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Why customer value propositions really matter - A focus on the telecom services sector
Why customer value propositions really matter - A focus on the telecom services sector
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Why customer value propositions really matter - A focus on the telecom services sector

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This strategic white paper, written in 2010, examines how the traditional business of communication service providers is under threat from innovative, Web-based services, delivered 'over-the-top' of Internet access.

To stay in the game, service providers and their ICT partners must find a way to deliver more effective customer value propositions, that offer top and bottom-line impact. This can be achieved by using a customer-focused, decision-driven approach to deliver the offers that users really want, quickly and effectively.

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Why customer value propositions really matter - A focus on the telecom services sector

  1. 1.                                                  Strategic  White  Paper    Why  customer  value  propositions  really  matter!     Delivering  communication,  IT  and  media  offers  that       people  want  to  buy  
  2. 2.      www.merkadoservices.com  Executive  Summary   This   fundamental   yet   complex   development     process   must   be   managed   in   a   dynamic   and  Today’s   end-­‐users   have   a   growing   choice   of   disruptive   context,   where   innovation   and  Web-­‐based   services   to   choose   from   to   meet   competition   can   come   from   anywhere,   at  their   broadening   needs.   These   services   are   anytime.    delivered   over-­‐the-­‐top   of   telecom   network    service  provider’s  Internet  access.  As  a  result   In  this  market  context,  Product  and  Marketing  of   the   growth   in   mobile   Internet   services,   leaders   can   improve   their   service/product  evolving   user   behaviour   and   changing   performance   by   executing   key   decisions  expectations,   end-­‐users   no   longer   look   to   better  and  faster  than  the  competition.    network   services   providers   to   fulfil   their    needs   in   areas   such   as   communication,   This   critical,   competitive   imperative   can   be  collaboration,   entertainment,   information   and   systematically   achieved   by   using   a   full   set   of  productivity.   integrated,   decision-­‐driven   go-­‐to-­‐market     methods,   to   develop   and   deliver   more  These  market  changes  have  pushed  the  value   relevant,  customer-­‐driven  value  propositions.  away   from   the   networks   used   to   deliver   This   approach   offers   Product   and   Marketing  services,  to  the  services  themselves,  allowing   leaders   at   service   providers   and   their   ICT  more   companies   to   compete   for   end   partners  several  benefits  including:  customers  using  a  range  of  business  models.        A   clear,   customer-­‐driven   approach   for  In   a   world   where   the   growth   of   traditional   developing  new  offers  services  is  unlikely  for  most  service  providers,    A   systematic   way   to   make   quick   and  and  cost  reduction  is  not  enough  to  compete   effective   decisions   resulting   in   better  over   the   long   term,   focusing   on   developing   performing,  market-­‐driven  offers  better,  customer-­‐centric  value  propositions  is    The  means  to  train  managers  and  staff  in  a  key  value-­‐creation  strategy,  offering  top  and   the   techniques   for   developing   effective  bottom  line  impact.   customer  value  propositions      For  Product  and  Marketing  leaders  at  service   Applied   effectively,   this   methodical   yet  providers   and   ICT1   vendors,   designing   and   practical  approach  helps  service  providers  and  delivering   effective   customer   value   ICT  vendor  partners  deliver  the  service  offers  propositions   requires   a   coordinated   blend   of   that   their   customers   really   want,   in   turn  diverse   skills   and   activities,   working   across   helping   them   achieve   a   sustainable,  organizational   functions,   yet   firmly   focused   competitive   advantage   within   the   quickly  on  customer  needs.  This  involves  leveraging  a   changing   market   for   communication,   IT   and  range   of   inbound   and   outbound   marketing   media  services.      activities,   used   respectively   to   understand    market   issues   and   needs   and   facilitate   the    commercialization   of   subsequent   customer  value  propositions.                                                                                                                  1  ICT:  Information  and  communication  technology  Why  customer  value  propositions  really  matter!   2  
