This document summarizes a presentation given by Graham Webster, Director of Customer Experience at Telefonica Europe, at an event in March 2013. The presentation discusses: 1) The commercial rationale for improving the customer experience to turn customers into fans, including data showing increased loyalty, reduced churn, and willingness to pay more from customers with better experiences. 2) Telefonica's integrated approach to improving customer experience across functions and touchpoints to increase loyalty. This includes understanding customer satisfaction and loyalty drivers, designing experiences throughout the customer lifecycle, and ensuring alignment across the organization. 3) Some innovative customer experience activities Telefonica has implemented, such as in-store "Guru" support, a "Fair

1. Telefonica Europe.
ICEW March 2013 © 2013 Telefonica. Not to be used or reproduced without permission.
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Telefónica Servicios Audiovisuales S.A. / Telefónica España S.A.
Título de la ponencia / Otros datos de interés / 26-01-2010
ICEW March 2013
Telefónica Europe
Making Customer Experience come alive to
transform your organization: Some tips
Graham Webster,
Director Customer Experience, Telefónica Europe.
Johannesburg, March 2013
© 2013 Telefonica. Not to be used or reproduced without permission.

2. Telefonica Europe.
ICEW March 2013 © 2013 Telefonica. Not to be used or reproduced without permission.
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Agenda
Telefonica
The commercial rationale for turning Customers into Fans
An integrated approach across functions to improve alignment
Loyalty through an Integrated approach to improving the Customer
Experience
Some Innovative Differentiated Customer Experience Activities
Engaging people to create and deliver improved customer
experiences
Learning
02
03
04
05
01
06
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3. Telefonica Europe.
ICEW March 2013 © 2013 Telefonica. Not to be used or reproduced without permission.
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Telefónica
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4. Telefonica Europe.
ICEW March 2013 © 2013 Telefonica. Not to be used or reproduced without permission.
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Telefónica …some numbers
Accesses by Region Revenues by Region OIBDA by Region (*)
FY 2011 (Mill. €)
Revenues
OIBDA
Operating CF (**)
T-Europe 34%
T-Latam 66%
T-Europe 52%
T-Latam 47%
T-Europe 52%
T-Latam 48%
(*) Underlying Figures: reported excluding exceptional items and spectrum acquisitions. Contribution to consolidated figures before intercompany eliminations
(**) Operating CF = OIBDA - CapEx (excluding spectrum)
62,837
20,210
11,282
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Telefonica Purpose … “Improving people’s lives
around the world by transforming possibilities into
reality...”
Happy Employees
& Partners
Happy Customers
Happy Shareholders
Contribution to Society
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Customer Experience is physical & emotional!
A Customer Experience is an interaction between an organisation and a customer.
It is a blend of an organisation‟s physical performance, the senses stimulated and
emotions evoked, each measured against customer expectations across all
moments of contact
It is
• About a physical experience, such as price, product, location, opening
times, channel e.g. stores, online, telephone etc , the features of the product
etc
and critically
• About Emotions – how a customer feels
› Using senses of Smell, See, Hear, Touch, Taste
 “People buy with emotions and then justify with logic”
(Buck Rogers, IBM)
Source: Colin Shaw, The DNA of Customer Experience
01
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7. Telefonica Europe.
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The commercial rationale
for turning Customers
into Fans
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8. Telefonica Europe.
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Churn
%
1.5
3.1
ARPU
€
420
381
-9%x2.1
Claims
%
3.2
17.9
x5.6
Enthusiasts
Detractors
• Even in an economic downturn… 50% of consumers will pay more for a
better Customer Experience 1
• 86% of your customers will pay more for a great customer experience 2
• 89% of consumers are doing business with competitors following a poor
experience 2
• Bad experiences travel fast and far - 26% of consumers follow a bad
experience by posting a negative comment on a social networking site for
global eyes to see 2
Source: 1 Customer Experience Impact Report. RightNow Technologies / Harris Interactive 2008
Source: 2 Oracle Research 2012
In Telecoms businesses creating Fans to reduce
churn is essential
02
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02 Creating emotional relationships with our customers
is at the core of our strategy
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The Goal
Random
Experience
 Inconsistent
 Unintentional
Predictable
Experience
 Consistent
 Intentional
 Not differentiated
 Not valuable
Branded Customer
Experience
 Consistent
 Intentional
 Differentiated
 Valuable
 Emotional
Relationships
Customer loyalty
& profitable growth
Source: Managing the Customer Experience. Shaun Smith and Joe Wheeler; O2
WOW
Customers are not
buying just a product or
service from a company;
they are buying the total
experience around its
consideration, purchase,
use and service.
Companies that master this
Experience, that can understand it and
deliver it better than their competitors,
have an edge in the marketplace.
Our strategy includes delivering “Branded Customer
Experiences”
9
02
FANS
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Understanding the loyalty drivers
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A twin approach to Loyalty
Logical
• Delivering the “basics” as the foundation to loyalty
Emotional
• Positives built on delivering the “basics”
• Driving an emotional connection with our brand
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03
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First – Understand the drivers of Loyalty
Customer Satisfaction
has a high impact on
both intended Loyalty
and intentions to
Recommend
Connecting Calls
70
Sound Quality
70
Network
70
Price
74
Complaint
Handling
75
Handset
77
Added Value
Services
48
Customer Service
68
Billing
74
Advertising
50
Communications
69
Loyalty
70
Recommend
61
Customer
Satisfaction
Index
73
Components
Account Manager
60
Salesperson
Text Messaging
77
Internet Use
72
56
Illustrative
COMPONENTRATING
IMPACT ON SATISFACTION
KEY ACTION
AREA
MAINTAIN &
IMPROVE
EVALUATE
MONITOR
Prioritisation
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03
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60
43
37
27
0
10
20
30
40
50
60
70
1 to 7 8 9 10
% of customers
who defected to
another brand
within 1 year of
these results
Level of overall satisfaction
27% of satisfied
consumers still
defected to another
brand
40% of dissatisfied
consumers did NOT
defect
DISSATISFIED
VSATISFIED
13
But we know from other industries that satisfaction
is not enough03
© 2013 Telefonica. Not to be used or reproduced without permission.
Source: TNS

