Reclaiming a Lost Opportunity: Why Mobile Network Operators Missed Out on the App Economy
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1 Reclaiming a Lost Opportunity: Why Mobile Network Operators Missed Out on the App Economy
2 Reclaiming a Lost Opportunity: Why Mobile Network Operators Missed out on the App Economy -- And How Gateway Apps are the Key to Fighting Back Mobile Network Operators (MNOs) face a dilemma: they fund the networks and subsidize many of the devices that power the digital landscape, and yet they are mostly marginal players in new digital ecosystems such as social networks, search, app-stores, apps, video distribution, cloud-services and personal storage. Ironically, the very smartphones that are so central to MNO strategies threaten to accelerate this marginalization. In 2012 the smartphone passed a little noticed threshold in the US: smartphone owners now spend as much time interacting with their phones as they do watching TV - approximately four hours a day in both cases. Moreover, close to half the people watching TV are using a smartphone or tablet simultaneously. Although the immersive power of the flat-screen TV is undeniable, a formidable rival for user attention has emerged. Digital titans have made mobile their primary battleground. Facebook s weakness in mobile hurt its IPO, and as its mobile revenue has exploded, so has its stock valuation improved. Apple, Google, Amazon, Microsoft are all increasingly anchored around mobile. Although the mobile battleground is varied, the primary front is in mobile applications (apps), both native and mobile web. The battle for positioning is ruthless, hypercompetitive and ultimately arbitrated by users even Apple had to bow to user preference for Google s Map for ios over its own version. Despite more than one million apps available and over 100 billion downloaded across the various stores, most users regularly use only apps, and the top 100 apps drive 90 percent of revenue and usage.
3 In this context, MNOs have fallen behind in their share of mobile user attention. Until the smartphone explosion, MNOs commanded virtually 100 percent of user attention, whether via voice or SMS or through pre-loaded ( on-deck ) content. By contrast, MNO s presence today in the app space is at best marginal. We are not aware of a single MNO app in the top 100 enterprise apps in the US, and globally most MNO apps languish far down in the charts. Even with core services such as messaging, third-party apps such as WhatsApp are gaining against MNO services, and voice is likely to face a similar fate as third party voice apps deliver equal or even superior experiences in MNOs have an imperative to become leaders in apps or they will face long-term consumer irrelevance as the app economy surges forward. Estimates from NPD and Flurry bear this out: between 2010 and 2012, daily voice usage in the US has declined from 35 minutes to 20 minutes, while daily app/mobile web usage has surged from 133 minutes to 197 minutes. This is not to suggest that MNOs should seek to reclaim the content and gaming spaces where they are competitively disadvantaged. Instead, MNOs need to harness the multiple ways in which they already interact with users today via TV, radio, newspaper, stores, online, SMS, , call center, IVR, chat, and social networks and integrate them into a smartphone-mediated experience. This is what we call the Gateway App Strategy. Although this paper focuses on MNOs, it is equally relevant to any subscription business.
4 The Gateway App Strategy is based on three premises: Convenience, Capability, and Superiority 1. Convenience Today, percent of interactions between smartphone customers and MNOs are handled via a smartphone, even though this is motivated by convenience (as mobile devices substitute landlines and computers) more than by design. For example, estimates from Nuance and Critical Path suggest that more than 30 percent of calls to customer care are made via the mobile phone and more than 30 percent of MNO s are opened on the phone. By definition, 100 percent of MNO SMS are delivered by phone. 2. Capability Every interaction between a customer and an MNO can technically be intermediated in part or in whole via a smartphone, preferably via a Gateway App. For example, smartphones can enable a chat session or voice call with a service representative, schedule a store visit based on proximity or user preferences, or channel social network interaction via Twitter or Facebook. 3. Superiority A well-designed app experience can employ the processing power, usability and contextual awareness of the smartphone effectively enough to become the preferred mode of interaction across any channel. Just like Google, Facebook or LinkedIn s apps are becoming the preferred mode of interaction with those brands, so should the Gateway App.
5 Building on these premises, we would typically organize a Gateway App Strategy along the following lines: 1. Build an intuitive user journey, from first contact to completion. Users expect maximum value for minimum effort. Gateway Apps should work out of the box, with zero customer effort. Using built-in network authentication, device analytics and customer information, they should provide critical data or services to help users complete their desired tasks, within seconds of opening the app. After a successful launch, it is key that the entire experience remains intuitive and fast, that it does not break, that it does not degrade into a non-mobile optimized session, and that its users can complete all their desired tasks within the same environment their mobile device. 2. Integrate and then replace notification channels. Many MNOs use SMS or for notification. These channels are almost always disconnected from one another, from the app experience and from other modes of customer service. For example, MNO SMSs often do not allow a response, cutting off a critical feedback loop. In the short term, the MNO should maximize the use of these free channels to push the app. An MNO with ten million users may be sending upwards of one billion notifications per year via SMS/ . Assuming a 1-2 percent app adoption rate, they should be able to drive almost 100 percent app adoption with no incremental distribution cost through SMS and push. These channels can also be tested in small sample sizes, giving the MNO confidence prior to a comprehensive campaign. In the medium term these channels will be displaced by In-App notification (e.g. Apple s APN), allowing much tighter integration of the operator push activity into the user response.