  3. 3.      Table  of  Contents    Executive  Summary ...................................................................................................................... 2  Introduction ................................................................................................................................. 4  Why  are  telecom  service  providers  losing  their  competitive  advantage? ...................................... 4  Service  convergence............................................................................................................................................4  Mobile  services  revolution ..................................................................................................................................5  Evolving  user  behaviour ......................................................................................................................................6  What  are  the  consequences  of  current  market  trends  for  telecom  service  providers? .................. 7  Decline  of  telecom  network  infrastructure-­‐centric  services ...............................................................................7  Commoditization  of  network  infrastructure .......................................................................................................7  Changing  business  models ..................................................................................................................................7  Emergence  of  two  kinds  of  service  providers .....................................................................................................8   Network  communication  service  providers .....................................................................................................8   Specialized  service  providers ...........................................................................................................................8  Why  customer  value  propositions  have  become  strategic?........................................................... 9  What  specific  assets  should  service  providers  use  to  develop  new  customer  value  propositions? .. 9  Company  brand ...................................................................................................................................................9  Billing  relationship...............................................................................................................................................9  Customer  relationship  experience ......................................................................................................................9  Subscriber  data..................................................................................................................................................10  Service  policy  management ..............................................................................................................................10  How  to  create  better  customer  value  propositions? ................................................................... 10  Two  examples  of  effective  customer  value  propositions..................................................................................10   Freebox  Consumer  Triple-­‐Play.......................................................................................................................10   BT  Business  for  SMBs ....................................................................................................................................11  Decision-­‐driven,  go-­‐to-­‐market  methods ...........................................................................................................13  
  4. 4.      www.merkadoservices.com  Introduction   Why   are   telecom   service     providers   losing   their   competitive  The   total   number   of   mobile   subscribers  worldwide   is   expected   exceed   5   Billion   in   advantage?  2010i   ;  having  already  far  outpacing  fixed  line    service  usage.  Despite  a  worldwide  decline  in   Users   no   longer   look   to   traditional   telecom  voice   revenue   due   to   competition   from   low-­‐ and   Internet   service   providers   to   fulfil   their  cost   IP   voice   services,   total   mobile   service   needs   with   specific   services   and   content.  revenues   are   forecasted   to   exceed   $1   trillion   Instead,   they   can   chose   from   an   ever-­‐growing  by  2013ii.  Over  this  period  mobile  data  service   range   of   innovative   Web   services,   often  revenue   are   expected   to   grow   10%   annually,   delivered   “over-­‐the-­‐top”   (OTT)   of   service  reaching  $330  B  by  2013,  or  1/3  of  the  total.   provider   offers,   usually   bypassing   existing     billing   and   customer   care   relationships,   using  While   nearly   90%   of   today’s   mobile   data   only  service  providers’  Internet  connections.    