Increasing demand from consumers is forcing telecom operators to look for new and creative approaches to build their businesses. At one end, operators are investing in new technologies and increasing their network capacity to cater to the increasing demands of customers and to introduce new programs to expand their customer base, while at the other end, they are trying to reinvent strategies that will enable them to provide better customer experience to help reduce churn.
Hilal Halaoui, partner at Booz & Co, says that while incumbents tend to focus more on retention of existing customers that they already have, new operators and players that have just launched new services such as mobile broadband, tend to focus on strategies to actively acquire new customers. “We see a lot of strategies and initiatives happening in areas of mobile broadband and its acquisition efforts from new entrants. If you look at Kuwait or Bahrain, operators have a lot of ‘push’ to acquire services because they have to grab the market share,” says Halaoui.
As a Middle East operator, Vodafone Qatar’s head of marketing, Cindy Moussa says the telco focuses on bringing products and services that offer value to customers with “enhanced customer experience,” to attract new customers.
However, Halaoui points out that the major strategy of bundling that has been prevalent in Europe has not been followed by MEA operators and this has resulted in significant cost expenditure to them. “In Europe, a subscriber plan involves a handset including bundle of minutes and data. Mostly it also includes commitment over a year or a minimum of six months.”
He says that in Europe, customer acquisition cost is almost three times higher than in the Middle East. “In the Middle East if it is around $30 per subscriber, it is around $100 in Europe. So, we have to also take this into perspective,” Halaoui says.
Customer acquisition
Customer acquisition involves an increasingly complex set of decisions to be made within a limited timeframe. Customer analytics and ensuring customer-facing sales personnel have the right information at hand play a critical role in quick decision-making.
In markets where there are low-end subscribers and high penetration levels, the focus is more on strong distribution and active promotions. Halaoui says that in these types of markets operators launch 2-3 promotions every day targeting different customer segments. “For example, when you buy a SIM, you get a free credit for a certain amount. In prepaid, the subscriber acquisitions are mainly focused on pricing and distribution activities,” he says.
Whereas in the case of high-end products such as mobile broadband, Halaoui says that a lot of investments happen in branding and subsidising of dongles.
“If you go to the UAE or Saudi Arabia, you see a strong positioning in branding of dongles and bundling them with existing services to have additional MB space on them. All these sort of value-added activities would create action with subscribers,” he says.
Another area that Halaoui says operators focus on is free trials. Here, customers are given the option to try for free a service for one or two months, especially on value added services, with the hope that a portion of these customers will eventually pay the operator for premium services.
However, Halaoui cautions that due to difference in customer acquisition costs in various markets, and also their corresponding market saturation levels, operators need to set their margins in terms of investing more on customer acquisition.
He says that there is a new dimension which is changing the entire telecoms scenario. “This is the entry of customer attractive services that lies outside the operator space. Examples are the use of smart devices such as iPhones and iPads that enable access to online services, and dongles that allow for free Youtube access to the internet,” he adds.
“Equipment vendors are signing up with operators to sell their mobile phones. The rate at which iPhones have spread in the region is a clear example of this. In Saudi Arabia, Mobily started with this trend and later STC got into the game this year. In Kuwait, Viva announced this plan, followed by Zain. These are also investments that position an operator attractively with high numbers of additional subscribers. So, this is the third strategy that we see happening, which I also expect to grow moving forward,” Halaoui says. With more iPhones coming into the market, he says that operators are to position themselves signing up with handset vendors to be able to acquire new customers or to migrate existing customers to high-end users.
Another dimension for telcos to acquire more customers is through partners. “If you look at the partners of operators who are dealers, distributors and retailers, they have their own set of tactical activities that support telcos in acquiring customers. For example, Axiom Telecom is a dealer for Etisalat. Apart from the promotions and activities that Etisalat does, Axiom also launches a broad set of acquisition strategies and promotions to capture customers,” he adds.
Moussa says that in Qatar, Vodafone realised that Facebook was particularly popular with expats who are keen to stay connected with their home country. This led Vodafone to offer a free Facebook service as a powerful acquisition tool. “Facebook plays a critical role in this for customers in the Qatari market. We made a bold acquisition offer saying ‘Free Facebook’ for all Vodafone customers. Amongst other Vodafone countries, we have very high mobile internet penetration driven off the back of this, with lots of our customers accessing Facebook several times on a daily basis. This is a big reason to be with Vodafone and one that many of our existing customers love,” she says.
Customer churn
Mobile phone services have become more of a commodity for consumers who shift carriers due to reasons such as reduced rentals or monthly fees, an increase in the number of ‘free’ minutes, or for an attractive offer that comes with the latest mobile phone in the market.
The customer attrition rate accounts for nearly 40% in the mobile phone industry, according to an online community forum, CustomerThink. Halaoui says that the mobile churn rates vary drastically between different markets, and depend on different factors, such as the maturity of the market, the price sensitivity of customers, the percentage of prepaid subscribers in the market, the competitive landscape, and most importantly, the pricing and commercial strategies of different operators within that market.
In the case of calling card patterns, he says that the customer churn rate is very high as these customers buy a SIM card and use it for both local and international purposes, and throw it away once the call time is over.
As Vodafone’s Moussa puts it: “Customer churn really does vary depending on whether you are talking about prepay or postpay. On the whole, churn rates are aligned on postpay globally as well as across MEA region. Prepay is slightly different as we tend to see more dual simming in MEA.” She says that the prepay churn rates are not as comparable globally due to the various ways companies measure churn.
Halaoui sees the MENA region’s churn rate differing from one market to another depending on the specific products that have been launched. In the case of calling card patterns, he says that the customer churn rate is very high as these customers buy a SIM card and use it for both local and international purposes, and discard it once the call time is over. “Mature European markets seem to have stabilised at a monthly churn rate of around 2%, with some countries such as Greece showing higher rates. In contrast, emerging markets, with large prepaid subscribers and high price sensitivities, have shown much higher churn rates such as Indonesia exceeding 10% mark where the calling card effects are more common,” says Halaoui.
