When 2degrees stepped into the telecommunications playground it was all bets off for the long standing duopoly that had ruled the cellular roost.
With a strong plan, an almighty strategy and an attitude to match, 2degrees gave the industry a good old stir up, snatching more than one million mobile customers in just three years straight from under the big boys’ noses.
There’s only one way to take on the hierarchy and win – and that’s doing things just that little bit differently. 2degrees CEO Stewart Sherriff talks to Melinda Collins about shaking up an industry, guerrilla tactics and playing the game.
2degrees came along when the market was being monopolised by two big players, so how much planning went into the launch before you burst onto the scene?
A lot – it actually took more than nine years of planning, government lobbying and strategic work behind the scenes before 2degrees launched. Our rapid growth (more than one million customers in just three years) since then is testament to our team who developed a different and compelling market proposition.
Our key objective has always been to do things differently – that was the opportunity for us. By launching products and services others wouldn’t or couldn’t do, we got immediate support from the NZ public who were frustrated with high pricing, poor service and inflexibility in the NZ mobile market.
But value is only one aspect of a mobile provider. 2degrees was, and still is, about creating a uniquely Kiwi customer experience from the moment our people pick up the phone. This is why we invested in our Auckland-based care team – available 24/7.
It was also important to make it easy for customers to use our online account management tools so they could fix their issues quickly. In doing so we created what has become an award winning customer service team we’re very proud of.
We built our own network from scratch. This ensured we could offer products and services on our own terms. We have always been focused on offering kiwis value – something they couldn’t expect five years ago – and we needed to control our own ability to innovate.
We also lobbied for regulation around sharing mobile phone sites with our competition so we could co-locate on their sites while keeping our equipment independent.
We also set up a roaming agreement with Vodafone, which enabled our customers to receive coverage throughout the country while we were still in the process of building our own. Now, we have 97 percent coverage.
What key things did you have to get right in order to compete against large, established competitors?
We had to build a nationwide sales channel. We couldn’t sell anything without a retail presence, so we made the 2degrees experience available to all New Zealanders by stocking SIMs in 3,500 oil, multi-brand retailers and grocery outlets.
We also made our proposition clear and easy to understand. We halved the price of calling and text when we launched, followed by continued product development with concepts such as Shared Data and Carryover Minutes and Data.
It was also important to build our social media presence early on as it helped us build a community of support for what we were doing.
Obviously our mobile network was integral to our business and whilst we were starting from scratch, we had the advantage of being able to employ the very latest technology which has a lower cost of upgrade to new technologies than the incumbents with legacy networks.
Our team is another fundamental we had to get right. We have grown very quickly but have focused on making sure we get the right people. Not only has this made it a fun place to work, but it has also helped create a very focused, collaborative culture within our organisation.
Finally – our brand. It was very important that we launched with something that was unique and different to the others but most importantly, stood for value.
Do you have to equal or exceed your competitors’ market exposure in terms of the advertising dollar, or is it just about making that advertising dollar count?
We’ve always focused on playing our own game when it comes to building our brand. We’re a low cost operator so we have to be smart with every dollar we spend. This extends through to our marketing, as our budget is a fraction of our competitors’.
We have to be creative and constantly look at how we can get the most ‘bang for our buck’. This includes mixing traditional media (like TV and newspapers) with increasingly more digital advertising through the likes of YouTube and Facebook.
For example, our last campaign for our best value National Broadband plans was purely digital, that would have been unheard of just two years ago.
Word of mouth is also such a powerful tool so we always try to ‘surprise and delight’ our customers whenever we can so they continue to spread the word!
How tough is it to stay competitive in this industry, with ever more demanding customers and strong competition?
2degrees created competition in the market today – so we welcome it. When we launched four years ago, we grabbed immediate attention as we halved the cost of calls and texts overnight. Naturally our competitors have responded and Kiwis are now getting some great mobile deals.
Now, our focus continues to be on providing value and fairness in the market. Our ‘Carryover minutes and data’ and ‘Shared data’ products are a great example of this as it is all about getting people to use mobile more so the real benefits of ‘being mobile’ are unleashed.
We have always done the things the others can’t or won’t do, like our free calls and texts to Australia out of your bundle. We’re prepared to make bold changes that break convention – many of which have then been replicated by our competitors.
Technology is changing the way we do things at an exponential rate and with it comes new customer needs and expectations. I’ve always seen this as a good thing as it keeps our industry interesting.
The key to remaining competitive is staying nimble and in touch with what customers want so we can then be quick to develop new innovative products and services. Listening is key to that and I, as well as many others within the organisation, regularly take time out to listen to live customer calls so we can keep our finger on the pulse.
I love my job because every day is different – it’s exhilarating and very rewarding when you see how important mobile is becoming to people’s everyday work and personal lives.
What advice would you give small players looking to take on larger organisations who have the majority market share?
As the underdog, you have everything to gain and the incumbents have everything to lose. You need to identify a segment that is dear to their business success and develop systems, products and processes to aggressively target that segment.
Care must be taken to remain focused on that segment and not be distracted by other areas which may seem attractive at the time. Once you have reached your target, you need to shore up defences to prevent a counter attack, then move on to the next area you have identified. Discipline is required to ensure you stick to that systematic plan.
Now you have established yourself as one of the main players in the industry. has your approach and philosophy to what you do changed, compared to when you were taking on the big boys?
Not at all – if anything we are more focused than ever on making sure the new people who come to work at 2degrees understand the battles fought to enter the market, so we continue to deliver ‘more from less’. We are a low cost operator delivering innovative mobile services Kiwis can afford.
Nothing about that has changed – we just have more customers to keep delivering that to. Whilst the technology and the way people are using their mobiles has changed, our philosophy on how we do business hasn’t – we remain focused on continuing our ‘Fight for Fairness’.
Considering the finite size of the New Zealand market, what is the future for the company when the industry has been saturated?
We have an exciting future ahead as there is still a lot of opportunity here. I have been in the industry for 30 years and have worked for mobile operators all around the world. 2degrees is already viewed by some as one of the most successful challenger brands in the world.
Kiwis have benefited significantly from our entry into the market and the competition it has created – but there is still more to do. There are a lot of Kiwis with mobiles, but usage is still relatively low as prices are still considered high in some mobile segments, especially business. Our focus is on changing that.
We have created a strong brand and are now looking at how we can offer more of the total telecommunications mix to customers – so watch this space!
Where do you see mobile technology heading in the next five, 10 years?
The future is all about data. In the last year alone data usage on our network has almost tripled and this is the same trend worldwide.
However, apps, social media, video and online content for mobile is changing the way people work and run their personal lives, so we expect massive growth in usage to continue in these areas.
A recent international study found people now use their mobile more than their PC, TV and all other forms of media – so if you are in business, you need to make sure you have an online presence that is optimised for mobile. Otherwise you may be missing out on potential business opportunities.
Customers are rapidly turning to their mobile devices to research products and services first before making a purchase decision. It’s an exciting time for our industry and the possibilities for mobile are endless.
What’s the best piece of advice you have ever received?
From my grandmother actually, “Take care of the pennies and the pounds will look after themselves”. This serves as a valuable reminder that we must maintain a cost structure which is very different from the giants. It also serves to remind me that if we look after the customers, then the rest will fall into place.
What’s the best piece of advice you have given?
Don’t be afraid to make a mistake. Albert Einstein once said “Fear or stupidity has always been the basis of most human actions.“