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.

Results
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.

The regular news of postponed launches of 3G services from a number of operators because of reported service quality problems is indicative of the service quality pressures that the mobile service providers are coming under. Coming close on the heels of a report by UK consumers’group Which? that effectively warns customers off 3G until prices fall and service quality gets better, it’s clear that many mobile operators, billions of euros later, are now having to put their reputations directly on the line, or at least in this context, over the airwaves.

Quality of service has always been a fairly problematical kind of topic in telecoms, at least since the emergence of mobility and the introduction of data services. Historically, under the days of the old monopoly utilities, service quality could vary extremely widely. The networks themselves may have worked extremely efficiently, but customer service was often dreadful. With no alternative suppliers on the horizon, customers largely had to put up with long waiting times for new phones, with little comeback if bills were faulty or faults kept occurring.

Today, the picture couldn’t be more different — at least on the surface. There’s no shortage of competition for customers in the mobile space and the increasingly widespread availability of mobile number portability in countries around the world has put the pressure up a notch or several. It’s also obvious that mobile service providers are also becoming exposed to a lot more risk as they expand into the delivery of content and applications to both the business and lifestyle and youth markets.

Customers at a push can usually find another voice phone to make a speech call on in an emergency. The same obviously isn’t true when you’ve been expecting your mobile device to securely access a corporate database, or you find your handset keeps crashing when you try to download an expensive music and video track — yet you still get billed for the transaction.

While 2G certainly had quality problems in its early days, with networks being rapidly rolled out and engineers having to learn on the job about radio performance in their own particular locations, the wireless and circuit-switched technologies involved were fairly straightforward. Once you bring data services and W-CDMA into the equation however, things suddenly get a lot more complex in a variety of directions.

Lengthening value chain
For a start, the value chain gets a lot longer, with many third parties becoming involved in service or content delivery. Secondly, the technical complexity of that value chain grows exponentially, from the multiple handset devices that must be supported to the performance of all the protocols such as SIP and RTP involved in delivering the services. Finally, there’s the internal organisation of the mobile service provider to consider. Has enough been done to create a real and unifying culture of shared quality within the operator, or are different departments still squabbling amongst themselves ? After a number of years of being in what one industry QoS expert called ‘a state of denial’ about these problems, the mobile sector has been starting to get its act together. Work by the TeleManagement Forum has resulted in deliverables such as the SLA Handbook and the Wireless Service Measurements Handbook, useful material for anyone looking to get a proper understanding of the different roles of Key Performance Indicators and Business Performance Indicators and how they can be used to both increase customer loyalty and cut operating costs simultaneously. More recently, at the TMF’s Long Beach conference, Ericsson, Motorola, Nokia, NEC and Siemens jointly announced that they will work together on common OSS system specifications, standardized interfaces for peer-to-peer element management, and common testing and verification practices.

One of the key points behind work like this is the emphasis that they put on considering the service provider organisation as a whole, rather than as purely the sum of all the different job functions and processes involved in providing what could be called ‘quality’ service. For Scott Erickson, VP of Wireless Sales at Telcordia, there’s strong evidence that mobile operators now realise that they have a problem to fix — collectively, “Historically, service quality was looked at in very network-centric ways and the chief engineer was in charge of basic quality parameters that really concentrated on connectivity. Now that mobile service providers have come to truly focus on services as their differentiator, they’re putting new organisational structures into place that span multiple organisational disciplines, from marketing to network planning.
“Now, if these new organisations are going to work successfully, they’re going to need the right information on the underlying network and service performance and that requires new supporting systems. Systems like our own Service Director product are beginning to appear, capable of collecting performance data from a wide variety of different sources and then, just as importantly, presenting it in ways that are appropriate to the different job and team functions within a service provider. A CEO, for example, needs totally different types of information to that needed by a network engineer trying to resolve a network problem at ground level.

“There’s a real push on at the moment for customer retention in many countries around the world at the moment as number portability takes effect. There are also, especially in Europe, drives by multinational mobile service providers to bring consistent service quality management principles and processes to bear across their different member companies. Complementing this, in some regions, is a growing awareness of the potential importance of MVNOs as significant strategic partners. If they can’t get the service quality they want from one provider they’ll soon go elsewhere with an accompanying loss of wider confidence in their services.”

This implied threat of churn is particularly acute in servicing the enterprise market is also recognised by Kieran Moynihan, CTO of specialist SQM system vendor, Watchmark-Comnitel, “In highly developed, mature markets such as Europe, North America and parts of the AsiaPacific region service providers are finally recognising that they have to become truly customer-centric in their approaches to service quality — and manage both the network and other parts of their operations in appropriate ways. The complexities involved in offering consistent service quality over increasingly heterogenous networks where EDGE, UMTS, CDMA 1X, EV-DO and other technologies are being rolled out are definitely non-trivial, yet all ideally have to be brought in under one quality banner.

