In emerging countries, mobile markets are highly competitive and are characterised by frequent promotions – but these are difficult to design appropriately. In these mostly prepaid environments, low-income customers are looking for bargains and often churn or use multiple SIM cards. So instead of focusing on standard tariff plans, mobile operators prefer to regularly flood the market with innovative promotions, in an effort to attract customers who are often waiting for these promotions to top up their accounts. In order to be effective, a promotion needs to deliver the relevant proposition at the right time for each customer. So, in prepaid markets with ‘anonymous’ customers, the key challenge is to gain knowledge of customer behaviour.
To meet this challenge, mobile operators should carefully consider how they can make the most of their data warehouse. This is an often underestimated resource from which operators can extract considerable amounts of highly valuable information on customer behaviour, such as usage patterns, ARPU evolution, life-cycle position, etc. Once acquired, this detailed knowledge makes it possible to predict consumers’ needs reasonably accurately, and to predict their likely responses to particular promotions. Additionally, the marketing department can effectively address particular segments – or preferably, micro-segments – that exhibit similar behaviour.
Analysys Mason has analysed many mobile promotions and tariffs in emerging markets. Figure 1 shows, in illustrative terms, the impact of a ‘bonus on recharge’ promotion (i.e. 50% bonus on each top-up made during one week), assumed to be launched in May.
Figure 1: Impact of promotion on spend of five subscriber segments defined by their average spending (illustrative only) [Source: Analysys Mason, 2009]
The promotion had contrasting effects on the usage of different subscriber segments. For medium and high spenders, it increased the billed consumption due to elasticity, creating value for the operator. Lower-end segments, however, actually reduced their billed usage and therefore caused revenue loss.
In this emerging market, a more efficient approach to promotions is to adapt the design of the offer to specific micro-segments. The delivery of the offer to users is then achieved via targeted and customised SMS.
- The medium- and high-usage segments can be split into micro-segments having a similar weekly spend. The promotion can then be targeted. For instance, users consuming around 20 local currency units (LCU) per week are offered a 50% bonus on top-ups above 30 LCU. The incentive here is to rise their weekly spending from 20 to 30 LCU. Similarly, users consuming around 30 LCU will get an incentive to top up above 45 LCU, and so on
- The low-end segments are not reacting as the operator wishes to this type of ‘bonus on recharge’ promotion, so the best option to increase ARPU from these users may be to rely on another lever, such as ‘stop-the-clock’ promotions.
Generally speaking, knowledge gained from detailed quantitative usage data brings many benefits to the process of designing promotions:
- analysis of the likely impact before launch is highly valuable to fine-tune promotions
- risks and expected benefits can be quantified before obtaining management approval
- evaluation of profitability after launch (appropriately monitored over time) provides useful inputs to the design of further promotions.
Analysys Mason has a unique understanding of marketing, financial and technical issues around the design of tariffs and promotions. This enables us to provide innovative and high-value solutions to our clients. We are today assisting several operators in designing new tariffs and promotions, along with detailed profitability analyses.
For more information please contact Charles Hurpy, Consultant, at charles.hurpy@analysysmason.com