revenueiii  comes  from  basic  Internet  access,  in    a  market  where  both  fixed  or  mobile  Internet   This   shift   in   the   marketplace   is   a   result   of  connectivity   is   less   and   less   differentiable,   various  related  trends,  including:    additional   services   are   what   customers   see,   Service  convergence  what   they   appreciate   and   what   they   really    value.    Users   have   access   to   a   growing   range   of     services,   from   a   wide   variety   of   Web-­‐However,   under   the   pressures   of   accelerated   based   service   providers.   Such   services  innovation   coming   from   a   multitude   of   new   cater   to   a   growing   range   of   needs,  services   delivered   “over-­‐the-­‐top”   of   existing   including   communication   (ex.   calling,  Internet   access,   many   telecom   network   messaging;   www.skype.com),   news   (ex.  service   providers   are   finding   it   difficult   to   www.yahoo.co.uk),   entertainment   (ex.  compete.  In  a  market  where  communications,   music,   TV;   www.deezer.com,  IT   and   media   services   are   converging   more   www.hulu.com),   information   (ex.   local  day-­‐by-­‐day,   they   are   now   faced   with   a   information;   www.google.com/latitude),  growing   range   of   non-­‐traditional,   Web-­‐based   personal   IT   (ex.   file   storage;  competitors.  Within  this  context  many  service   www.dropbox.com),   and   work  providers   are   slowly   loosing   their   once   productivity   (ex.   office   documents;  unrivalled,  competitive  advantage.   http://docs.google.com).   Such   services     also   offer   users   a   mix   of   communication  In  this  ever-­‐changing  market,  telecom  service   and   collaborative   elements,   facilitating  providers   who   are   unable   to   find   ways   to   usage  and  interaction  with  others.  differentiate   their   service   offers   by   quickly    and   consistently   delivering   new   and    Most   services   are   available   “over-­‐the-­‐top”  innovative,   customer-­‐centric   value   of   telecom   service   providers’   offers,   and  propositions,   may   be   relegated   to   simple   are   delivered   using   any   standard   Internet  carriers   of   data   traffic,   while   Web-­‐based   connection.   This   connection   acts   a   direct  companies   capture   the   bulk   of   new   services   channel   to   market   for   the   Web-­‐based  revenue  and  profit.   services,   offering   little   if   any   additional   value-­‐add   from   the   network   service   provider.  Why  customer  value  propositions  really  matter!   4  
  5. 5.      www.merkadoservices.com     Underpinned   by   the   Web,   users   can   Figure  1  –  Global  Communication  Subscriptions   access   their   personalized   set   of   services   through   a   range   of   different   device   platforms,   according   to   their   context   and   preferences   at   any   given   moment   or   place,   with   little   importance   for   the   Internet  connection  being  used.      While  certain  network  service  providers  have  tried   to   compete   with   OTT   players,   most   have  had   little   success.   How   can   telecom   service  providers   play   more   effectively   within   this  converging  services  market?  Mobile  services  revolution     Driven  by  mobile  Internet  devices  like  the   Apple  iPhone,  the  wireless  web  is  reaching   maturity.  This  has  largely  been  enabled  by     a   slick   user   experience,   offering   easy   access   to   a   large   range   of   Internet   ‘Apps’     dedicated  for  mobile  use.  As  early  leaders    The   number   of   connected   devices   is   in   mobile   Internet   usage,   Japanese   mobile   exploding   across   diverse   industries.   Internet   services   spend   grew   28%   yearly   Mobile   Internet   applications   have   between   2000   and   2008.   Their   share   of   emerged   in   areas   like   car   electronics,   spend   on   non-­‐‘mobile   data   access’   grew   transactional   services,   healthcare   and   to  34%  of  the  total,  up  from  15%  over  the   home   appliances.   Morgan   Stanley   (See   same  period.     iii Figure   2)   estimates   that   between   2010-­‐   2015   the   total   number   of   connected   More   and   more   people   are   adopting   devices   will   exceed   10   Billion   iii,   while   mobile  communications  at  the  expense  of   Ericsson   estimates   that   this   will   grow   to   fixed   line   services.   There   are   already   50  Billion  by  2020iv.   close   to   70   mobile   subscriptions   per   Figure 2: Connected Devices   100   people   worldwide,   compared   to   19  for  fixed  telephony  (see  Figure  1).   By  the  end  of  2010  the  ITU  expected   over   5   Billion   mobile   phone   users   worldwidei.   Furthermore,   in   many   markets   in   emerging   regions   like   Africa,   Asia,   Middle   East   and   Latin   America,   and   in   hard-­‐to-­‐reach   zones   worldwide   where   fixed-­‐line   services   and   Internet   usage   is   low,   mobile   services   will   continue   surging.   Many   people  in  these  areas  will  experience   the   Web   for   the   first   time   thanks   to   wireless  service  access.   Source: Morgan Stanley, Economy + Internet Trends, Apr 2010Why  customer  value  propositions  really  matter!   5  
