billing bureau's david werdiger at commsday summit 2014
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The Convergence of Telco & the Subscription Economy
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Agenda
• Wake everyone up!
• The Own-Lease-Rent-Subscribe Continuum
• Understanding the Subscription & Sharing
Economy
• Why Telcos are Best Positioned to be Significant
Players
• Key Challenges
• Take Outs
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Own-Lease-Rent-Subscribe Continuum• Owning
• The “great Australian dream” – owning a home
• The traditional/historical way to access an asset
• Finance often plays an important role
• Leasing
• Gives the lessor almost all of the benefits of
ownership but without tying up capital
• Finance is an essential part
• Sometimes indistinguishable from owning with
finance (e.g. car lease vs hire-purchase)
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Own-Lease-Rent-Subscribe Continuum
• Renting
• An agreement where a payment is made
for the temporary use of a good, service
or property owned by another
• Further down the continuum from leasing
• Subscribing
• Getting access to a resource, or regular
supply of a product on a regular basis
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Own-Lease-Rent Subscribe ContinuumProperty
Own
Lease
Rent
Subscribe
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Own-Lease-Rent Subscribe ContinuumCars
Own
Lease
Rent
Subscribe
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What is the ‘Subscription Economy’?
• A new way of looking at how people ‘buy’ ‘things’.
• Utility trumps ownership.
• Shift in consumers spending habits.
• Goods are repackaged as services.
• It can be anything: cloud-based software & services,
media/content, groceries, consumables.
• Just another XaaS?
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Economics of the Subscription Economy
• Infrastructure is expensive and ties up capital.
• Companies want to shift fixed costs to variable
costs.
• Consumers want capital to be used for assets,
not liabilities (cf. Rich Dad, Poor Dad)
• Ownership shifts up the supply chain and is
replaced with subscription.
• For a telco, does this sound familiar?
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Traditional vs Subscription Business Model
• Tradition Business Model:
• Value of the sale is the value of items sold.
• Each sale is a one-off transaction
• Customer is only your customer for one single
transaction
• Customers might be anonymous, so CRM is a
big challenge
• Loyalty is a bolt-on system
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Traditional vs Subscription Business Model
• Subscription Economy Business Model:
• Value of the sale is the ‘Customer Lifetime
Value’
• A sale results in multiple transactions and a
revenue stream over time
• Customers cannot be anonymous
• You can/must communicate with them
regularly
• Loyalty is a key part of the business model
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Subscription Economy Business Model
• Revenue = Customers x ARPU
• Customers (month N)
= Customers (N – 1)
+ New Customers
– Churn
• Key metrics of performance are customer
acquisition cost, acquisition rate, cost to serve,
churn rate
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Marketing in the Subscription Economy
• Instead of repeat purchase, you subscribe
once and continue until you cancel.
• Inertia works for the vendor rather than
against it
• Dramatic impact on the marketing process –
consider Dollar Shave
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What’s in it for the Customer?
What motivates customers to participate:
• Value – cheaper access to a resource
• Sharing – better use of resources
• Trust – will you be there next month?
• Simplifying the purchase decision/cycle
• Tapping into the power of communities
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Why Telcos are Significant Players• The original sellers of subscription services
• Experience in pricing services, cross-
subsidisation, ‘freemium’
• Already have billing relationships with
customers
• Telco ‘hard’ services converging to cloud
services, e.g. Virtual PBX
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Key Challenges• Billing – much more complex with multiple
products and bundles
• Pricing – understanding margins, true cost,
value of marginal increase in ARPU
• Selling & supporting multiple products
• Mixed regulatory environment
• TCP Code impact
• Lack of control of the supply chain
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Take Outs• The ‘Subscription Economy’ is here
• It has been here for a long time, just known
by other names
• Telcos are in the best position to take
advantage of it
• Position now for the next (NBN?) wave
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Shameless Plug• Billing Bureau have been doing this for
nearly 20 years; started in telco and now
expanded to subscription and services.
• We live and breathe it.
• Experts in convergent billing and automation
and scalability of billing & related processes.
• Cloud billing will only become more
complex; we have already done it all.
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Thank You!• Any questions?? All clear as mud?
• For more information, contact
• Lesley Kelly; Sales and Marketing
03 8611 1111; [email protected]
• David Werdiger; Chairman
0412 389 389; [email protected]