Driving Profitability through Innovative Pricing

Transcription

1 Driving Profitability through Innovative Pricing > > The telecom market, like any other industry, has experienced the ups and downs of economic change over the past decade. This change has created a more competitive market for communications service providers (CSPs), and a savvier consumer - one who is willing to shop for the best value and price plans available. In this new environment, effective marketing becomes increasingly important. Service providers work to lure potential subscribers from their competitors with targeted price plans, loyalty programs and costly promotions in order to meet their growth objectives in an increasingly saturated market. This is not an easy task. Service providers are saddled with higher investment costs as average revenue per user (ARPU) is being diluted. In this environment, the ability to launch new services and promotions quickly becomes much more important.

2 Market Overview > > Today s service providers are challenged with keeping ahead of the competition to help support their investment in next generation 3G+ networks. This, along with flattening, or in certain cases declining ARPU s and weakening margins, is creating increased pressure on marketing teams to launch a constant stream of enticing tariff plans and promotional services. In years past, margins were larger, so there was less of a need for price plans to be as precise and on target- there was more room for error. Of course, back then the market was less saturated, services were more limited, and subscribers did not have as many options to choose from - and network investments were able to be anticipated more easily. Fast forward a few years and profit margins have become razor thin as the market has grown increasingly saturated. Price plans now have to be segmented, targeted to specific markets with built-in pricing tiers, and bundled in offers to serve a more dynamic set of subscribers. The ability to launch services and marketing promotions quickly and cost-effectively has become table-stakes for any service provider looking to sustain a competitive advantage. This challenge is only getting more complicated as next generation networks are promising more capacity and speed along with performance thus opening a path for a new array of services. These services are offered through various channels - including the operator, content providers, device manufacturers, app store vendors, etc. But keep in mind that although the services tsunami looks like it is here, no one can anticipate if having more bandwidth and capacity will guarantee the profitability of all these new services. On the subscriber side of the market, we are seeing inflationary pressures reshaping and lessening the service provider s share of the subscriber s wallet. This demands a more sensitive approach to creating and marketing price plans one that is more flexible and able to meet the needs of the individual subscriber, yet profitable for the service provider. Gain Insight and Optimize Your Pricing Strategy > > The opportunity is significant for service providers to capitalize on the flood of new services, applications and content developed through various channels. However they must first be willing to change their concept of how services are bought and sold- they need to be willing to look at new business models and determine what makes the most sense in this dynamic and quickly changing environment.

3 Operators will need to become true marketers, with more focus on planning, targeting, segmenting, developing and launching innovative business plans. Traditionally, service providers have had a limited ability to forecast the success of any price plan or promotion, creating labor intensive ad-hoc pricing scenarios that are often costly, time consuming and inaccurate due to small sample sizes and unreliable data. Service providers need tools and resources that can help develop and execute a cohesive pricing methodology that is closely aligned with the service providers business objectives. It s time to change the pricing mindset, which from the service provider s perspective has been we need to price it this way because our competitors are doing it this way, and begin to put more science behind the creation of price plans. Today s method of spending weeks or months to create ad-hoc pricing scenarios needs to become a thing of the past. With today s need-it-now consumers, service providers are often losing their window of opportunity and losing revenue. In fact, studies have shown that close to 35% of large companies have no formal pricing methodologies in place to set, manage, measure & control their prices. Two thirds (66%) do not have a pricing management function, and 80% of companies price purely based on costs & competitor s prices. In other words, the majority of service providers aren t price-setters, but price followers. Very few companies successfully implement a price methodology that involves all the stakeholders, including Marketing, Customer Support, Sales and Finance. Each of these departments can provide valuable information and should have input when setting product and service pricing; unfortunately this is not usually the case. This lack of focus can lead to service providers making marketing investments without fully understanding what impact a new price plan will have on their business. Service providers need to know what to expect before a new price plan or promotion is launched- What is the expected adoption rate? What is the profit margin? How will it impact ARPU? Will this reduce churn, and by how much? Will it result in new subscriber add-ons? What length of time should the promotion run? What happens if we extend it? Will it cannibalize other services? How will it impact subscriber behavior? For even the largest service providers, it is often not even possible to perform a simple analysis on product lifecycle, profitability, or customer buying behavior. Yet this type of analysis needs to be conducted, both at the macro

4 and the micro levels, helping service providers to compare their price plans to the competition. Service providers also need to be able to compare and consolidate this data even further, and act upon it proactively. This data, once integrated with customer care, can be used to launch churn reduction campaigns that are supported by the customer care center. Company representatives can utilize the information to offer optimal price plans to subscribers, focusing on those customers who have been identified as at risk- or close to churn. By extracting pricing data to campaign management tools, pricing scenarios can be quickly tested through simple drag and drop functionality. Complex pricing scenarios and impact studies that once required weeks or months to perform can now can be completed in just a few minutes. And with more science behind the process, success has risen considerably. Service providers have come a long way from being network centric the mentality of let s build it first, and worry about profitability later. To succeed in today s market, profitability, revenue and margins need to be part of the discussion from the very beginning. Empower Better Business Decisions > > As discussed, operators need to be equipped and empowered to design and quickly implement business models and price plans without the lengthy research cycles required today. They need to know ahead of time how new promotions and price changes will impact their business and their profitability. The ability for any marketer to understand the impact of their price plans on revenue, and forecast profitability with maximum accuracy is a necessity in today s competitive market. The key to success is designing new price plans or revising existing ones, so that they are in alignment with not just the company s business objectives, but also take into account subscriber price sensitivity and behavior. Service providers have a wealth of subscriber information, and this data can be used early in the service planning cycle. Fortunately there are also powerful pricing tools that can make this process less of a best guess effort. As Peter Dykes, Chief Analyst with Informa said, Business Intelligence is not a gimmick, nor is it vaporware. For decades, network operators have known that the information they collect on a minute-by-minute basis about their customers is potentially valuable, but they have lacked the means of reaching

5 meaningful conclusions based on that data. The combination of technologies that will enable them to organize and make sense of that information is now available and requires only that they have the foresight and imagination to invest in it. About Redknee s Price Simulator > > Redknee has worked with Tier 1 service providers across the globe, such as Orange, Telefonica, MTN, Telenor, and many others; helping define and launch successful price plans through a combination of technology and expertise. Redknee s Price Simulator solution works with any service- voice, data, fixed line, wireless, or cable, to bring added accuracy and efficiency to any pricing program: Quickly define tariffs through wizards and event driven tools Validate against existing data at the micro-level (evaluating against CDRs) Model price elasticity Identify and model migration patterns, for on-net adoption as well as competitive user/subscriber adoption Model behavior profiles - sets of what if scenarios that increase forecasting accuracy to optimize pricing strategies and effectively target specific markets Business validation - to measure direct impact on ARPU, margins & profitability with increased precision Dashboards and reporting real time visibility into service adoption and business impact; reducing the reliance on IT and network teams through automated reporting capabilities Post launch analysis did your price plan/promotion perform as expected? Redknee has been working with its customers to bring about a change in the way services and promotions are planned today. By utilizing the minuteby- minute information that exists in the operator s network, decisions are no longer based on ideologies or gut feelings. They are more informed; shaped on the basis of data analyzed through Redknee s statistical tools that

6 help service providers understand their markets, their customers, and the historical view that contributes towards precise forecasting. Marketing teams will continue to build forecasts and revenue projections, but the systematic application of quality data is empowering them to improve the odds of making better decisions. Redknee Price Simulator Customers For more information about Redknee s real-time monetization software, contact sales@redknee.com.

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