  6. 6.      www.merkadoservices.com   Mobile   service   innovation   is   accelerating.   services  are  available  on-­‐demand,  in  real-­‐ The   mobile   development   community   is   time,  and  with  low  /  no  sign-­‐up  fees.   wide  reaching  and  highly  active.  The  Apple    Users   are   actively   creating   and   sharing   App  Store,  which  opened  in  July  2008  and   content   via   the   Internet.   While   the   early   currently   operates   in   77   countries,   now   Web   was   characterized   by   companies   offers   over   185   000   apps   created   mostly   publishing   media   and   advertising,   today’s   by   3rd   party   developers   from   around   the   Web   gives   people   the   ability   to   directly   world.   As   of   April   2010,   users   had   contribute   as   ‘creators’   of   content,   downloaded   over   4   Billion   appsv.   Other   personal  opinions  and  other  forms  of  self-­‐ mobile   app   stores   serving   Android,   expression   with   tools   such   as   chat   groups,   Blackberry,   and   Windows   Mobile   devices   blogs,  video  and  photo  sharing  sites,  social   have   seen   similar   growth   trends   on   a   network   services.   This   has   spawned   a   smaller  scale.   mass   participatory   culture   previously     reserved  for  an  elite  few.   In  an  effort  to  play  a  greater  role  in  mobile     service   development,   a   group   of   leading    Virtual   interactions   are   becoming   the   global   telecom   network   service   providers   norm.   People   around   the   world,   are   and   equipment   manufacturers   including   growing   accustom   to   interacting   with   Orange,  Telefónica,  Vodafone,  AT&T,  NTT,   others   remotely,   in   personal   and   China  Mobile,  Samsung  and  Sony  Ericsson,   professional  contexts.  This  is  illustrated  by   recently   founded   the   ‘Wholesale   the   growing   popularity   of   blogs,   social   Application   Community’   networking   services   (ex.   Facebook,   (www.wholesaleappcommunity.com).  The   Twitter,   LinkedIn)   and   other   collaborative   WAC’s   primary   objective   is   to   establish   a   tools  (ex.  Wikis,  shared  workspaces,  etc.).   simple   route   to   market   for   developers,   in   By   breaking   the   barriers   of   time   and   turn,   providing   access   to   the   latest   and   space,   these   tools   are   changing   the   way   widest   range   of   innovative   applications   people  relate  with  each  other.   and   services   to   as   many   customers   as     possible  worldwide.        Users   expect   greater   service     customization   and   management.   As   a  Initiatives  like  the  WAC  offer  service  providers   result  of  richer,  more  interactive  services,  potential   access   to   Billions   of   customers   users   have   come   to   expect   open   and  worldwide.   How   can   service   provider   flexible   service   environments   that   can   be  effectively   leverage   their   respective   strengths   tailored,   self-­‐configured   and   managed   by  and   assets   to   improve   their   competitive   each  individual  in  real-­‐time,  in  a  way  that  position?       makes  the  most  sense  to  them.    Evolving  user  behaviour   While  most  telecom  service  providers  already     have   access   to   a   rich   set   of   customer   data   People   expect   easy   access   to   a   growing   including   user   profile,   preferences   and   range   of   services.   Users   now   have   access   behaviour,   most   have   been   relatively   to   an   ever   increasing   set   of   ‘Web   2.0’   unsuccessful   in   launching   or   selling   effective   services  and  applications  via  the  Internet,   Web   2.0   services.   How   can   such   service   fulfilling   needs   such   as   communication,   providers   effectively   deliver   compelling   socializing,   entertainment,   gaming,   services  that  are  tuned  to  each  user’s  evolving   personal   and   business   productivity,   desires,  in  a  profitable  manner?   education,   security   and   more.   Most  Why  customer  value  propositions  really  matter!   6  
