’s something that we really want, is that they wished we had more markets launched and a greater footprint. We are working aggressively on that both in expanding into new markets as well as bolstering coverage in existing markets. That’s a good sign. It means they like it and they want more.
RCRWN: What sort of impact is Sprint Nextel seeing in customers care when it comes to the growth of smart phones?
Johnson: What we are finding is that more and more of the customer decision and the prioritization in an individual’s decision is based on the initial handset. We know that because when we launched the Evo 4G at about the same time as the new iPhone and compared to previous iPhone launches we were much more successful in new market share. That told us that even though the iPhone is known as a great and iconic product, we were able to stave off many of the historical issues because we had this new product that customers wanted.
Now, having said that, that is all at the time of decision. What we find is that churn is still based on the value of services that customers are using on a month-to-month basis.
RCRWN: Sprint Nextel has initiated a number of in-store customer care enhancements over the years, most recently with its Ready Now service. What sort of challenges are you seeing in trying to expand that offering to other retail channels?
Johnson: That is indeed one of my main focuses in improving the customer care experience, but you have to pick your battles and priorities. Making sure my customer care organization was the best in the industry has been my focus for three straight years. An expansion of that focus is what we call channel consistency. That extends first to our stores with the example of initially our Red Carpet offering and now Ready Now, which makes sure that our customers leave our stores knowing how to use their devices and that results in fewer calls.
Similarly we are now trying to move that to our third party channels and to the extent that it’s possible to extend that to our big box retail partners. That’s difficult in that they usually sell service from every carrier, but if we can get them more knowledgeable and comfortable in our product that is the best result for our customers and for Sprint. That channel consistency is what we are focused on now and our stores are an important part of that. Ready Now is one step, but we are also expanding access to customer care notes so those in the store can see the historical interaction, which is something that before was not possible. We are also giving credit tools to stores that in the past required a call into customer care.
