www.arcgroup.com copyright © arc 2004 understanding how to develop and deploy cost-effective...

www.arcgroup.comwww.arcgroup.com Copyright © ARC 2004

Understanding How To Develop and Deploy Cost-Effective Methods for

Optimising Prepaid ARPU and AMPU


PRESENTATION STRUCTURE

• THE PREPAID OPPORTUNITY

• AMPU AND ARPU – EFFECTIVE MEASUREMENT

• MAXIMISING ROI – DISSUADING CHURN AND INCREASING LOYALTY

• SEGMENTATION AND PROFILING - IDENTIFYING AND DEVLOPING KEYMARKETING TARGETS

• MERGING SUPPORT SYSTEMS – INCREASING LOYALTY AND SPEND


PREPAID OPPORTUNITY – SNAPSHOT OF AN EVOLVING INDUSTRY

• Prepaid seen poor relation to postpaid

• Failure European Telcos to migrate users to postpaid contracts

• Evolving Markets – China

– Latin America

– US ‘enlightenment’

• Youth potential

• Mobile payments SVA potential


GLOBAL PREPAID STATISTICS

0.0

200.0

400.0

600.0

800.0

1000.0

1200.0

1400.0

1600.0

2004 2005 2006 2007 2008 2009

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

%

Postpaid Subscribers Prepaid Subscribers Prepaid/Total Wireless Subscribers (%)

Subscribers (Millions)

Figure 1: Global Prepaid Versus Postpaid Demand - 2004 – 2009

© Baskerville Global Mobile Prepaid Strategies 2004


REGIONAL PREPAID STATISTICS

2005

2006

2007

2008

2009

Mid

dle

Eas

t

Afr

ica

Asi

a P

acifi

c

Lat

in A

mer

ica

Eas

tern

Eu

rop

e

US

A/C

anad

a

Wes

tern

Eu

rop

e

-5.0%0.0%5.0%

10.0%15.0%20.0%25.0%30.0%35.0%40.0%

© Baskerville Global Mobile Prepaid Strategies 2004

Figure 2: Regional Prepaid Percentage Growth Over Forecast Period – 2004 - 2009


AMPU AND ARPU – EFFECTIVE MEASUREMENT


• Origin of revenue generation measurement metrics

• Problems measurement metrics


Main financial indicators

Operator Strategy

Growth Driven

Revenue Subscribers Market share

Profit Driven

EBITDA

TIME

Main financial indicators

Operator Strategy

Growth Driven

Revenue Subscribers Market share

Profit Driven

EBITDA

TIME

Figure 3: Selected Measurement Metrics and Related Operator Strategy


• AMPU explained – Low ARPU does not preclude positive AMPU

• Consideration of AMPU and ARPU

• Margin consideration – examples might include:– Marketing sales

• State of market development - impacts on cost of acquiring customer– Customer retention which can include:

• CRM and billing• Support systems to run CRM and billing

– Consideration factors such as debt risks

• Consideration of revenue versus margins – factors to consider might include – Services utilised minus the cost to provision for the services– The relative profit margin of a service e.g. voice telephony versus premium data services– Level of use – high/medium/low



• Considering AMPU – Encourages proactive service development approach

• Fitting the measurement metric to the market and operator strategy

• Market development

• Balanced approach



MAXIMISING ROI – DISSUADING CHURN AND INCREASING LOYALTY



• Churn – the biggest threat to achieving maximum ARPU and AMPU

• Types Churn – Forced

– Involuntary

– Voluntary

• Enforced distance prepaid – Good CRM difficult

– Historically low investment in support services

– No binding contract

– No handset lock-in

– Number portability – TeliaSonera

• Recouping massive investment in 3G makes dissuading churn especially important



• Churn and customer relationship

• Mechanisms of achieving maximum return – Incentive/bonus schemes– Loyalty Schemes – Sponsorship – Infrastructure Partnerships



CASE EXAMPLE - Incentive/bonus schemes

• Cellcom Talkman

• Bonus Scheme linked to recharge

• SMS utilised as key communication mechanism



CASE EXAMPLE – Loyalty Schemes

• Discourages churn number of ways– Gaining perceptional value (loyalty points etc.) – Engenders a sense of belonging

• Creates sense of aspiration/kudos – the platinum card effect – Tiered approach adds sense status and urge to aspire

• TMN Portugal – Pontos– TMN Star



CASE EXAMPLE – Sponsorship

• Interest from third party’s– Increasing capabilities of device make more attractive proposition – Requires careful handling of marketing process as to not dissuade end-user