  7. 7.      www.merkadoservices.com  What   are   the   consequences   of   Commoditization   of   network  current   market   trends   for   infrastructure    telecom  service  providers?   While   service   innovation   continues,     supported   by   IP-­‐based   software  Today’s   fast   changing   services   market   has   development,   the   network   infrastructure  been   made   possible   by   the   use   of   open-­‐ used   to   build-­‐out   voice   and   data   transport  standards  software  for  developing  flexible  IP-­‐ networks  has  become  more  standardized  and  based   services,   quickly   and   cost-­‐effectively.   widespread.  As  a  result  of  consolidation  in  the  This   is   pushing   the   value   from   the   network   service   provider   sector,   combined   with   the  infrastructure   used   to   deliver   services   to   the   arrival   of   lower-­‐cost   ICT   network   equipment  services  themselves,  while  allowing  a  growing   suppliers,   network   equipment   revenue   and  number   of   companies   from   all   industries   to   margins   have   fallen,   signalling   its  participate   in   the   value   chain.   This   has   lead   to   commoditization.    a  repositioning  of  many  service  providers  and    ICT  vendors.     In   an   effort   to   further   control   CAPEX   and     OPEX,   many   services   providers   have   begun  These  changes  in  the  ICT  landscape  is  a  result   outsourcing   their   network   operations   to   3rd  of  different  factors:   parties   and   in   some   cases   have   started   sharing   infrastructure   among   each   other.  Decline   of   telecom   network   These   changes   further   demonstrate   that  infrastructure-­‐centric  services   service   differentiation   can   no   longer   be   based     only   on   specific   infrastructure   deployment  Traditional,   proprietary   network-­‐centric   strategies.    services   models   (ex.   IN   services,   PSTN   Voice,  closed   messaging   and   other   data   Changing  business  models  communication  networks)  are  in  decline.  They    cannot   deliver   the   flexibility,   quick   time-­‐to-­‐ New   competitors   –   often   Web-­‐based  market   or   cost   advantages   offered   by   many   companies   or   integrated   hardware/software  open-­‐standards,  software-­‐based  services.     manufacturers  –  are  offering  a  growing  range     of   OTT   services,   supported   by   innovative  On   the   other   hand,   most   OTT   services   are   business   models,   including   white-­‐labelling,  delivered   using   IP   environments   via   the   fee  /  commission-­‐based  transactions,  revenue  Internet.   IP-­‐based   services,   like   consumer   and   sharing,  and  advertising-­‐sponsorship.    business   IP   voice,   related   calling   functions   or    IP   contact   centres,   are   supported   by   a   large   This   growing   range   of   business   models  base   of   developers,   offering   quick   and   easy   enables   the   effective   commercialization   of  evolution,   thus   lowering   operation   and   customer-­‐driven   services   and   applications   by  maintenance  costs.     easily   satisfying   the   varied   interests   of   the     different   parties   involved   while   mitigating  Open-­‐standards,   IP-­‐based   software   has   risks.  With  time,  many  of  these  new  business  become   the   new   fabric   for   service   models   will   become   common   across   service  development.   Service   providers   and   ICT   providers  of  all  types.  vendors   who   cannot   evolve   in   this   changing    landscape   are   slowly   being   marginalized   as    their   services   lose   relevance   in   an   ever-­‐changing  marketplace.  Why  customer  value  propositions  really  matter!   7  
  8. 8.      www.merkadoservices.com  Emergence   of   two   kinds   of   service   customer-­‐driven   solutions,   fulfilling   their  providers   clients’   particular   needs.   This   may   require     joint   collaboration   with   any   number   of  As   a   result   of   current   market   dynamics,   relevant,   best-­‐of-­‐breed   service   partners   from  service   providers   are   beginning   to   cluster   into   different   industries,   many   non-­‐technology-­‐two  main  types:   based,   in   order   to   deliver   the   right   customer     solutions,   in   a   consistent   manner.   This   requires   using   different   business   models   to  Network  communication  service  providers   satisfy   each   party’s   interests,   while     maximising   their   unique   assets.   Where  Providers   of   reliable,   high   quality   network   necessary,   this   also   means   buying   network  connectivity   services   including   proprietary   communication  services  from  other  dedicated  voice,   Internet   and   other   dedicated   data   service   providers,   moving   away   from   such  communications   networks.   Their   focus   is   on   non-­‐strategic  activities.  assuring   a   consistent   connection   for   their    network-­‐based  communications  services.  This   While   traditional   network   communication  includes   guaranteed   service   availability,   services  providers  will  continue  to  exist,  faced  service   coverage   or   any   other   relevant   SLAs,   with   market   changes,   many   will   need   to  related   to   their   network   service   offers.   