Mobile operators vs over-the-top players Milking your cash cow dry without finding new streams of revenue will lead you to the same situation that many mobile operators face today. With no growth left in voice and SMS, how can companies like Vodafone and AT&T tap into the long tail of mobile data revenue? Why is a more effective storytelling process key to making this transition a successful one?

1. A!lied Storytelling in Marketing
Operator pricing & OTT:
When storytelling is a matter
of survival
M obile phone’s primary usage shifted from voice to data back in
2010. Industry data shows that global voice traffic has been
stagnant since 2010 while data traffic has been increasing exponentially. In
2013 data will surpass voice in revenues as well. The successful operator of
tomorrow is the one built around data.
Per-minute, per-event charging models will be rendered useless and unless
operators adopt a more customer-focused mindset, they leave themselves
open to exploitation by over-the-top (OTT) players. “It’s a strange business
model at present where telcos invest huge amounts of money to upgrade
data networks and players like YouTube, who gets the revenue, don’t pay
anything.” Vodafone India’s Managing Director and Chief Executive Officer
Marten Pieters.
"Around 18 months ago we started noticing that people were using more
Skype, people were using Viber and What's App," Vodafone Chief Executive
Vittorio Colao told the Mobile World Congress industry meeting, referring to
three apps that let users route phone calls or messages through data plans.
"And our SMS revenues started going down. So we asked them why and it
was a very simple answer. It was because it was free," he said. "So we
decided to turn the model upside down."
OTT players are eating up the market with messaging and content services
that drive revenues off the operator bill. As players like Google have already
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2. shown in the fixed line market, incumbents are seriously exposed to game
changing shifts. In response, mobile operators need to evolve their charging
models or end up left on the shelf like the record labels in the 90s.
Sustaining vs Disruptive
Operators have 3 options in mitigating the threat from OTTs:
1. Produce their own content or charge for added value (e.g. 4G)
2. Sign more deals with OTTs
3. Charge more
The first of the two options are reactive strategies aimed at sustaining the
current business model. Those are the more comfortable options as they
require the least internal change. Those options also leave the operators
more vulnerable to players like Google disrupting the market.
The third option holds the most promise for operators. To get mobile prices
back up, some operators are planning to charge a premium for faster 4G
networks. EE, the first to launch 4G in Britain, has chosen to charge higher
prices for new service, but has not disclosed how many customers it has
won.
In Norway, Telenor increased ARPU by 2% in 2012 by charging more
(compared to a 4% decline in rival Teliasonera). Telenor found that data
usage varied widely by user and there was a significant number of customers
willing to pay extra for more data allowances (Telenor’s standard offering was
400Mb per month).
Young people are the heaviest users of data. One of the reasons youth ARPU
has been in decline since 2008 is because operators have been preoccupied
with monetizing voice & text while ignoring the potential demand for more
expansive data offerings. Because operators are not providing data tariffs that
fulfill youth mobile behavior, they are both losing the youth market and its
revenues.
Youth market leads the way
Youth are leading the way in defining the operator charging models of the
future.
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3. What youth are demanding today will be the mainstay of the mass market in
3-5 years. If operators want to stay relevant to the market they will need to
better understand how these change agents are using their mobile phones on
a daily basis.
Prior to launching the Red tariffs, Vodafone research revealed that what
customers really wanted was a “great network” and “freedom to
communicate.” Rather than cool ad campaigns, more content from the
operator or deals with OTTs, youth want the common things done
uncommonly well without the fear of uncontrolled spending.
Operators should avoid the mistake of offering “youth tariffs.” The future lies
in providing charging models that cater for a shift in mobile behavior lead by
the youth market today.
35% of youth mobile spending is already going to OTT players through
mobile music, games, video and other forms of data usage (source Mobile
Youth report 2013). The current trend in OTT usage isn’t about youth seeking
out ways to get content cheaper or for free, it’s about youth seeking control.
Current operator data plans are not conducive to allowing youth the “freedom
to communicate” in CEO Colao’s words.
Youth want operators to address their fundamental pain points e.g fear of
going over data limits, exceeding personal budgets and lack of transparency
in data tariffs. If operators are able to get the youth market right this year, they
will lay the foundations of the mass market for the next five.
Aren’t youth price sensitive?
Operators have continued to believe the myth that youth only care about
price because the industry has not created anything else for youth to care
about. Very few operators have actually created steps to involve young
people in the storytelling process. Operators have partnered with ad agencies
when it should have partnered with youth. This resulted in wasteful spending
on big budget ad campaigns that yield no sustainable results.
Winning and keeping youth isn’t about creative campaigns and big media
buys but about generating positive recommendation from existing customers.
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4. Most operators have negative NPS. New data services and charging models
aren’t the silver bullets to fix negative NPS scores, they are an opportunity to
do so.
As operators launch new data tariffs, the risk is using cool advertising to sell
them to influencers without fixing the NPS first. In the 21st century, the
marketing needs to be baked into the product. A good product is based on
solid fundamentals - reliable networks, billing control and transparency. Youth
won’t talk about tariffs, they’ll talk about these pain points and these are the
key drivers behind churn and influence.
Changing its external story from price to reliability and user-control changes
the operator’s price elasticity. However, before a company can change its
external story, it needs to change the story it tells internally. In an industry
that has come to believe the fiction of price-based marketing, operators need
to overcome the fact that it has turned itself into a mere commodity.
***
Discussion points:
As products and technology become obsolete at an accelerated pace, your
brand story will out last them all. By focusing on creating better stories
instead of better products, profit leaders like Apple can disrupt markets with
new product lines. Apple’s CEO Tim Cook said, “Our base philosophy is to
never fear cannibalization. If we do, somebody else will just cannibalize it.”
To be able to take risks by entering new markets, releasing new products/
services, or launching new tariff plans a company needs to have a solid base
in its brand story.
1. How can you improve your brand story to increase your price elasticity?
2. What stories are customers telling each other about your brand? Is it the
same as the one you’re telling each other internally?
3. Which segment of the market should you partner with to improve your
brand story?
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