In October 2016 the British multinational telecommunications company Vodafone achieved an unwelcome milestone – the single biggest fine for “serious and sustained” breaches of consumer protection rules in the UK.
It was the result of a troubled CRM and billing consolidation project.
UK telecoms regulator Ofcom slapped a £4.6 million fine on Vodafone, payable within 20 working days. The fine was made up of two chunks – £3.7 million for taking pay-as-you-go customers money and not delivering a service in return, and £925,000 for failures relating to the way that the carrier handled complaints.
In a checklist of shame the regulator found that:
> 10,452 pay-as-you-go customers lost out when Vodafone failed to credit their accounts after they paid to ‘top-up’ their mobile phone credit. Those customers collectively lost £150,000 over a 17-month period.
> Vodafone failed to act quickly enough to identify or address these problems, only getting its act together after Ofcom intervened.
> Vodafone breached Ofcom’s billing rules, because the top-ups that consumers had bought in good faith were not reflected in their credit balances.
> Vodafone’s customer service agents were not given sufficiently clear guidance on what constituted a complaint, while its processes were insufficient to ensure that all complaints were appropriately escalated or dealt with in a fair, timely manner.
> Vodafone’s procedures failed to ensure that customers were told, in writing, of their right to take an unresolved complaint to a third-party resolution scheme after eight weeks.
For its part Vodafone has admitted to the breaches. It has also reimbursed all customers who faced financial loss, but for 30 it could not identify, and made a donation of £100,000 to charity.
The events have led to a £54m crash in sales from April to June 2015, and Vodafone said that “continued operational challenges” with the mobile customers’ billing system that was introduced in 2015 had led to the 3.2% drop in sales to £1.55bn due to a customer exodus.
Adding the £4.6 million penalty on top of that, we are talking about a £59 million loss without taking the costs of the project itself into account.
Timeline of Events
2012
Vodafone first selected the Siebel CRM system back in October 2012, an implementation which was intended not just to service mobile customers, but also customers for fixed-line telecoms, data networking, TV subscriptions and other services.
Siebel CRM is a product originally created by Siebel CRM Systems. The company was founded by Thomas Siebel and Patricia House in 1993. At first known mainly for its sales force automation products, the company expanded into the broader CRM market.
By the late 1990s, Siebel Systems was the dominant CRM vendor, peaking at 45% market share in 2002. On September 12, 2005, Oracle Corporation announced it had agreed to buy Siebel Systems for $5.8 billion. «Siebel» is now a brand name owned by Oracle Corporation.
Vodafone planned to integrate Siebel CRM with Oracle BRM (Billing), Prepaid, Provisioning, ERP, DWH, etc. in order to cover the mission-critical Sales, Service and Marketing operations.
It was a hugely ambitious migration and consolidation of billing and CRM systems involving moving more than 28.5 million customer accounts from seven billing platforms to the new system. It was the largest IT project that Vodafone had undertaken,
The main business challenges addressed in the context of this project were:
> Create a single, centralised, 360 degree Customer View that can be accessed by the various front-end systems and channels.
> Achieve more efficient & effective Customer Service, minimising handling time, call transfers and logging incident tickets and service requests.
> Empower the Call Center Agent to become a Universal Agent, able to handle any Sales, Service or Marketing related issue.
> Use Siebel as the main front-end system at the Contact Center and drastically reduce the use of all other systems at the front-end.
> “Keep customers happy” while reducing time and cost to serve.
2013
The migration and consolidation program began in 2013.
2015
In April 2015 the migrations to the new system were completed. But in addition to suffering from downtime, the system has also led to a flood of customer complaints about bills, including some who have continued to be billed even after contracts had been cancelled, others who have had their direct debits mysteriously cancelled, or have been shut out of online accounts.
Vodafone was the most complained about telecoms provider in the three months ending in December 2015, due network failures that meant many users could not make and receive calls or were billed incorrectly.
2016
Telecoms regulator Ofcom launched its own formal investigation into Vodafone in January following a spike in complaints during 2015 over the new system.
Based on the results of this investigation the regulator slapped the £4.6 million fine on Vodafone in October.
What Went Wrong
In a statement, Vodafone said:
“Despite multiple controls in place to reduce the risk of errors, at various points a small proportion of individual customer accounts were incorrectly migrated, leading to mistakes in the customer billing data and price plan records stored on the new system. Those errors led to a range of different problems for the customers affected which – in turn – led to a sharp increase in the volume of customer complaints.”
The problems resulted in the the pay-as-you-go issues:
“From late 2013 until early 2015, a failure in our billing systems – linked to the migration challenges explained above – meant that customers who had topped up a PAYG mobile which had been dormant for nine months or more received a confirmation message that the credit had been added to their account; however, the mobile in question continued to be flagged as disconnected on our systems.”
