With the shift of numbers from voice to data services, the need is more pertinent than ever before for telcos to turn the increased data consumption into substantial growth in revenues. However, that hasn’t been realised in an optimal way yet. So, what are the hindrances on the path to maximum monetisation of data packages, and how can telcos effectively counter those to embark on a profitable track ahead?
Although the adoption of connected digital solutions have continued to drive telcos’ strategic and operational decisions around data offerings, they are yet to fully capitalise on exploding customer data to better understand usage trends, behaviour patterns, and preferences, says Wale Knox Babalola, research analyst – telecoms, IoT & digital media, IDC MEA. Telcos need to identify customers’ preferences, and proactively tailor offerings to make compelling value propositions.
Another major hurdle is related to perception of value. After years of unlimited packages, consumers have gotten accustomed to not perceiving data for its real value but rather take it for granted. “Most users are willing to pay for an expensive handset but are not willing to pay a few extra dollars for the data connection that enables it to do all the wonderful things it does. Re-educating consumers about the value of data is key going forward,” says Isil Yalcin, head of network products at Ericsson in region Middle East and North East Africa.
Recent consumer surveys have also brought to the light that while different consumers perceive value differently, telco packages lack the flexibility to cater to all segments and their specific needs. It’s time to take the saying ‘one size doesn’t fit all’ seriously.
Adel Belcaid, senior principal, A.T. Kearney believes that pricing models, especially in the region, are still geared towards voice monetisation, even as consumers are shying away from voice communications.
Moreover, many times it’s seen that some operators tend to compete on price due to lack of enough footprint. “This forces price wars that end up killing the whole market,” says Yalcin. MNOs in their effort to improve quality, resort to traditional ways that eat up investments without really improving users’ quality of experience. The result is no differentiation on quality of service which leaves the door open for competition on price.
Then there are the OTT players eating into telcos’ revenues by delivering innovative digital solutions over telco networks, that they aren’t necessarily willing to pay for. While some telcos have tried to counter this by imposing restrictions on some apps, that hasn’t actually helped the matter much.
Yalcin draws attention to yet another barrier that she terms as ‘synthetic’. “The most prominent example we have seen was mobile operators deploying latest technology, state-of-the-art networks, only to restrict their usage to a fraction of the subscriber base (users with big packages), leaving important segments out and significantly reducing its potential for revenue generation.”
So, what’s the way out? Just delivering incremental data packages is not at all going to serve the cause of telcos unless and until they come up with well-planned offerings to cater to the exact needs of individual customers. That calls for a huge emphasis on big data analytics and operationalisation of the intelligence to personalise offerings for consumers. Price wars aren’t going to take anyone far. The key is to differentiate in terms of the quality of offerings and the uniqueness of experience offered so that not just customer retention is guaranteed, but also new customer acquisition becomes an easy progression.
Restricted apps restrict growth?
Few applications are restricted in the region. How good a decision is that? Does it mean depriving telcos of the added revenues from the customers who would have used those apps? Babalola says: “Removing restrictions is good for the consumer and would of course encourage greater use but from a regional perspective the regulator's motives behind restricting a number of apps is mostly geared around homeland security and to protect user's privacy in the region.”
Sharing a different perspective, Yalcin says: “I believe operators should look beyond specific apps and look holistically at the value they provide the consumers. Restricting some applications doesn’t achieve the intended results and could potentially fire back by alienating a sizable segment of the customer base. Also, users are now more savvy, so they will always look for new ways to get what they want. A better approach could be to lift restrictions and add these apps to the date packages for a small fee.” Something for the telcos and the regulators to ponder over?
One size doesn’t fit all
There’s no shortcut to set off telcos on profitable journeys in the data centric era. They must transform from being connectivity service providers to digital lifestyle providers, with unparalleled focus on the quality of experience. “Telcos should also proactively employ advanced business intelligence and data analytics tools to provide a clear path for monetising heaps of data flowing through their networks,” says Babalola. “There's a need for telecom operators to provide high value propositions to customers by designing customised plans as per the anticipated usage trends as opposed to flat rate data plans to improve overall customer satisfaction.”
Segmentation is a necessity with the wide variety of applications available and the diversity of user preferences. Since different users perceive value in different ways, segmentation will allow telcos to design the right package for the right segment, at the right price.
Is time-based billing of data a better alternative to the traditional billing criteria? Needless to say, users are mostly used to the MB/GB billing. However, there might be a gap to fill. As Yalcin says: “We, humans, identify better with time, something we can understand and measure, compared to some abstract measure that was created by some tech - savvy geeks. Moving to time-based billing not only makes users feel ‘in control’, but it will also alleviate the stress induced by the ‘fear of going out of bundle’. The result? Users fully consuming their package,or close to that, and the potential for a package upgrade for a few.” Verizon is already experimenting this with their PopData offer of unlimited superfast connection @ $3 for 60 minutes. Belcaid however believes that what really makes a difference to the consumer is the bandwidth he/she is able to access. “I can view my favourite music video on YouTube over a low bandwidth connection and it will take ages to download, or I can do the same over a high bandwidth connection and it will be much faster with a TV-like experience. This is becoming and will continue to be a key decision criterion for consumers.”
Babalola believes it is all about stimulating and creating demand with apps and services that target specific user groups. “A lot more can also be done in respect to bill clarity, consumption patterns and alternative options. Often the case when a customer runs out of data, they commonly wait until they have a Wi-Fi coverage or until the actual data plan renewal cycle. Therefore, it is advisable to offer on-demand data bandwidth at attractive prices which can sustain users till the next renewal of the data plan.”
While data services are definitely here for the long haul, does it mean users are no more interested in voice calling or messaging? Belcaid believes that voice minutes and SMSs are losing importance in the eyes of the consumer. Yalcin, on the other hand, feels that operators can re-invigorate the usage of voice services on their networks. “They can offer bundles where voice minutes are added to data packages for an additional fee or unlimited voice for a premium. Taking advantage of the technology advancement, they can differentiate by offering high definition voice or leverage their IMS platforms to offer rich communication services where messaging, VOIP and video are bundled together. The other choice is to join hands with the likes of Skype and add their services to the data packages for a nominal fee,” she adds.
Value added services have remained one of the ways to attract new customers or compel existing ones to go for new packages by paying a premium. There has been an evolution in the demand and perception of such services with most consumers going digital. As a direct consequence, operators around the world are experimenting with many different add-ons and their combinations. These include, among others, shared data plans across multiple devices, smartphone financing schemes, and bundled content.
One thing which remains unchanged, however, across industries and time is the need to deliver great quality of experience. As Babalola says: “Customers simply want value for money and improved user experience. Therefore, telcos must endeavour to make customer centricity a top priority. This can be done by focusing on improving omni-channel experience, offering higher variety of service plans, and flexible add-ons to customers.”
We are witness to the increasing rate of smartphone penetration and the way internet dependence has gone beyond millennials to take people across diverse ethnicities, and age groups in its frenzy. Telcos need to recognise the immense power of their three main assets – networks, user database, and distribution capabilities. Through a proper combination of data intelligence, innovative marketing, strategic partnerships with content providers, and revamped customer services, telcos can re-invent themselves as the most profitable components of the digital ecosystem. The key is to give customers what they want.