• Incentive based approach with incentive cost covered by sponsor

• Bouygues Telecom’s Spot service offering – Company/service offering analysis


CASE EXAMPLE –Infrastructure Partnerships

• Access to end-user – Drive recharge at POS

– User in retail environment

– Impulse buy

• Does not necessarily reduce churn but improves user convenience

• Convenience equals user retention

• Trusted retail brands increase comfort and use of topup mechanisms




• The power of content/data services– Compelling content is sticky (another reason to encourage prepaid data service

rollout)– Youth glue– Requires walled garden– Expensive approach

• Churn as mechanism of achieving maximum ROI – Customer value– Usage model – Costs for set-up and ongoing provision


SEGMENTATION AND PROFILING - IDENTIFYING AND DEVLOPING KEY

MARKETING TARGETS


• Identification key user segments particularly important prepaid – Resource allocation for churn reduction strategies

• Legacy profiling and segmentation tactics of little use – difficult to track and engage users who are unknown

• What other solutions are available

SEGMENTATION AND PROFILING – IDENTIFYING KEY MARKETING TARGETS


SOLUTION APPROACHES

1. Incentives/CRM/registration

2. Modified incentive schemes e.g. combined marketing infrastructure partnerships

3. Handset segmentation

4. Behavioural analysis (profitability analytics) • Segmentation by spend,

• Recharge propensity,

• Type of content used

SEGMENTATION AND PROFILING – DEVELOPING KEY MARKETING TARGETS


• Importance of youth segment – Size market/data usage metrics

– Captivating potential postpaid audience

• Developing the key segment of youth

• Virgin demo - handset segmentation, content attraction, differentiation

SEGMENTATION AND PROFILING – DEVELOPING KEY MARKETING TARGETS


MERGING SUPPORT SYSTEMS – INCREASING LOYALTY AND SPEND


• The billing process and other BSS allow access to the consumer

• Leveraging CRM at this point allows strategies to be implemented proactively e.g. churn management

• Proactive strategy and user account management capabilities require support of advanced real-time content billing solutions

– Industry reliance on near-real-time and Hot Billing solutions

– Real-time for data technical and financial challenge

– ROI for such systems justified by identification of data usage patterns/potential



• Education to the importance of CRM in prepaid

• Advantage good CRM – Increased likelihood use data services (time user retained greater the potential

– Reduced cost of CRM versus acquisition

– Greater potential recoup investment from user for 3G implementation costs

• Increasing prepaid user spend is the antithesis of prepaid for some users



• Legacy CRM approaches – Contact centres

– Data warehouse applications

– Management tools

– Complaint/enquiry

• However such approaches prohibitively expensive if applied to all prepaid users moreover some users do not warrant such attention due to low ROI

• Self-care mechanism to reduce CRM costs



• Unique prepaid approaches to incorporation of CRM elements with customer interface technologies

• Vodafone incorporation of incentives CRM and complex user analysis

• Profitability analytics




© Terradata/Vodafone

Rule/effect of event on customer

Details Cost

Categorisation in terms of cumulative s-curve type customer i.e. early adopter, laggard etc.

Targeting of specific users at specific times in customer/market lifecycle

Cost dependent on marketing expended

Identify purchaser by purchase history e.g. early adopters of WAP, MMS

Not always a good indicator

CRM experience Analysis of whether CRM experience has been good or bad? Were problems resolved?

Impact of cost of CRM balanced against potential for customer to be profitable/churn

Call behaviour Customer propensity to call at peak and off-peak times

Calls to CSR at peak times are a revenue drain

Recharge behaviour Level of recharge – decrease in recharge rapidity

Figure 4 : Selected Rules-based Analysis Used in Customer Lifetime Expectancy


Segment Low Medium High

High Revenue/High Margin

High Revenue/Low Margin

Low Revenue/High Margin

Low Revenue/Low Margin

Standard Service

Standard Service

Standard Service

Standard Service

Standard Service

Low Cost Incentive

Low Cost Incentive

High Cost Incentive

High Cost Incentive

High Margin Incentive



Likelihood of churn

Customer profitability

Figure 5 : Selected Rules-based Analysis Used in Customer Lifetime Expectancy

© Terradata/ARC Group



Stage 1Stage 1 Stage 2Stage 2

Stage 3Stage 3

Stage 1Stage 1 Stage 2Stage 2

Stage 3Stage 3

Figure 6 : Vodafone Prepaid Churn Management CSR GUI


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