Although this impacted 10,452 customers, the situation caught Vodafone unaware:
“Unfortunately, as the circumstances of the IT failure in question were very unusual (at the time, less than 0.01% of all Vodafone UK PAYG customers’ phones were inactive for more than nine months before being reactivated), the teams responsible for the day-to-day operation of the relevant areas were not fast enough in identifying the issue and did not fully appreciate its significance once they did so.”
The migration and consolidation program began in 2013 and was completed in 2015.
“The IT failure involved was resolved by April 2015 – approximately 11 weeks after senior managers were finally alerted to it – with a system-wide change implemented in October 2015 that – as Ofcom acknowledges – means this error cannot be repeated in future.”
“More broadly, we have conducted a full internal review of this failure and, as a result, have overhauled our management control and escalation procedures. A failure of this kind, while rare, should have been identified and flagged to senior management for urgent resolution much earlier.”
“Our new billing and customer management system is designed to give our customers the best experience possible. It puts the customers in control of every aspect of the Vodafone products and services upon which they rely. It also enables our customer service and retail employees to respond quickly and efficiently to changing customer needs and swiftly put things right if they go wrong.”
“All of our consumer customer accounts have now been migrated successfully to the new system with a number of positive effects as a consequence. For example, there has been more than 50% reduction in customer complaints since November 2015 and our Net Promoter Score – which measures the extent to which our customers would recommend Vodafone to others – has increased by 50 points.”
Vodafone has suffered for its failings commercially in the process. In the three months to the end of June 2015, UK sales fell 11.4%. At the time, Vittorio Colao, Vodafone CEO, admitted that the IT program’s problems were having a wider impact:
“The UK is more a mixed picture. On one hand, we have a very good performance of the network in London, where, actually, we have really 99.9% coverage and a very good performance on dropped calls and video speed. In the rest of the country we still have to do a little bit of work. There is still improvement but we have to do a little bit of work.”
“The real issue has been billing migration problems in the UK which has caused disruption to the customers and to our commercial operations. We still have reached 7 million 4G customers, we still have activated 20,000 new homes in fixed broadband, but, clearly, we have got more churn than what we wanted and less commercial push until we fix the problems.”
“The problems are being fixed. I would say 75% of them are out of the way. We have reduced the extra calls to the call centers by more or less 0.5 million but we still have a little bit to go. We believe we will have resolved everything by the summer and then we will resume full commercial strength in the second half of the year.”
How Vodafone Could Have Done Things Differently
There are some good lessons to learn from Vodafone’s troubles.
Understanding Your Problem
Vodafone had a lousy reputation for customer service for some time, coming out as easily the most complained about UK mobile provider in Ofcom’s 2015 market survey. It had more than three times the industry average of 10 complaints per 100,000 customers in the last three months of 2015.
So Vodafone clearly had lessons to learn about the way it deals with customers before starting their CRM implementation. And if you start such a project with the mindset that customers are a pain in the ass, then all the CRM software in the world won’t make things better; it’ll just make it easier to anger your customers.
Internal Controls
Vodafone should have better internal controls in place. Since these incidents Vodafone has conducted a full internal review and overhauled its management control and escalation procedures, noting that the problem should have been spotted and flagged much earlier than it was.
“Despite multiple controls in place to reduce the risk of errors, at various points a small proportion of individual customer accounts were incorrectly migrated, leading to mistakes in the customer billing data and price plan records stored on the new system. Those errors led to a range of different problems for the customers affected which – in turn – led to a sharp increase in the volume of customer complaints.”
“Unfortunately, as the circumstances of the IT failure in question were very unusual (at the time, less than 0.01 percent of all Vodafone UK PAYG customers’ phones were inactive for more than nine months before being reactivated), the teams responsible for the day-to-day operation of the relevant areas were not fast enough in identifying the issue and did not fully appreciate its significance once they did so.”
Employee Training
The best CRM system in the world will have no value if your employees are not willing and empowered to help your customers. Improving customer services teams’ ability to respond to questions and problems is key to a great customer service.
“We fully appreciate the consequences for our customers of various failures in the migration process over the last three years,” it said. “We have sought to remedy these through an additional £30m investment this year in customer service and training, including hiring an additional 1,000 new UK-based call centre personnel and more than 190,000 hours of training to improve how we identify and resolve individual customer problems.”
Vodafone said that since doing this, it had seen a 50% reduction in complaint volumes and a significant improvement in its net promoter score.
Closing Thoughts
Ofcom Consumer Group director Lindsey Fussell said:
“Vodafone’s failings were serious and unacceptable, and these fines send a clear warning to all telecoms companies. Phone services are a vital part of people’s lives, and we expect all customers to be treated fairly and in good faith.”
Vodafone replied with:
“Everyone who works for us is expected to do their utmost to meet our customers’ needs,” it said. “It is clear from Ofcom’s findings that we did not do that often enough or well enough on a number of occasions. We offer our profound apologies to anyone affected by these errors.”
It is sad state of affairs that we need a regulator to make companies realize this.
In a nutshell: The best CRM system in the world will have no value if your employees are not willing and empowered to help your customers.