They   refocus   on   delivering   more   specialized   and  might   sell   directly   to   a   broad   range   of   end-­‐ relevant   customer   value   propositions,   as   a  customers,   including   consumers,   businesses   key  strategy  to  compete  more  effectively  over  or   governments,   or   indirectly   as   wholesalers   the  long  term.    to   other   specialized   firms   including   niche  service  providers  and  large  private  and  public  organizations.   While   some   resources   will   be  dedicated   to   managing   and   developing   their  product   portfolio,   greater   efforts   will   be  placed   on   assuring   operational   excellence   of  their  services  network  in  order  to  assure  high  scalability   and   production   at   the   lowest  possible  cost.    Specialized  service  providers    Providers   of   specialized   services   fulfilling   the  particular  needs  of  targeted  customer  groups.  Specialized   service   providers   will   focus   on  delivering   targeted   and   effective   value  propositions   offering   a   better   customer  experience  through  greater  service  relevance,  simplicity   and   higher   overall   customer  satisfaction.  They  own  or  will  try  to  develop  a  recognized   brand   and   positioning,   customer  relationship,   and   local   and/or   virtual  presences   in   order   best   serve   their   specific  target   markets.   Their   primary   focus   will   be   on  the   development,   marketing   and   selling   of  Why  customer  value  propositions  really  matter!   8  
  9. 9.      www.merkadoservices.com  Why  customer  value  propositions   problems,   motivations,   expectations,   preferences   and   behaviour,   which   in   turn  have  become  strategic?   conditions   the   solutions   to   these   issues   and     what   they   are   willing   to   pay   someone   (i.e.   a  In   light   of   evolving   user   expectations   and   specialized   service   provider)   to   help   resolve  continued   innovation   in   a   nearly   border-­‐free   them.  market   for   over-­‐the-­‐top   mobile   and   Web-­‐  based   services,   most   telecom   service   While   the   idea   of   developing   more   relevant  providers   worldwide   can   no   longer   rely   only   and   compelling   value   propositions   seems  on   existing   network-­‐centric   services   to   apparent,   judging   by   the   range   of   similar,  generate   top   and   bottom   line   growth.   complex   and   often   technology-­‐centric  Moreover,  for  all  but  a  few  service  providers,   services   in   markets   today,   it   seems   that  focusing   on   lowering   network   delivery   costs   further  progress  is  possible.  through   diverse   outsourcing   strategies   is   not    enough   to   ensure   a   long-­‐term,   sustainable   Finally,  during  this  time  service  providers  have  competitive  advantage.     built-­‐up  a  unique  set  of  assets,  which  must  be     used   to   stay   competitive   when   designing   the  Many  regulators,  which  have  already  allowed   next  generation  of  customer-­‐driven  offers.  infrastructure  sharing  among  network  service    providers   while   forcing   them   to   wholesale    network   access   to   new   entrants,   are   now  pushing   strongly   for   Net   neutrality.   If   What   specific   assets   should  successful,   this   ruling   will   mean   that   telecom   service   providers   use   to   develop  network   providers   cannot   even   receive   rent   new  customer  value  propositions?  for   bandwidth   usage   from   Web-­‐based    content  providers.   Prior   to   the   growth   of   the   Web,   telecom     service   providers   were   the   main   suppliers   of  In   this   context,   Product   and   Marketing   communication   and   IT   services.   During   this  leaders   at   telecom   network   service   providers   time   they   developed   long-­‐standing   customer  and   their   ICT   vendor   partners   need   to   find   relationships,   and   gained   a   variety   of   specific  more   distinctive   and   strategic   ways   to   assets  that  are  hard  to  copy.  This  includes:  compete.   If   growth   of   traditional   services   is  unlikely   and   squeezing   costs   or   claiming   Company  brand  subsidies   is   not   enough,   the   focus   must   turn    High   brand   awareness   within   current  to   developing   and   managing   more   relevant,   markets,   an   established   brand-­‐promise,  customer-­‐centric   service   offers   as   a   key   an   existing   customer   base   and   a   varying  strategy  to  drive  top  and  bottom-­‐line  growth   degree  of  market  power.  and   re-­‐establish   a   sustainable,   competitive  advantage.   Billing  relationship      A   trusted   client-­‐provider   billing  This   requires   offering   specific   customer   relationship,   including   existing   real-­‐time  groups   –   for   example   homeowners,   nomads,   transaction   capabilities,   credit   guarantee  grand   parents,   or   control   seekers   -­‐   mechanisms,   purchase   history   and   buyer  discernable   value   through   solutions   profile  data.  addressing   their   distinct   needs   and   issues.  This   is   driven   by   gaining   an   acute   sense   of   Customer  relationship  experience  what   those   people   and   organizations   value,    An   established,   personal   customer  through   insights   into   their   specific   needs,   relationship   experience   across   a   variety   of  Why  customer  value  propositions  really  matter!   9  
