“New technologies and new content are creating new markets and opportunities at a dizzying rate” says Graham Porter. But if service creation is to be successful operators must make use if their revenue intelligence. Porter offers Mobile Europe readers a guide.
Today’s fixed and mobile telecommunications customers are increasingly sophisticated and informed about service plan and pricing alternatives. Through the introduction of new communications laws and standards, such as number portability, it has never been easier for customers to change services and service providers.
In conjunction with the rise of savvier consumers, new technologies and an increasing variety of content are being developed at a breakneck pace. Along with globalisation, these new technologies and new content are creating new markets and opportunities at a dizzying rate. In this complex environment, what differentiates market leaders from followers is the ability to respond rapidly—in hours and days, rather than weeks and months—to customers’ demanding and evolving service requirements.
In order to create and maintain competitive advantage carriers must have in-depth, knowledge about customers and partners including market segments, buying habits, trends and overall lifetime value to the business. Moreover, they must be able to accurately predict in real-time how changes in services, packages and pricing will affect customer retention and profitability. To accomplish this, service providers need a structured set of business intelligence tools focused on maximising revenue generation and profitability — they need revenue intelligence.
Maximising Customer Value
Revenue intelligence is a competitive differentiator that directly — and immediately — contributes to the bottom line. It provides the ability to better understand and manage customers and provide them the best services, increasing customer satisfaction by minimising churn of the most profitable customers.
Minimising churn of high-value customers is essential. Customer retention activities and marketing campaigns take up a large portion of service providers’ budgets. Managing effective return on this investment is crucial to business growth. Service providers must be able to identify the customers that deliver the greatest lifetime value potential and develop and roll out appropriately targeted campaigns.
Regular market analyses of the existing customer base, including what subscribers would pay for competitive offerings, can anticipate and prevent churn. Service providers must also consider what may happen when launching a tariff similar to that of a competitor but with a lower price. Unless there is an ability to accurately forecast the future margin of the tariff, the offering might turn out to be of low value or even unprofitable to the service provider. This is especially true when free-usage bundle offers come into play.
Revenue intelligence enables telecommunications service providers to focus on these business issues. It assembles existing information from various sources and produces enriched information based on simulation and data calculations. Revenue intelligence enables service providers to:
l Calculate the effect of new product pricing versus existing pricing or the competition’s pricing. This includes taking multiple bundles and convergent services into account. For example, a customer might receive a free 10MB home Internet download for each 100 pounds spent on wireless calls.
l Increase availability of information regarding business profitability or future margin opportunities of new services.
l Address market elasticity to maximise margins. For example, there may be a five percent shift in customer base to another price plan as a result of a marketing campaign. Or, the introduction of a new service may move 10 percent of calls in Zone X to this new service in Zone Z.
l Improve the capability to negotiate changes in the value chain.
The information provided through revenue intelligence can be translated into more effective service creation, bundling, pricing and marketing campaigns. The advantages of using revenue intelligence during the price planning and development stage cannot be underestimated. The example below provides a step-by-step look at how revenue intelligence can maximise profitability during price planning and launch.
Price Plan Rollout Process
Step 1: Programme Creation and Definition
Develop ideas using information about the general targeted customer segment. For example, what types of promotions might be effective? What would be effective against competitors?
Step 2: Customer Segment Identification
Use revenue intelligence to accurately identify customers most likely to accept the new plan or offer. Evaluate likely competitive offers and ensure the target corresponds with original ideas in the Creation and Definition Phase.
Step 3: Programme Plan Identification
Evaluate potential programme plans. Based on Step 2, determine which offers seem most appealing.
Step 4: Testing
Utilising the expected service usage (and/or based on real usage), calculate the cost for the subscriber of the service as well as for the service provider. Ensure profitability within the targeted customer segments.
Analyse data for customers with low or negative margin and their characteristics (especially actual call behaviour, contract and demographic data) to identify and minimise any financial risk. Utilising this information, make informed decisions regarding the assumptions, tune the service costs (by reiterating steps 2 and 3), or to accept a known risk.
Note that steps 2 through 4 remain a closed loop until consensus is achieved. Revenue intelligence reduces the time spent between steps 2 and 4 by making meaningful information and data immediately available to the decision makers. These are the most critical and time consuming phases in the rollout process. Each day spent here potentially diminishes return on investment. Data quality throughout this process is critical. If the data is poor, each approximation made working with averages or skipping steps to save time may entirely compromise the profitability of the new price plan or service.
Step 5: Launch
The launch phase includes the implementation of the new plan in the revenue management and billing system. It also optionally includes the agreement with any approved interconnect partners and the marketing campaign preparation up to the launch day.
Using revenue intelligence service providers can calculate the highest value package for the installed base and determine the optimum length of the new contract, forecast the approximate margin contribution gained from the offer and the expected break-even point per customer. In addition, it is possible to identify customers who will have the highest probability of utilising the offer—enabling informed decisions to be made that will gain the most favourable margins for the price plan. This knowledge contributes to faster pricing plan launches and/or modifications (and to the highest value customer segment), because the extensive testing phase has been bypassed. In addition, relevant data has been captured to back-up the decision.
After the Launch
As significant as the gains are during the planning and launch of services, there are also benefits to be gained in customer support. For example, when a customer calls with questions or concerns about a contract, the provider’s service representative should have relevant customer information immediately available to maximise this “moment of truth.”
Today, this typically requires tight integration to the CRM system, and data regarding average revenue, real margin contribution made throughout the relationship, and the forecasted length and value of the contract is available.
However, raw data is insufficient. Customer service representatives cannot be expected to manage customer queries while making the calculations and connections required to propose appropriate service bundles and pricing packages. Revenue intelligence converts the raw data into valuable information that equips the representative with the power to propose, according to actual customer behaviour, an appropriate price plan that is in full alignment with the provider’s business objectives — all in real-time.
Revenue intelligence also provides visibility into applying discounts (including cross-discounts), free units of all types, market elasticity, and other seasonal effects. Armed with this information, providers can offer customers the service packages that will enhance the relationship, leading to increased revenue potential from that customer.
Conclusion
Market leading telecommunications and media companies are realising the valuable information that resides in the volumes of customer data that they generate each day. By utilising revenue intelligence to understand this information, service providers can anticipate customers’ needs and gain sustainable competitive advantage. A structured revenue intelligence solution provides key insights that can be applied directly to promotions and pricing programmes that are uniquely tailored to each individual customer. This not only maximises revenue, it increases loyalty and minimises costly churn.
By utilising a 5-step programmatic approach, service providers can define new programme opportunities, identify appropriate customer segments, develop specific offerings, test the offerings and introduce the offerings to the target market.
A methodical approach to revenue intelligence helps make sense of the complexity and pace of today’s telecommunications and media marketplace, enabling service providers to provide programmes and promotions that fit their customers’ needs.