Strategy

Telstra takes back retail store ownership in omnichannel customer service play

Telco announces plans to take back all retail store ownership as it reports its H1, 2021 results

Telstra will take back full ownership of all of its Australian retail store network as part of efforts to improve its omnichannel customer game.

The news was announced as the ASX-listed telco presented its first-half FY21 results, showing a more than 10 per cent drop in total income to $12 billion, a 14.7 per cent decline in EBIT to $4.1 billion, and a 2.2 per cent drop in NPAT to $1.1 billion. The dips have been attributed in large part to National Broadband Network (NBN) transition, lower device sales following an ongoing trend of customers holding onto ever-more expensive devices for longer, and lower store traffic from COVID-related restrictions.

Telstra CEO, Andy Penn, said that as more customers interacted with the business online as a result of the COVID-19 global pandemic and lockdown, it became clear ownership of all retail touchpoints was necessary “as a way of more flexibly dealing with customer needs”. The telco experienced significant customer service and support challenges as a result of workforce capacity issues in the height of the pandemic.

“We think now is the right time to bring back ownership to ensure a consistent and integrated customer experience across our online channels and entire store network,” Penn said.

“At the height of COVID last year, we were able to redeploy frontline staff from Telstra owned stores to assist customers through our digital channels or via the phone. It’s this flexibility that we’ll be able to unlock as more retail branded stores are under Telstra’s ownership.”

Telstra has more than 60 Telstra-owned and operated stores, with another 166 branded stores run by individual licensees and a further 104 stores operated by the Vita Group. Vita Group and individual licensees have been notified of the plan with discussions and transition arrangements expected to progress over coming months and take up to 18 months. The decision does not include Telstra Business Technology Centres or T-Partner operators.

“Importantly, we know that in many regional and rural towns, the local Telstra store is a valued part of the community providing support and connectivity to a range of businesses and industries. This will not change, and neither will our commitment to ensuring current licensee store customers continue to receive an excellent level of service,” Penn said.

Telstra group executive for consumer and small business, Michael Ackland, said the move was also designed to further embed responsible business practices through direct employment relationships with store staff, lift standards of service, and have more customer service issues resolved in-store.

“Ultimately, we want locals to be getting what they need by visiting their nearest store or speaking with a familiar voice over the phone,” he added.

Ackland said Telstra expected to maintain a large retail presence across Australia while also expanding the availability to purchase and access services via its digital channels.

In addition to the retail store changes, Telstra is in the process of transitioning customer support staffing and processing back to an onshore model. Penn said the company is on track to have all in-bound calls from consumer and small business customers answered in Australia within the next 18 months. The company also closed its call centre in Cebu in the Philippines earlier this month.

According to Telstra’s results, H1 2021 digital sales interactions with consumer and small business customers were up 10 percentage points to 40 per cent compared to FY20, which was already up strongly on the previous year. Overall, digital service interactions accounted for more than 70 per cent of all service interactions.

Against the challenges of customer service in 2020, Telstra reported a +3 increase in episode NPS over the last six months to +6, but a decline of 1 compared to H1, 2020. Strategic NPS improved +5 in the last six months and +11 over the last 12 months.

“I am very conscious of the delays some customers have experienced in trying to contact us and I want to apologise for those,” Penn said today as part of his results presentation. “I also know not all aspects of our customer experience are yet where we need them to be and we have more work to do.”

Other key customer indicators highlighted in the results include an increase in customer loyalty program participants to 2.8 million Telstra Plus members, and an average services per customer increase to 2.75, compared to an FY18 re-baselined figure of 2.62. Telstra also has 4.42 million active My Telstra and Telstra 24x7 app users, up from 4.36 million 12 months ago.

Overall, the telco report 19 million retail mobile services, 3.7 million consumer and small business bundle and data services and 195,000 enterprise data and connectivity services. Highlights included an 80,000 increase in net retail post-paid mobile services and $3 lift in minimum transaction commitments, plus 163,000 new wholesale services and 456,000 Internet of Things services. Fixed was more challenging, however, with 53,000 net new retail bundles lost.

Penn said 2021 was a significant year for Telstra as it realises the big-ticket items of its T22 transformation strategy, first unveiled three years ago.

“After a decade of disruption following the creation of the NBN, and with its rollout now declared complete, we can clearly see the path to underlying growth ahead,” he stated. “Our investment in innovation and technology, digitisation and networks, improving our customer experience and being disciplined in our capital management, mean that Telstra is in a strong position to grow.”

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