If that’s the top down perspective, what’s the view from the ground up, where fault and performance data is actually gathered? Thomas Jensen, sales and marketing VP with network monitoring specialist NetTest explains, “As the metabolism of the mobile industry speeds up, with services being created and getting to market far faster than was ever the case in the past, some significant changes need to take place in the ways that service quality data is gathered. For most of their past, telecommunications service providers have been able to get away with largely gathering data in batch mode, with fault reporting being a historic process. That now has to shift to cope with a much more dynamic environment, not just because more services are becoming available, but because network and service conditions can change so rapidly under the influence of new data applications or variations in radio performance caused by greatly increased traffic in particular cells.
“This is particularly true if you look at the pressures on service providers to offer self-provisioning services to their customers in an attempt to limit rapidly rising support costs. When you throw in a complex mix of new protocols and technologies, it’s essential that you can provide the data required to anticipate or resolve problems quickly.”

In terms of service quality, there’s also something of a major re-examination underway when it comes to better understanding what customers actually mean when they talk about quality. Important standardisation work has been recently done by the ITU in defining the parameters for speech quality over both mobile and IP networks and activity continues in the commercial world to apply these principles to video as well. According to John Winchester, CEO of quality assessment company Psytechnics, “Mobile operators need to have systems in place to monitor the customer’s actual experience of voice or video services. If they do, they can find out whether a call might have finished because of voice quality problems — and, if they’re a corporate customer, find out if the service they’re getting really meets the SLAs in place. The kinds of data that you get from most QoS systems don’t provide this sort of information. To support this, we’ve developed applications that can downloaded onto platforms like Symbian, Brew and Windows CE to report back directly and automatically over SMS , as well as run on the usual network infrastructures.”

In its widest context, service quality has to be seen as an essential risk management discipline, and one that’s important to everyone within a service provider organisation. The main problems though won’t probably be to do with the underlying systems, which are slowly but surely coming together. As ever, it takes far longer to re-engineer the human beings operating those systems, than the systems themselves.

It’s not even a term everyone agrees on to describe what it does, but there is no doubt OSS has a higher priority within operators than ever before, Keith Dyer finds.

At Vodafone’s recent results announcement in London, the cto was present and willing to answer questions. Remember, this wasn’t a service launch, it was purely a financial briefing, but the cto was there to talk about how Vodafone was aiming to make billions in cost savings as it integrated its multiple networks around the world.
 What this principally meant was not that the network themselves would somehow be merged into one physical entity, but that the process and platforms used to introduce new services and provision new mobiles on the network would be merged. Vodafone’s name for this process is One Vodafone, and the name itself tells the story. Vodafone wants one way to implement service introduction and management, across the whole range of its operations, and in doing so it thinks it will save billions. All those supplying Vodafone in any of these areas need to sit up and take notice.

Keith Willetts, the Telemanagement Forum Board Chairman, says that this escalation of OSS up the operator hierarchy (and it doesn’t get much higher than sharing a platform with the ceo of the largest operator in the world) is typical of the activities of his members, as is the focus on platform and network integration, and cost reduction.

The roots of this, Willetts says, lie in the way telecoms businesses were originally structured, and how they ran their businesses.

“A few years ago, if we weren’t exactly in a monopoly situation then it was one of managed competition. There were regulated rates of return and so there was an incentive to increase operational expenditure because operators could put the prices up accordingly.

“The industry had no incentive to be highly efficient.  Allied to this, in the run up to 2000 there was also a belief in unlimited traffic growth, and operators were looking at revenues not cost. Only in the last three to four years have people been looking at the telco business as they would at any other business.

“That internal focus has come in the last two to three years, looking at how a business was organised and how it worked. And what people found was in the most part it was working as lots of little businesses — one for data, for voice, for internet, etc. I make the analogy to a supermarket in that it was the equivalent to having the greengrocery department next to the household wares and having a different checkout and billing system for each.

“Admittedly a lot of that mentality came from the fixed line operators. But one mobile operator for example has got one of everything. It has an Ericsson sub-network and a Nortel sub-network and going from one to the other is like dialling network to network. So although the mobile community is not as bad as some fixed operators it has had the same kind of mentality, being organised around the networks not the customer.”

Mobile has been through some pretty significant cost savings in he last two to three years and that has led to people looking at the business and saying “we can do better,” Willetts says.
Organisations have begun to begin with the customer, and drive their requirements through the business, instead of operating in little departmental islands. This in turn means that operators have had to look at what technology makes the process work, not the other way round. There is also going to be increasing pressure on margins and introducing services quicker.

“Mobile has had the luxury of high margins but in a saturated market new revenues will not come on stream so easily. You need cost containment and to do things faster. If a person has got to go to each little fiefdom and make changes to each standalone system, it takes a year to get anything out the door, ” Willetts sums up.

