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June 2015

The Key to Driving 4G Profit: Sell Value, Not Bandwidth

The Key to Driving 4G Profit: Sell Value, Not Bandwidth

How can mobile operators earn a solid return on their multi-billion dollar 4G networks?  Strangely enough — six years after 4G service was first launched — operators are still struggling to answer that question.

But it’s not for a lack of trying.  Many operators tried charging a premium for 4G service, a logical approach since 4G delivers  more bandwidth than 3G.

Unfortunately, many customers don’t seem to agree.  Most 4G operators have discovered that users don’t want to pay more for greater bandwidth.

The reasons are varied.  Some customers regard 4G as nothing more than a routine network upgrade the operator should pay for itself.  Others are confused by the whole notion of bandwidth levels: they don’t see the tangible difference that a 1GB tariff plan, a 2GB plan, or a 5GB plan makes to their service, so they opt for spending less.

In fact, there’s a danger of selling 4G by only emphasizing bandwidth plans: it makes it easy for the buyer to compare  prices with those of competitors.  And when that happens, it’s not long before 4G service becomes a commodity.

The Need for More Creative Marketing of 4G LTE Services

All is not lost, however.  Customers with 4G LTE service subscriptions are usually delighted with it.  In fact, Gartner reports that LTE users consume on average, twice as much bandwidth as non-LTE users.  So the problem with LTE profitability is clearly not the service itself.

One of the answers to the 4G profit challenge is to implement more creative marketing.  There is a well-known saying, “sell the sizzle, not the steak.” The mental image of a product should excite the buyer. “Steak” makes the buyer imagine an unexciting trip to a grocery store, but “sizzle” suggests a fun barbecue with friends on a sunny summer day.

So how can operators inject some sizzle into 4G service?  It’s certainly not by selling a feature such as bandwidth whose value is not well understood.

Carriers must strive instead to create value by aligning products with the personal preferences and desires of the buyer.  Don’t sell bandwidth, sell value — value in the eyes of the customer.

And the secret to discovering what customers value is to analyze their behavior in great depth.  Only with accurate market and customer intelligence can we put truly profitable offers in front of customers.

Examples of Personalized Offers Powered by Analytics

So what are pioneering mobile operators doing to emphasize value in their marketing?

Well, look at how SK Telecom in Korea analyzed its daily usage traffic and identified a profitable customer niche.  It began by offering unlimited high-speed LTE coverage to commuters who spend an average of 55 minutes travelling to work each day.  SK Telecom’s Unlimited Data Option for Commuters offers these commuters a high speed boost from 7-9 A.M. and 6-8 P.M. at a monthly fixed rate.

Striving to differentiate itself from competitors, SK also analyzed the growing mobile video traffic in its market and introduced “Angles,” a social multimedia service, which allows HD video files filmed from different angles by up to four users to be automatically edited into one single file in the cloud where it can be viewed and shared.  By offering a free download of the app, SK drives increased data traffic to its LTE-A network.

Another way operators have creatively marketed the higher bandwidth of 4G is through “shared data” plans for multi-users or multi-device users.  Verizon, which pioneered shared plans in North America (its plan aptly named ‘More Everything’) attributed its nearly 10% year-over-year increase in ARPU to the introduction of these plans.  These plans create higher customer stickiness, leading to long-term, profitable loyalty while simplifying administration and lowering costs by bundling all devices on a single bill.

There are also newer types of data propositions that bundle specific content and services.  This can be a simple bundling of VAS services.  Alternatively, it can be a partner-sponsored data model, like how 3 Austria and Spotify are offering for music streaming services.  The advantage here is the streaming music usage is not deducted from users’ data plans.

Analytics is key for discovering patterns of behavior that are relevant for designing and targeting unique services.

Deeper Analytics: Key to Discovering Innovative Value Propositions

Big Data Analytics capabilities are vital to identify the services and content that individual customers’ value.  Employing a mix of XDR and Deep Packet Inspection (DPI) data sources, a Big Data platform analyzes individual customer usage and determines exactly which incentives will appeal to them and how much data they will need each month.

Deep analytics used to be hard to come by as tools, resources, and data source access were limited.  However, Marketing Analytics tools are now making it cost-effective to track a subscriber’s detailed usage behavior and patterns, and build profiles of their interests and needs.

Operators can use this insight to create new value-adding service propositions.

If it’s a shared data plan you want to build, analytics is key to discovering networks of friends and family members, or analyzing the tethering behavior of multi-device users.  Analyzing targeted audience behavior can also support a well-designed plan — one that avoids cannibalizing your current plans, or increases revenues by making 4G affordable for teenagers and other people with low disposable income.

Analytics-driven marketing can drive a variety of personalized offers, including:

  • Consumers who spend a lot of time on social networks are likely to be attracted to a tariff plan that offers unlimited usage of Facebook and Twitter.
  • Sports fans may jump at a plan that bundles in multiple live football matches each month.
  • Music lovers might snap up a service that includes free streaming of tracks.

Ideally, these value-added propositions will showcase the multimedia and low latency capabilities of 4G networks.

Teaming with a Marketing Analytics Solution Provider

A Marketing Analytics solution provider working with mobile operators should identify different customer segments and develop appropriate 4G propositions.

At one operator, for instance, we identified family relations between 10% of single accounts who were not marketed-to as families in the CRM database.  This intelligence was used to drive a successful mobile data sharing plan supporting up to five devices.  It was a win/win that combined both a volume discount by the customer with a profitable, long-term contract.

The operator has also used our Marketing Analytics solutions to offer customers personal, one-time weekly bundles, daily speed boosters and service based propositions based on analyzing their interests and the types of content and apps they consume most.

For the operator, the net impact has been a 3% increase in data revenues in the first year, while reducing churn by 10% and increasing net promoter score by two points among data users.

Conclusion

4G operators need to move away from pricing on the basis of bandwidth volume or network performance and start focusing on creating true value for customers.  Those who differentiate their offers to match customer preferences will benefit from a unique and sustainable competitive advantage, and will enjoy greater profits.

Copyright 2015 Black Swan Telecom Journal

 

About the Expert

Miri Duenias

Miri Duenias

Miri Duenias is a senior strategy and marketing professional with over 15 years of experience in the Telecom industry with a successful track record in base management consulting and analytics-driven solutions.

Miri currently heads the Marketing Analytics Business Unit at cVidya, a market leader in Revenue Analytics solutions for the Communication, Media and Utilities industries

Prior to joining cVidya, Miri was a Director of Solution Marketing and Pre-Sales in Pontis, a provider of contextual marketing platform and strategic consultancy services.  Prior to Pontis she held several marketing and business development positions at Amdocs, focusing on business intelligence and digital lifestyle solutions.

Miri holds a BA in Economics and Business Management from Tel Aviv University.   Contact Miri via

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