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Emotional Engagement is required to create Fans
Forgiveness
Trust
Surprise & Delight
Advocacy – Promoters
Recommend friend or family
Loyalty
Very Satisfied
High
Satisfaction
Functional
Loyalty
Emotional
Engagement
FANS
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Satisfaction & Loyalty : Telefonica Slovakia
Creating Loyalty needs good Customer Experiences
as the foundation
Months with O2
57%
43%
57%
46%
54%
46%
54%
49%
51%
40 5010 20 30
43%
>90 CSI <90 CSI
The ratio of delighted customer grows over time with O2. We believe it is driven by our
Fair behavior and trust we build in our relationship with the customer
03
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17. Telefonica Europe.
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Loyalty through an integrated
approach to improving the
Customer Experience
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UnderpinTop-down
Our plans to
ensure delivery
What makes
us different
People & Culture
Proving it to
customers &
galvanising
employees
Brand
Vision
Customer Experience
Customer Promise,
Programmes & Touchpoint
Blueprints
Business Strategy &
Functional Plans
Systems &
processes
Organization
Set up
Building Customer Loyalty
An Integrated approach - it only works when it all
works ...
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ICEW March 2013
Designing the Customer Experience throughout the
Customer Lifecycle
Meaningful customer experiences are THE success
factor, but most organisations still think inside out,
mainly in terms of initiatives, products, markets
Need to be thinking about customer insight,
needs, journeys and touchpoints BEFORE
solutions
Want Help & Support
Return
Deepen
Relationship
Aware Buy Use
Invoicing,
Top Up
& Payment
Interest
&
Decide
Technical
Service
Repair
in situ
Commercial
Service &
Claims
Set Up /
Provisión
Recommit Leave
04
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20. Telefonica Europe.
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Designing the Experience & Moments of Truth
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Web
Customer
Service
Retail
Device
Other
Aware &
Learn
Interest &
Decide
Buy Setup Use Billing Help &
Support
Deepen
Relationship
Re-commit
or Leave
Hear / find out
about, attract
attention, need
Enquire, compare
and decide
Commit Ready to use,
delivery, install,
want to get started
Receive service,
explore service,
access account
Receive my bill,
Top up or Pay
Get help,
complain,
feedback
Receive
information,
benefits, surprises
Amend, extend
contract, stay
John goes
online to the
O2 site, and
reads about
the handset
deals O2
offer
John sees
new O2 print
advert
announcing
they’re
offering the
latest HTC
handset
Legend !Poor moment Differentiation opportunityKey risk Moment of truth
John arrives in
store, and ask
a staff member
if he can have
a look at the
handset
Adviser
gives him a
charged
phone, and
lets him
play with it
while
explaining
its features
John decides
that he want
to see who
else is
offering the
phone. He
looks online,
but decide to
buy from O2
Once he
receives the
handset, he
struggles to get
started, and
goes to the O2
store for a free
Guru
appointment
John gets
used to
using the
handset’s
features,
and uses
the phone
regularly
To find out
how to
download
video from
their phone,
he goes
online and
uses a Guru
John sets
up a direct
debit to
pay his bill
every
month
About to go
on holiday,
he phones
customer
services to
make sure
his phone
will work in
the USA
He then
receives a
text, telling
him how to
check his
voicemail
abroad, and
how much
calls/texts
cost
Arriving home
from the trip,
he checks his
account, and
find he has
risen up the O2
loyalty scheme
to Silver
Approaching
the end of
his contract,
he contacts
customer
services to
find out what
deals he can
get
Example 1 (macro, made up) Cross channel: Handset buying experience
Fair moment Good moment
!
!
04
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21. Telefonica Europe.
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Some Innovative Differentiated
Actions
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Using Web chat to reduce calls to Customer Service
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© 2013 Telefonica. Not to be used or reproduced without permission.