Putting this all together, planning all the systems that make an enterprise work, as Willetts puts it (“I don’t like the term OSS”) means the amalgamation of all the systems in an operator — customer care, billing, service assurance, network management, fault labelling and so on. With this in mind the TMF is in the process of producing a document called the Telecom Application Map, which is a picture of what it thinks the landscape is.  Mobile Europe has seen an advance copy, and we can tell you that it is not simple. Far from it. But Willetts says such work on definition is essential as more and more functions within an operator come to rely on and take an interest in the OSS.

“Say a marketing guy has a scheme or content or a free service to promote, and needs a view of customer activity, of service availability and what billing systems can deliver. Even a simple offer can mean the operations folk say, ‘That’s difficult’, but marketing people are talking to us about the art of the possible.”

Such cooperation has not just been within operators, equipment vendors too have begun to come together to address operator concerns, although it has taken a little coaxing.

“But in times where everyone is tight for cash, that brings people to the table. Cooperation is about reducing the cost of deployment in multi-vendor environments. If Nortel is supplying into an Ericsson environment the cost of integration is higher than it should be.”

Willetts takes up the Vodafone theme. “Vodafone is rationalising its infrastructure across 80 countries, looking for a common architecture. It is using the (TMF defined) NGOSS to reinvent the architecture. And we are seeing other operators doing the same thing. NGOSS is a process map, a data map and an application map to get a common view of all the pieces and a common way of integrating.

“The impact is there is not a supplier that has not got Vodafone at the top of their list. If a supplier is in with Vodafone then he has a large landscape to address so there is a lot of bending over backwards to meet demands.”

But there is another imperative driving OSS development, and that is in fact, according to one industry expert, coming from outside the mobile industry. Not only that but OSS may be vital in the decline of the mobile industry itself in the face of an aggressive push from fixed line multi-service players.

Competition and OSS
Brian Buggy, senior vp OSS Architecture at Cramer, says that fixed line service providers’ OSS is way in advance of their mobile counterparts, as a result of already coping with triple and quadruple play environments.

“The big thing happening is that people are going from circuit to packet switched, and fixed operators from a network with one or two services to VoIP, high speed VSL, Internet access and all the rest. And it’s taking place now. The big fixed line players have an OSS structure sophisticated enough to commoditise and resell mobile telephony, but integrated with their other three plays. They have the technical horse power to stretch into the mobile business.

“Are the mobile people really aware of the threat coming over the hill, that the fixed providers want to control all the telco spending of a resident?
 
There is some evidence from Japan that they are, where NTT DoCoMo has started to offer a form of  integrated fixed and wireless service mobility, involving the docking of a 3G handset into a homephone environment.

“I can see many other applications,” Buggy says, “But it takes the back office of a fixed operator to do that. Mobile operators don’t have the technical sophistication to do that. It’s not a symmetrical competition. BT for instance has already launched mobile services without building a network and I don’t see a mechanism by which the wireless guys could reverse the threat.”

The other view is that the marketing power of the mobile operators will come out on top in the long run.

“But the problem is you have to deliver,” counters Buggy. “If you don’t have the mechanism of delivery then you  are not going to part of the future.” This will lead to mobile operators looking at how they can partner with other players, and at the modes of that partnership. To do that, OSS will be key.

“Before they invest in OSS they need to know what it is you want to make. It needs a change of behaviour from mobile operators first. Is the product catalogue of the mobile operator big enough to last them a long time?
They have been very successful with a small product range, but they have only been around for sixteen years, and need to outlast the initial wave of enthusiasm.”

Operators who may be feeling more relaxed about this are those like France Telecom, T-Mobile and Telecom Italia which can exploit fixed and mobile assets.
 
“If you have fixed and mobile assets then they are feeling pretty happy about themselves. If they are pure play mobile then they have more to worry about, they don’t have the wireline experience and the sophisticated OSS.
But even operators with fixed assets in one country don’t have it in other countries. So what do they do there?

“We have seen a one-stop approach by the telcos who have invested in a very focused and inflexible service delivery platform. Because there are so few products they don’t need a complex environment behind service delivery.
Investment in infrastructure for a service-ready network for three and four play is on a different scale and sophistication to that of a mobile operator.”

Mobile has been a niche application, Buggy says, and is still behaving like one. “When you look at video you are talking about making one minute editions of a popular soap. The rest of the world is thinking about high-definition video with hundreds of channels.

“There is a real danger of over-investing in certain services rather than leveraging services from sister fixed companies. In the long term as a consumer I want transparency between all my services and that transparency is what OSS has to do. The credibility of the wireless operators is about how they are going to get into your home and exploit the bigger bandwiths available. OSS will be key to that.”

And, if you follow the argument, key to their survival. It’s perhaps a slightly alarmist vision but even if you believe only a little of it, then it shows how high up the list of priorities OSS has climbed.