David Walker, CEO, Business Logic Systems, explains how sophisticated business intelligence solutions can help prepaid profiling and customer loyalty campaigns
The dominance of prepaid users on mobile networks across Europe has provided operators with revenues above those provided by the contract subscriber base. However, the flexibility inherent to the prepaid user in selecting and changing networks and services presents operators with a challenge to generate greater loyalty from them.
Safeguarding operator revenues and limiting prepaid churn is not such an easy task when dealing with a population whose personal profiles and details are largely unknown. Effective Customer Intelligence (CI) solutions, however, enable operators to segment customer information into clearly structured customer profiles for more effective management of marketing campaigns. These solutions help identify patterns of customer behaviour from data which would otherwise remain stored and unused on a network database. The realisation that profiles and segmentation can be used to increase benefits for the subscriber, and the Average Revenue Per User (ARPU), and Average Profit Per User (APPU) for the mobile operator, is finally beginning to dawn.
When it comes to delivering new services effectively, segmentation is crucial, because without knowing clearly what service to deliver, when, and to whom, the potential maximum, new-service revenue stream from ‘appropriate’ subscribers will not be realised. Similarly, when it comes to those subscribers likely to Churn, CI can identify and segment likely churners thus enabling the operator to take actions, e.g. loyalty schemes, to encourage those subscribers to stay with the network before they leave. Churning is a highly unpredictable action driven by a number of factors, including: costs, service levels, peer-group pressure and advertising. And once a prepaid customer leaves a network it is very difficult to get them back. Acquiring new customers is not the answer as it is too expensive, especially when the number of churners goes beyond 30% of the entire subscriber base.
This is why CI systems are so essential, enabling the operator to segment the customer base according to degrees of profitability, granting individualised status to subscribers according to their value for the network — e.g. bronze, silver, gold levels of importance. For many markets in Europe, which are already coping with high subscriber penetration, safeguarding their profitable businesses is now about identifying their most valuable existing customers and keeping them loyal.
One indicator invaluable in profiling, which can help identify the value of a customer to the network, is the Life Time Value (LTV). The two key components which determine LTV are the monthly profit from the subscriber and their length of time on the network; with the overall result being a figure for the net profit an operator can expect to make from a user during their ‘lifetime’ on the network. Being aware of LTV can help operators take action to encourage extending the LTV at points when a subscriber nears the end of their predicted lifetime.
With effective CI leading to clear segmentation, profiles and understanding LTV, operators can then set about the business of targeting their marketing and loyalty/retention campaigns at the right customers at the right times.
For operators to increase retention rates and move from ARPU as the main measure of success to APPU, their focus must now be on identifying and growing the profitability of the various segments within their subscriber bases — and particularly that of the prepaid user.
Loyalty incentives are not new to the consumer. What is new is the ability of mobile operators to take existing initiatives, or even create new ones, using them to answer their own needs, as well as the needs of their own customers. Using their existing infrastructure, mobile operators can secure the loyalty of their customers by applying advanced reward solutions.
Loyalty measures can be designed to appeal to all varieties of customers, from potential churners to high value users. For example, if mobile operators identify the customer segments at a high risk of migration, they can deploy proactive retention measures using loyalty schemes to grant incentives, or credit to be used as free minutes or SMS. At the other end of the profitability scale, valuable customers sometimes require encouragement and acknowledgement of their value for the network.
Clients are rewarded for using the services in a personalised way, by receiving bonuses according to a variety of criteria. The client feels appreciated for belonging to the network, increasing their satisfaction and confidence in the mobile operator.
The result is increased confidence in the network’s potential, as customers are encouraged to prize the mobile operator’s services at their justified cost level. For the mobile operator, the benefit is a fall in churn rates, as well as the promotion of a successful image. In the longer term, the key benefit of loyalty is the building of strong, committed, long-term relationships with customers.
The key issue to the success of an effective loyalty campaign is in-depth knowledge of the segments more likely to respond positively to it. For instance, the youth market is keener than other segments on SMS usage; so, free SMS options may be sufficient to gain the desired effect. Deploying a loyalty campaign that grants two free SMS for every 10 SMS sent will encourage users to send more messages. However, such a solution is not that simple — the youth segment will require further segmentation as not one SMS reward size will fit all.
