If you watch digital television, have broadband and still use a landline, there's a good chance you are a Sky subscriber. With a customer base of just over eight and a half million, equivalent to one in three households in the UK and Ireland, the media company has come a long way since its launch in 1989 when it broadcast just four channels. It's the responsibility of Mark Anderson, customer marketing director at parent company BSkyB, to ensure those numbers stay high and climb further still.
Since joining BSkyB just over 18 months ago, following 10 years at Centrica and two at OneTel in similar roles, Anderson has certainly made the maths work. Average revenue per customer figures exceeded £400 for the first time, up by £12 compared to the previous quarter, according to BSkyB's results for the nine months ending March 2007. It's encouraging news for Anderson, but he still faces an uphill task.
BSkyB is experiencing intense competition from new entrants in the broadband, telephony and digital television space, most notably the launch of Virgin Media (following Virgin's acquisition of NTL) and BT's version of its digital TV offering, BT Vision.
Anderson's battle for customer retention doesn't stop there. Sky's traditional customer base was hooked on the back of deals made in the 1990s, such as its exclusive rights to show live Premiership football. But with broadcasters such as Setanta and ITV encroaching on this space, it's a luxury that Sky can no longer afford to rely on. As well as competing in terms of content, it has to contend with free-to-air digital services such as Freeview.
This competitive scenario, however, does not appear to daunt Anderson. "The customer experience is our new battleground, and we believe passionately that it is our differentiator," he says. "At the end of the day, products can be copied - we have Sky+ but BT, for example, is about to launch its own personal video recorder. BT is also four times our size in terms of market capitalisation, but we constantly set ourselves higher numbers and chase them down. Our challenge is to resonate with our customers and beat the expectations of the City and occasionally (BSkyB's chief executive officer) James Murdoch, but that doesn't happen very often!"
As part of its gameplan to retain customers, BSkyB's focus has switched from competing aggressively on price and offers, to enhancing its relationship with customers and encouraging them to be more loyal. Anderson's job title reflects this well, as his predecessor had the less glamorous title of 'head of churn'.
Key to BSkyB's aim has been to integrate the acquisition and retention departments, a feature that few brand owners can boast. At the company's offices in Osterley, west London, Anderson sits across from the man responsible for acquisition, John Orriss, the director of direct sales and marketing. Both report to William Mellis, director of customer acquisition and retention.
"Sky is more integrated across its sales, marketing and customer service divisions than other companies," Anderson explains. "If I have a good quarter, the pressure is off the acquisition team, and if we're slightly off our forecast, John has to pick up the slack." Two years ago, BSkyB spoke to the customer as an individual account holder, but with the launch of its broadband and telephony services it now talks to customers in a family context.
Retention campaigns run across direct mail, telemarketing and email, with Sky's two call centres in Scotland handling an average of 45 million calls a year. According to Marketing Direct's latest Top 100 Direct Mail Spenders report, enclosed with this issue, BSkyB increased its direct mail spend by 43 per cent in the last year, up to £24.5m from £17.1m. Its below-the-line agencies include RMG Connect and Finex, and most recently it added EHS Brann to the roster. The launch of its "Speak, Surf, See" through-the-line campaign earlier this year, which was aimed at supporting a new subscription package, was devised by its above-the-line agency WCRS and was the first time Sky had marketed a combined television, broadband and telephony offering.
While discount offers have played a strong part in increasing customer growth, Anderson says the business is now focused on price transparency. Last July, for example, it introduced price equalisation, where services such as Sky+ and high definition were offered for the same price to existing customers. It also reduced and then removed viewing package discounts previously used to acquire and retain customers. The first full impact of this price transparency was assessed in its third-quarter results, which showed churn increasing by 13.7 per cent, up from 11.9 per cent in the previous quarter. In a recent trading update, however, the broadcaster said its churn figure had fallen to 12.1 per cent in the three months to the middle of June, with a further 90,000 new customers acquired.
"The balance has very much changed," says Anderson. "We no longer use software offers (such as Sky+) in 90 per cent of our acquisition campaigns. Some of our competitors are still leading on upfront deals for existing customers. It's less about price and more about value for money, but we keep household value in mind. Services such as broadband and telephony are about providing overall savings for homes."
Customer communication
His biggest challenge is to improve customer data or, as he puts it, "to understand the dynamics within a base of eight and a half million customers", and be able to predict and respond to consumer lifestyle changes in real time. "If subscribers wish to drop one channel, such as Sky Movies in favour of Sky Sports, it might be because someone has got divorced or someone's son has gone to university. We have to question how we predict this. It's not something you can see from a database or buy from a third party or a list. We need to empower our call centre agents with the necessary tools and customer information."
Anderson is also keen to explore using different customer touchpoints, including its customer service division, to identify other areas the business can invest in to improve overall customer experience, such as technology and the programmes it commissions.