  10. 10.      www.merkadoservices.com   touch-­‐points,   including   dedicated   strategic  for  business  growth,  yet  it  remains  a   customer   representatives,   retail   stores,   challenge   for   many   Product   and   Marketing   contact  centre  and  customer  Web  portals.   leaders   at   service   providers   and   technology   This   covers   the   personal   relationship   companies.   It   requires   gaining   a   deep   experiences   before,   during   and   after   a   understanding  of  the  specific  problems,  issues   client   subscribes   to   any   services.   It   may   and   needs   of   potential   customer   groups,   in   also   include   a   documented   customer   order   to   then   quickly   design   and   deliver   history   combined   with   an   implicit   effective   customer   solutions   that   offer   clear   knowledge  of  the  local  market  context.   value,   all   at   the   right   time.   What   are   some   examples  of  good  value  propositions?    Subscriber  data   A   collection   of   customer   metadata   Two   examples   of   effective   customer   including   service   registration   details,   user   value  propositions   preferences   and   profiles,   usage   statistics,   address  book,  geographic  location  (in  real-­‐ Freebox  Consumer  Triple-­‐Play   time   for   mobile   services)   and   purchase     and  payment  history.   French   Internet   service   provider,   Free   (www.free.fr)   launched   its   Freebox  Service  policy  management   broadband,   triple-­‐play   offer   at   the   end   of   The   ability   to   define   and   actively   manage   2003.    At  that  time,  it  was  the  first  ISP  to  offer   network   policies   (ex.   Uptime   guarantees,   French   consumers   an   all-­‐inclusive   package   SLA   parameters,   traffic   prioritization),   including   unlimited   broadband   Internet   application   policies   (ex.   Allowed   services   (2MB/s   download   /   512kB/s   upload   speeds),   and   options,   service   limits,   other   TV   and   unlimited   national   calling,   all   for   just   conditional   parameters)   and   subscriber   €29.99/mth   (see   figure   3).   This   was   in   stark   policies   (ex.   promotional   tariffs,   usage   contrast   to   the   incumbent   service   provider,   rewards),  on  a  per-­‐customer  basis.   Orange’s   (previously   Wanadoo)   2-­‐8MB/s     broadband  Internet-­‐only  offer  for  €26/mth.  These   assets   are   a   combination   of   hard   and  soft  attributes  and  are  valuable  so  far  as  they   Figure  3  –  Freebox  Triple  Play  Offer  can   be   used   to   enhance   customer  propositions   by   offering   appreciable   added  value.      Using   these   assts   to   create   effective,  customer-­‐centric   value   propositions   can   help    lead  to  more  satisfied  customers  and  greater  loyalty,   helping   to   fuel   business   growth.   The    key   question   then   becomes,   “How   does   one   Free’s   simple,   yet   innovative   offer   quickly  create  better  customer  value  propositions?”   won   over   new   customers   who   were   tired   of     searching  through  a  plethora  of  different  and     complicated   offers   to   get   what   they   needed,  How   to   create   better   customer   while   ultimately   paying   more   for   less.   During   the   first   three   years   they   more   than   doubled  value  propositions?     their   market   share,   mostly   at   the   expense   of     the  incumbent  service  provider  Orange.    Creating   the   product/service   offers   that    people   and   organizations   really   value   is  Why  customer  value  propositions  really  matter!   10  
