News Release

Cisco Study Shows Mobile Providers Strong in the 'Must Haves' of E-Commerce, Lag on Innovation in Online Channels

Verizon Wireless and Carphone Warehouse Lead Pack in Providing Strong Online Customer Experiences
May 14, 2007

SAN JOSE, Calif., May 14, 2007 - To help mobile service providers transform business and the online customer experience, Cisco® today announced the results of a worldwide mobile e-commerce study. The study, conducted by Cisco's Internet Business Solutions Group (IBSG), finds that even though mobile service providers are ranked at the bottom of the American Customer Satisfaction Index, they are strong in basic e-commerce execution. However, when it comes to innovation, the mobile service providers fall far behind, while the major nonmobile retailers lead the innovation curve. The study's key findings show that improving multichannel collaboration, incorporating "smart" capabilities, such as guided selling tools, and increasing interactivity and community dialogue help transform the customer experience.

Online sales are projected to reach $329 billion in the United States by 2010, with almost half of all U.S. households shopping online, a nearly 40 percent increase since 2005. The study shows that to tap into this burgeoning channel, executing a superior customer experience through their online channels is critical for mobile providers. To date, online sales for mobile providers remain sluggish in the low to mid single digits.

In order to compete, mobile service providers must view their online channel as an integral part of their customer strategy and company brand. It is a low-cost channel for acquisition, upselling and service, as well a crucial part of the customer experience.

"Customers do not differentiate between the online and offline channels of mobile providers; they see both as one company with the promise of one brand," says Mohsen Moazami, vice president of Cisco IBSG. "Both the stores and the e-channels should cross-promote and drive traffic to each other to maximize the value both to the customer and the mobile provider. Operating the online channel apart from the store will only be costly in the long run."

Study Methodology

The IBSG study assessed the online channels of 27 major U.S., European and Australian companies that sell mobile products and services, including mobile service providers, pure-play mobile retailers, leading discount retailers and other major online retailers. IBSG analyzed the entire online purchasing cycle from a consumer's point of view, measuring the buyer's experience. The study looked at five distinct categories: ease of use, personalization, content, transaction reliability, and the level of interaction between the consumer and the online retailer, and between online shoppers. Within these categories, the study measured foundational, "must-have" characteristics and emerging, "sophisticated" attributes that add even greater value to the customer experience. The aim was to compare the effectiveness of the front-end and back-end processes of these businesses.

In tandem with the study, IBSG conducted an e-channel assessment of 27 additional retailers that sell online, but whose core focus is not mobile products and services, extending the total companies surveyed to 54.

Key Findings

Overall, IBSG found that mobile service providers make up seven out of the top 10 online retailers of mobile services and offer a stronger experience through their online channels than more traditional retailers offering mobile products/services. The top 10 rankings among mobile providers were:

1. Verizon Wireless 5. Cingular
1. Carphone Warehouse 7. Nextel
3. Best Buy 7. Telecom Italia Mobile
3. LetsTalk 7. T-Mobile Germany
5. T-Mobile USA 7. Vodafone Italy

Foundational Capabilities

The leading mobile service providers present a superior e-commerce experience, getting most of the basics right. These consumer "must haves" are foundational elements that are nonnegotiable for the customer, and include:

Ease of Use and Content

The online channel is an important tool to inform and educate customers. Consumers want portals with search capabilities to help them easily navigate through the maze of products, service plans and networks. While 80 percent of surveyed mobile providers exhibited appropriate product content, only 50 percent of sites offered side-by-side feature and price comparisons, and only 40 percent displayed pictorial representations of the features. The IBSG study found that mobile providers generally offer a consistent Web experience across different Web properties and landing pages. The IBSG study also identified self-help functionality and information searching , especially regarding new products and promotions, as weak points for mobile service providers, with only 40 percent offering these capabilities.

Reliable Transactions

The purchase experience was mostly positive; more than 60 percent of the mobile providers surveyed had Web sites that required just three to five clicks to complete a purchase transaction. On the returns side however, only 50 percent of mobile providers offer an acceptable solution, with common complaints cited such as customer inquiries handled by multiple contacts and lengthy telephone hold times.

Emerging Capabilities

The more sophisticated aspects of the online channel that take the user to a new level of experience, both in terms of convenience and in satisfaction, include enhanced personalization, multichannel collaboration, advanced content and increased interactivity, and community dialogue. With most mobile providers lagging in this area, there is much room for improvement. A case in point is Amazon, the top-category performer, which scored only 32 percent in its emerging-capability performance. While the average performance score for all mobile providers surveyed in foundational elements was 64 percent, the score for emerging capabilities was only 20 percent. Mobile providers can take the lead from the nonmobile retail leaders whose superior experience is mainly due to advances in the emerging capabilities. (While the aggregate performance score for nonmobile retailer leaders is 64 percent, it is 53 percent for the leading mobile providers.)

Clearly, excellence in foundational elements alone is not enough to attract and retain online shoppers. Major trends in emerging capabilities include:

Multichannel Collaboration

IBSG found that most service providers do not take advantage of their online presence to increase in-store transactions. For example, while store locations are prominently displayed on the majority of mobile provider Websites, only 35 percent showcase services offered at stores. Only one service provider among 28 companies surveyed offers in-store pick-up of a postpaid online order. To blur the line between online and in-store shopping, customers should be able to research and order products and services online and pick up the orders at the store. This is a model that has been executed by retailers such as Circuit City and Best Buy, and mobile customers expect this type of seamless shopping experience as well.

Increased Interactivity and Community Dialogue

The move to Web 2.0 and the popularity of social networking sites has made interactivity an expectation, especially among younger consumers. Mobile service providers need to increase their Web portal community development with the enhancements of message boards, customer reviews and the addition of e-mail functionality like "shopping with a friend." Mobile service providers should borrow a page from nonmobile retailers and "lifestyle brands," such as Cabela's and Scion, who are successfully tapping into the social networking phenomenon to increase the frequency and level of interaction with the brand.

The most popular mode of interaction offered by mobile providers is "click to chat," which enables online shoppers to directly communicate with a customer service representative at the click of a button, at various points in the shopping cycle. It is offered by only 30 percent of mobile providers in the United State and only 10 percent in Europe.

Enhanced Personalization and Smart Tools

Smart tools are applications that guide customers through the shopping lifecycle, from research to transaction. They are necessary for helping shoppers purchase increasingly complex products and services online. While mobile leaders such as Carphone Warehouse offer tools for consumers to research and make the most appropriate phone or service selection, only 28 percent of mobile providers surveyed offered any smart or intelligent tools.