"We have the standard household data, but our challenge is how we move away from knowing who the account holder is and what television package they have, to whether they have broadband, whether they are an owner-occupier or tenant and why they have chosen a particular package," says Anderson.
BSkyB undertook a review of its customer data infrastructure working closely with data services provider ClarityBlue. It has built a prospect database that enables BSkyB to create highly segmented marketing messages from a thousand options, and several hundred message and creative variants. The platform also enables BSkyB to interact more with its customers and prospects by providing a feedback mechanism for understanding, responding and measuring the impact of each interaction at the point of sale. It also uses attribute data from Acxiom to enhance its customer records to improve cross-sell and up-sell tactics.
"Our challenge is to use our CRM functionality and customer service to capture more information. We have a recommendations section on our site so customers can enter their pick of programmes, and we deliver a weekly e-newsletter based on their preferences," says Anderson.
Investment in customer magazines is also a priority, and Sky has launched magazines dedicated to movies and sports to reflect its customers' particular interests, with personalised newsletters enclosed. But aren't customer magazines a very expensive way to retain customers? It's not how Anderson sees it.
"It's a convenient way to communicate with subscribers," he says. "The vast majority don't get bills, so it's important for them from a customer marketing perspective to receive something regular in the post."
As part of its 'Sky Learning' initiative, Sky also launched an online search tool that makes recommendations for television products related to GCSE subjects. Customers can enter their interests and the website highlights the range of educational programming available on its satellite platform.
With Sky TV's proposition being so broad, part of its challenge is to help customers navigate its services and products such as Sky Anytime, an on-demand service launched in March that enables customers to download entertainment and news on their computers and mobile phones, or access Sky's pick of the week on their televisions, is key to this. It's what Anderson refers to as Sky's "hidden gems".
Establishing loyalty
"We know we have a good product, but the bar has been raised both in terms of consumer perception and the competitive environment. We used to shout at customers; now we've established a dialogue with them. It's about ensuring this is in the framework of our customer. Sky's focus now is on both its customer base and acquisition, which wasn't the case two years ago," says Anderson.
Ultimately, Sky is seeking, as Anderson puts it, to form an emotional connection with its customers, enabling them to watch the TV they want, when they want. "While Sky has maintained its market-leading position with strong offers, it is now focusing on the customer," says Mark Hewitt, business director at RMG Connect. "One of Mark's strengths is his ability to balance the need to move from a product to a customer-centric view, while still delivering against his commercial targets."
Anderson's balancing strengths extend beyond the workplace, as he is currently juggling his day job with the final year of a two-year Masters in Business Administration at Ashridge Business School, culminating in a dissertation on how marketing and operations can influence the customer experience. With his work thus far at BSkyB, he should have little problem providing the 10,000 words required.
POWER POINTS
- The acquisition and retention teams are very closely integrated
- BSkyB's focus is to encourage loyalty rather than compete on offers
- Anderson's biggest challenge is to improve existing customer data
MARK ANDERSON ON ...
Customer experience: "It's about pushing the customer relationship further up the lifecycle. Many things influence customers' perception of our value, ranging from the way they were acquired, the proposition they were sold, the customer experience and word of mouth."
Retention: "I've been working in customer retention for 10 years now and there is no silver bullet. It's about working very closely with colleagues in acquisition and customer service, and with other brands to ensure that what we are doing is not just focused on the outside world of prospects, but that it touches existing customers."
Digital marketing: "We are one of the biggest online spenders, and our acquisition team is very focused on digital marketing opportunities. We've developed microsites to attract people to our website and to promote products such as high-definition (HD) television. We can't do HD TV adverts as you need specific equipment to view this, so we've been using the website to show the benefits. We have carried out research on how people buy online. Some prefer to use search and others opt to have a conversation online, so we are looking at developing web chat services to meet this need."
Customer magazines: "We have eight and a half million subscribers, all of whom have very different preferences. Our task is to consider how much more we can focus on content in terms of developing other magazines. We also use our titles to promote other products."
Promotions: "Services such as broadband are standalone products - there are no discounts for new or existing customers. Offers have played a significant part in our growth, but we have moved away from blunt ones to make our marketing more efficient."
BSKYB - THE COMPETITION
BSKYB VIRGIN MEDIA FREEVIEW
Products TV, Sky+, High TV, V+, On Demand, TV, Playback
Definition, Broadband, Phone,
Anytime Telefony Mobile
and Broadband
Customer numbers 8.6 million 3.3 million 11 million
(homes)
Monthly basic TV, *£15 (plus *£30 n/a
broadband, phone £11 a month
package BT line rental)
*Prices correct at time of going to press. Source: BSkyB, Virgin Media,
Freeview
Txt2email: You can send a copy of this article to a friend's email account by texting, 'MxD 1121 recipients email address', to 86222. Text messages are charged at standard network rates.
Comments