Operators are being outflanked on content by Google and Apple. How can they fight back? Charging for products rather than access would be a good start.
The volatile nature of the telecom marketplace makes it no surprise that operators currently find themselves at a quandary. Having seen rapid growth, the market is now at saturation point. All of a sudden, the strategies that stimulated such rapid growth – selling access to the network in the form of voice, data, SMS, etc – are not having the same effect.
The problem with this approach is it assumes all other market inhabitants use the network in the same way. This is not always the case. It’s why Google and Apple are now effectively challenging the telcos’ relationship with customers.
It’s arguable the latter two now dominate an industry they have little previous background in. At February’s Mobile World Congress, the HTC Magic, the second phone running on the Android OS, generated more coverage than any other announcement, while the lack of attendance by Apple was seen to devalue the exhibition.
Consumer confusion is another problem. A recent Convergys survey showed almost half of British mobile customers do not understand what mobile broadband services could offer them. Clearly, operators need to shift focus away from the network, and look at the needs of their customers instead. They can start by reacting better to customers’ buying habits.
Their first priority should be billing and payment. At present, systems charge on the basis of network access, not customer propositions. This is akin a restaurant charging a flat rate for entry, and then letting the customers eat what they like. These systems cannot react quickly enough to changes in customer behaviour.
What’s needed is a means of charging that works in real time, so customers can see the exact cost of any new services they’re signing up for. It also needs to work across different network platforms, from the traditional voice and text to newer data services of mobile internet and video. It must also be able to analyse, charge and build promotions across all of these services.
It’s called real-time convergent charging. Such systems allow a more intimate relationship with the customer, providing companies with the ability to action changes to packages immediately and begin charging for them simultaneously. It means prices can be amended in relation to customer demand.
The all you-can-eat data, voice and text bundle approach allows competitors to undercut the telcos. This has kicked-off the spiral of ever decreasing prices and left operators using handsets as deal breakers. As a consequence, manufacturers have strengthened their control over the market. Exclusive deals, have become the vogue, with Vodafone, O2 and T-Mobile all taking on showpiece handsets as a differentiator.
This is not to say handsets are not a crucial part of any selling strategy, just that the services must become important once again. The rise in app stores shows that telcos need to be more flexible about their approach to charging, rather than restricting their revenue income from inclusive data plans.
The sales and marketing strategies that were used during a period of high growth have not transferred successfully to the era of maturity. But this is a genuine opportunity, presenting operators with an opportunity to use existing insights to react quickly to new consumer behaviours. By doing so, telcos can secure future revenue streams and ensure they continue to generate a profit.
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