23. Telefonica Europe.
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O2 Gurus – In store, On Line, In Call Centres
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Inspire customer with „showcase
demonstrations‟, creating a desire to buy
and a great overall experience
Explain complex products and
services in an easy to understand
language.
Give expert advice on all O2 propositions
Share his/her passion and enthusiasm for
new technology
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24. Telefonica Europe.
ICEW March 2013 © 2013 Telefonica. Not to be used or reproduced without permission.
UK Example – “Fair Deal”
Fair Deal introduced in 2007 is
not a tariff or a deal - its an
ethos.
One of the fundamental wrongs
of the UK mobile industry was
that new Customers were treated
better than existing Customers.
We’ve changed our retention
offers, policies and tariffs to
ensure that existing Customers
get just as good a deal with O2
as new Customers - plus, their
loyalty is rewarded.
It demonstrates trust and
transparency to our Customers.
05

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The O2 in the UK is a unique partnership between Telefonica
UK and AEG to deliver Europe's premier music venue.
This is so much more than a partnership deal- it’s a unique
“money cant buy” Customer Experience for our Customers.
They get exclusive tickets before anyone else, access to a VIP
area, competitions and a whole lot more. A place to see, feel
and experience O2.
The O2
Selling the benefit, not the product

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Reward Programme linked to Customer Location
25
05
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27. Telefonica Europe.
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To Affinity and Beyond
We’re fortunate to have Ireland’s most relevant
sponsorship and some of its most iconic figures
Our Rugby Sponsorship strategy in Ireland was focused on
driving loyalty through real insight to create differentiated
emotional experiences
05
© 2013 Telefonica. Not to be used or reproduced without permission.
Insight: “People need to believe that their support makes a difference”

28. Telefonica Europe.
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Rewards & Sponsorship used to create differentiated emotional
experiences05
© 2013 Telefonica. Not to be used or reproduced without permission.

29. Telefonica Europe.
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Activities have a direct impact on our churn
10%
19%*15%
18% 20%
26%
28%
Churn differential for prepay customer
participating vs prepay base
Those participating with multiple
properties have churn 28% less than the
prepay base
400,000 Customers
144,000 Customers307,000 Customers
05
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30. Telefonica Europe.
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Engaging people to create and
deliver improved customer
experiences
06
© 2010 Telefonica. Not to be used or reproduced without permission.

31. Telefonica Europe.
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Strong Leadership demonstrating their commitment by actions
Cross functional working the norm in delivering the Customer Experience
Turning Employees into Fans
• If Employees are fans they will….
› be advocates for the business, its products and services and as an
employer
› “go the extra mile” for customers
› stay longer
• Employees will be fans if….
› they are engaged in the business
› they have a great employee experience
› all people based activity is focused on engaging employees and
delivering a great employee experience
A Corporate Strategy that encompasses our people
30
06
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32. Telefonica Europe.
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Slide 31
Engaging people internally is key06
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33. Telefonica Europe.
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Telefonica Germany – “Get into the customers shoes”
Start: Telco is not the centre of our customers life
Introduction of customer roles
TP “Attract”: Experience of the information overload
TP “Information”: Address different information channels
TP “Buy”: Address importance of customer need based
consultations
TP “Bill”: Experience bill as important tool to reassure
buying decision
TP “Use”: Address how important user-friendly services are
TP “Help”: Experience the customers frustration over
unsolved problems
TP “Lifetime:” Address the importance of using customers
language and a customer dialogue
TP “Cancellation”: Experience the cancellation process
CEX Trail Live
06
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Learning
07
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35. Telefonica Europe.
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Learnings
34
Devote time and attention of top-level team and do not rush – take your
time to realize where your starting point is and to align
Do not underestimate the need of culture change and coherence between brand values
and customer propositions to enable attitude transformation towards customers
Pay attention to communication: cascade the message down through the
whole organization and demonstrate “walk the talk” early in the process
Treat Customer Experience as a continuous process with a number of key
steps/milestones/indicators, not as one-step/turnaround change
When implementing make sure the budgeting process enables proper
allocation of funds and realization of priorities and considers a long term vision
Prioritizing is key to success in Customer Experience
07
Telefonica S.A.
Forrester November 2011 © 2013 Telefonica. Not to be used or reproduced without permission.

36. Telefonica Europe.
ICEW March 2013
Some more learnings
1. Put the customer at the heart of everything you do
2. Start with customer insight – emotional not just rational
3. Challenge yourself to invest in what customers really value
4. Dramatise the difference through clear and compelling
Marketing and propositions
5. Bold top-down leadership
6. Believe that numbers are the output of doing the right things
7. Keep on innovating
8. You must engage people internally to succeed
© 2013 Telefonica. Not to be used or reproduced without permission.

37. Graham.Webster@telefonica.com
© 2013 Telefonica. Not to be used or reproduced without permission.

38. Telefonica Europe.
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