Improving the payment experience and rewarding pre-paid usage will help operators win the mobile youth market, says David Chambers.
According to recent research by LogicaCMG, 38%of all mobile content downloads in the UK are conducted by under-18s.
This adds weight to years of evidence painting young people as early adopters keen to have a go at the mobile data services which operators are making the centrepiece of their business. Despite mounting proof of their value, however, the mobile marketplace has remained an awkward place for many young people to access.
Younger customers are still essentially a price-sensitive group, typically subscribed to restrictive pre-paid plans that frustrate their natural inclination to experiment and impress their peers with the latest kit and content.
Competitive offers and a lack of affiliation to the operator lead to a high churn rate. The magic formula for capturing and holding on to customer loyalty continues to elude most operators.
What they need is a new way to manage pre-paid accounts that ensures accurate billing, an improved range of options for topping-up, offers reward schemes keyed to individual usage and provides adequate protection from impulsive overspending and unscrupulous marketing schemes.
Today’s reality
Much of the value younger mobile customers represent is pent-up by technological shortcomings, and the fact that the network infrastructure for managing pre-paid accounts has traditionally restricted the ability to offer flexible, convenient and secure access to data services and content.
Take the cumbersome process of topping up. Until very recently this has been an overly mechanical process, based on purchasing a card from the nearest shop, and then dialing an interactive voice response unit to credit and reactivate the pre-paid account. The process is awkward and time consuming, interrupting the momentum of purchase.
Once topped up, the account itself has been inflexible, comprising a single cash pot for all services. And many of the services have lacked price transparency, often burying unit prices until the end of the transaction or sometimes trapping customers into unwanted monthly content subscriptions.
Even with these impediments, LogicaCMG’s research shows that many younger customers have begun to spend significantly. But that spending is spread across a multitude of content suppliers. No one has managed to pin down their loyalty and establish a dominant position.
Tomorrow’s promise
Happily, recent technological developments in mobile network infrastructure are improving the way some operators manage pre-paid accounts, and point the way to a new content services provisioning model.
Account flexibility is set to improve with the development of multiple pot management for pre-paids. Operators are beginning to offer several pots which can be cash-, volume- or time-based. This allows customers to manage their credit in different ways for different services. A cash pot could be used for simple debit against voice calls; a volume pot could be created for, say, 10 SMS messages or 5 music downloads; while a time-based pot could be created to bank 15 minutes of web browsing.
Operators are also taking steps to deal with pricing uncertainty by offering advice of charge notices. This allows customers to confirm in advance what a given download or service will cost. In addition to boosting the likelihood of completing a purchase, advice of charge capability supports the operator’s commitment to protecting younger customers from overspending and unintentional purchase.
Loyalty programs
But even with these promising signs of change, the struggle to secure the loyalty of young customers and reduce pre-paid churn will continue until operators can implement proper loyalty programs that reward and incentivise purchases from both the operator and/or their content partners.
While it is too soon to label a trend, indications from some operators suggests the ability to manage multiple pots of value within a given pre-paid account will unleash a wave of mobile loyalty programs.
Targeting specific customer groups improves the return on investment for specific promotions. Personalised loyalty campaigns form a type of ‘underground marketing’ which competitors may be unaware of, and thus unable to respond directly to. These can be achieved by analysing historic usage to identify and segment customer groups.
More flexible technology then empowers the operators to run many parallel, low-cost, targeted campaigns. Each campaign can have its own criteria to achieve a reward, as well as a wide range of reward options to choose from. Promotions were once limited to processing purchase information offline, then manually rewarding the user with either a cash credit or some other benefit such as a free phone upgrade. Now the options are set to increase significantly, with more innovative operators able to improve their bottom line.
Operators can, for instance, offer promotional tariffs for short periods such as sporting or music events. Step tariffs can encourage increased usage through lower initial rates. For example, offering the first 10 downloads for 50p per, then £1 per for each download after that.
Cross-promotions can be implemented via bundling, perhaps sending 10 MMS would create a reward with 50 bonus SMS to encourage take up of new services. Tie-ins with content partners such as MTV could result in music download promotions.
In short, all the tools of retail merchandising and promotions can feasibly be applied to the pre-paid mobile market. These are just a few examples of what we foresee based on our research and experience in the field.