Deploying repetitive or ongoing loyalty campaigns will ensure further ‘bonding’ with the customer. Incentives and rewards/ bonuses will generate and support consumption and, provided they are not deployed too often, user profitability. In the case of existing services, subscribers can be encouraged to use these more frequently through flexible, ‘rewarding’, billing plans — for instance, free credit granted as the user’s monthly bill reaches a specific threshold. Alternatively, users can choose from a variety of other loyalty options — granting handset incentives or free credit to be used as in-network calls or SMS. As customers use the services more intensively to gain from the loyalty benefits, more profits can be made.
New services are always best accompanied by promotions aimed at overcoming the subscribers’ inherent reluctance to adopt something new. Any implementation must be properly explained and promoted to subscribers. Loyalty measures, such as free trial offers, or additional benefits aimed at increasing the familiarity with the service, can work effectively.
A loyalty campaign intending to increase GPRS usage, for example, might offer users free data traffic for a limited period of time to secure future use of the service. Activation of the MMS service can, for instance, be accompanied by a free trial or permanent subscription to a sound and image database.
A case in point
A European Tier 1 regional operator turned to loyalty in order to counteract a number of negative trends in its mature mobile market. Recent increases in the usage of newly implemented services alternated with drop-offs in like-for-like, voice-based services and action was needed to tackle increased competitive pressure and boost customer satisfaction to grow its 3.5-million subscriber base.
A loyalty programme was designed to increase the profits generated by specific customer segments. The subscriber base was divided into four categories, according to the amounts spent by subscribers on Monthly Outgoing Calls (MOCs). The customers would also receive bonuses based on the amounts of incoming calls received, or according to Monthly Incoming Calls (MICs). Based on the MOCs and the revenues generated by subscribers, the subscriber base was given four profiles:
* The segment that generated less than -5/month (which was, as a result, not included the campaign)
* The segment that generated revenues between -5 and -10
* The segment that generated revenues between -10 to -20
* The segment that generated revenues of more than -20/month.
From the MICs, the campaign revolved around the 10-minute/month, received-calls threshold. Rewards consisted of free talk time and the procedures for identifying costs and potential scheme impacts was based on accurate profiling of the database. All data was collected into a Loyalty Knowledgebase, from which profiles were created. Then, the deployment of the loyalty schemes was monitored and sent back to the Loyalty Knowledgebase for continuous update to study the impact the specific scheme had on the different customer profiles.
Bonus for outgoing calls
The bonus for free talk time was proportionate to the total duration of the national calls made on all networks. The rewards were automatic without any additional procedures or criteria. Its simplicity was considered the basis of its success. The campaign also included revenues from roaming services.The bonuses were awarded according to the following simple scheme:
Monthly Outgoing Calls
Bonuses as percentage of MOCs
-5 – -10 =10%; -10 – -20 =12%; Greater than -20 =15%.
The level of the bonus was the sum of the amounts that corresponded to the various tariffs. The bonus was calculated based on national calls made per month. As roaming was also taken into account the bonus was valid even when subscribers were abroad. Tariffs also included tax. The incoming calls’ bonus related to the total time duration of the national calls received from mobiles and landlines throughout the month. The rewards were based on the following scheme:
0 – 10 minutes = -0 / minute; More than 10 minutes = -0.01 / minute.
For example, calls of a 60-minute duration would grant the subscriber -0.60 free credit to be used as in-network minutes. The bonus was calculated based on the total number of minutes per calendar month for all received national calls. The bonus was valid even when abroad. A time limit of 10 minutes for each received call was established; beyond this limit, the time was not added to the bonus.
The subscribers were notified of their bonus status either by SMS, upon receiving a bonus, or alternatively, by dialling a prefix number on their handsets.
The first evaluation of the campaign’s success showed that the mobile operator experienced not only a halt to falling usage of voice services, but also a significant increase in voice revenues. Moreover, a notable increase in retention rates was gained as an effect of the campaign.This successful loyalty programme aimed at increasing retention and stimulating the usage of services, has become the engine driving an enterprise-wide customer relationship strategy.
The operator is now able to exploit the impact of such programmes to develop new revenue-generating products and services. The implementation of the ‘Point Reward Scheme’ reinforced the mobile operator’s efforts to segment the market scientifically and provide customers with differentiated and personalised services, thereby stimulating consumption and promoting customer retention.