6 3. Make the app the customer gateway. The app should maximize self-service, but also choice. For example, a user may want to switch from a text self-serve mode towards a voice self-serve mode, via an IVR session launched through the app. Or a user may want to engage with a human via chat or a live call via the app. By funneling live sessions through the Gateway App, many expensive (for the MNO) and frustrating (for the user) calls may be eliminated altogether, because the desired task can be completed without human intervention (for example, checking account balance). By channeling the remaining calls through the app, including automatically porting customer, device, and prior transaction data to the care representative, MNOs can reduce user authentication time and handling time. MNOs can also better predict call flows (app usage will be a leading indicator of call usage) and manage call volumes (for example, initiating chat sessions for customer problems which are likely to trigger voice calls, which are longer and more expensive). Given the potential benefits of app-centered care, MNOs should heavily promote and incentivize customers to access all services via the Gateway App, including providing priority access or even charging for calls not made via the app. 4. Integrate 3rd party services consistent with the MNO proposition. Success in the prior steps can help the operator establish credibility with the user. A satisfied user may now be ready to adopt other services using the Gateway App. These services could include mobile commerce aggregation, over-the-top communications services, personal cloud storage and other products that fit within the MNO brand. It is critical that any services retain the same standards of usability and reach of the core MNO-related app services. By promoting frequency of usage in these adjacent services, MNOs can ensure that their app remains a top destination. In the short-term they should also price these services for break-even or even be willing to subsidize some services if the net benefit is superior.
7 5. The Cool Stuff. What we have described above is highly valuable but only the beginning. The amazing power of smartphones could allow MNOs to deliver truly transformative experiences. For example, the Gateway App could be integrated with operator TV advertising through recognition technologies to deliver a secondchannel experience. IVR agents mediated by the Gateway App could be used for third-party engagement that could drive entirely new revenue lines. More broadly, given the rate of advances in hardware, software and methods associated with the smartphone, the range of what is technically possible will keep on expanding. 6. Go to War. Once MNOs are satisfied that they have built an effective app, and gained confidence of app adoption and usage via SMS and push, they are ready to deploy an aggressive, multi-channel app adoption strategy. For example, instructing store or call center reps to recommend or push the app following a contact, promoting the app via mass-market media, promoting the app with online users, and promoting the app and directly integrating it into social networks. Other brands and enterprises often boldly promote their apps, even featuring them as part of expensive TV campaigns. Once MNOs have a truly compelling app, they could employ these strategies as well.
8 These prescriptions are not for the faint of heart. MNO systems are typically inflexible and not easily manipulated to yield compelling user experiences; managers in charge of SMS and may resist the idea that their channels will be cannibalized once they have helped drive Gateway App adoption; IT organizations and established vendors will promise that they can deliver world-class implementations, despite poor track records and limited experience in the mobile app domain; customer care managers will resist such a fundamental change to their mode of operation. Despite these barriers, MNOs possess compelling assets to leapfrog from app laggard to app leader. Moreover the migration can more than fund itself through significant savings in areas such as customer care calls. An operator with ten million subscribers could save between $30M and $100M a year in customer care call reduction alone by fully deploying a Gateway App strategy. After several decades of user experience fragmentation, in which users and operators communicate across an ever-growing number of disconnected channels, the Gateway App offers the first opportunity for a truly integrated experience. Senior management needs to steel itself to overcome the many barriers to success, and lead their organizations to face the challenge of becoming mobile-centered. Without minimizing other priorities, the failure to properly participate in the mobile experience land-grab will consign the Mobile Network Operator to an ever-dwindling role in an app-centered economy.
9 About MobileAware MobileAware helps mobile network operators deliver extraordinary customer outcomes in order to drive incremental revenue, improve retention and reduce total cost to serve. The company s innovative technology enables operators to rapidly build and launch a mobile support and sales presence that is tightly integrated with their existing systems and accessible from any device. This enables users to, for instance, change their plan, upgrade their device, resolve technical problems and explore new services without assistance. MobileAware has helped many of the world s largest operators including Orange, T-Mobile, TELUS and Vodafone provide customer journeys that outperform the ordinary experience. info@mobileaware.com Facebook facebook.com/mobileaware Copyright 2013 MobileAware Inc.
Reclaiming a Lost Opportunity: Why Mobile Network Operators Missed out on the App Economy -- And How Gateway Apps are the Key to Fighting Back
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