  11. 11.      www.merkadoservices.com  By   continuing   to   add   value   to   the   Freebox   BT  Business  for  SMBs  offer   without   ever   changing   the   price,   Free    has   remained   competitive,   winning   new   As   BT’s   channel   to   market   for   small   and  clients,   while   ensuring   the   loyalty   of   existing   medium   businesses   in   the   UK,   BT   Business  ones.  Today’s  Freebox  users  benefit  from:   (http://business.bt.com/)   had   been   under     attack   by   its   rivals   since   competition   began.   Internet  access  of  up  to  28MB/s  download   During  the  2002-­‐2007  period  its  revenues  had   /  1MB/s  upload  (or  100  MB/s  fibre  access   fallen   by   16%.vii   At   the   time,   this   business   was   in  eligible  zones)   characterized   by   its   supplier-­‐to-­‐customer   Unlimited   e-­‐mail   addresses   and   10GB   for   push   approach   for   selling   a   range   of   separate,   personal  websites  or  Blogs   technology-­‐focused   communication   and   Wifi   access   at   home   and   in   Free’s   public   connectivity   services;   the   use   of   a   standard   hotspots   SMB   segmentation   model   that   covered   over   Unlimited  calling  to  fixed  lines  in  over  100   90%   of   all   UK   businesses;   offering   countries   components   vs.   business   solutions;   a   set   of   30   supplementary   calling   services   (ex.   underlying   customer   management   processes   voice  mail,  call  waiting,  call  forward)   that   were   heavy   and   time   consuming   to   use,   TV   features   such   as   DVR2,   VoD3   and   multi-­‐ making  them  frustrating  to  deal  with.   TV  access       In   an   effort   to   redesign   its   SMB   business   to  Maintaining   a   fixed   pricing   strategy   while   offer   greater   relevance   and   convenience,   BT  regularly   adding   service   value   has   required   a   made   a   number   of   important   and   strategic  solid  business  case,  with  a  concerted  effort  on   changes  to  its  BT  Business  offerings.  managing   the   underlying   related   and  overhead  costs.  This  has  been  achieved  by:     Using   in-­‐house   SW   development   to   create   a   customized   set-­‐top   box,   meeting   market     requirements   and   aligned   with   their   product  roadmap.     Focusing  mostly  on  a  single  offer,  enabling   Its   new   philosophy   has   been   to   focus   on   the   reduced  marketing  and  support  costs.   distinct   problems   and   needs   of   SMBs   by   Using  a  direct  distribution  model  including   offering  connected  solutions  with  discernable   online  ordering  and  mail  fulfilment.   value.  It  achieved  this  in  several  ways:   Delivering   plug   &   play   functionality,   with     remote  software  set-­‐top  box  upgrades    Demonstrating   a   deep   understanding   of   Offering  online  and  chat-­‐based  customer-­‐ SMB   daily   business   concerns   through   care  capabilities  where  possible.   insights   on   the   different   aspects   of     running   a   small   business   (ex.   planning   a  Today   Free   has   amassed   4.6   M   clients,   business,   effective   sales   and   marketing,  making  it  the  third  largest  ISP  in  France,  with   dealing  with  suppliers  or  partners,  etc.).  over  23%  of  broadband  market.vi    Helping   prospective   clients   choose   the     right   offer   based   on   their   practical   needs     (ex.   according   to   their   stage   in   the   business’  lifecycle).                                                                                                                Focusing   on   selling   business-­‐centric  2  Digital  Video  Recorder   offerings   that   contribute   to   greater    Video  on  Demand  3Why  customer  value  propositions  really  matter!   11  
  12. 12.      www.merkadoservices.com   business   efficiency,   (ex.   Website   management,   product   development,   product   consulting,   SEO4   consulting,   CRM5,   e-­‐mail   marketing   and   sales,   all   while   maintaining   a   marketing  services),  described  in  terms  of   common  customer-­‐driven  focus.     the   business   benefits   offered   (ex.   cost     control,   increased   sales)   and   not   the   Effective   Product   and   Marketing   leaders   draw   technology  used.   on   inbound   marketing   activities   for   listening   Leveraging   ICT   capabilities   themselves   in   to   the   market   to   understand   the   unresolved   order   to   improve   their   customers’   problems   and   needs   facing   users;   to   draft   relationship   experience   through   simplified   customer-­‐focused   solutions   to   these   market   capabilities   like   electronic   contract   problems;   and   to   create   a   coherent   and   signature   and   self-­‐serve   customer   service   detailed  plan  to  deliver  new  offers  to  market,   portals.   Such   changes   reduce   the   sign-­‐up   profitably.   Such   activities   are   usually   the   time  from  weeks  to  hours.   domain   of   Product   Management,   following   Helping   SMBs   quickly   develop   more   Strategic   lines,   but   working   closely   with   connected   and   efficient   businesses   selected   key   or   potential   customers   and   through   pre-­‐packaged,   Internet-­‐age   Product   Development   functions   to   gather   propositions   like   eShop   -­‐   an   e-­‐commerce   market   requirements   and   test   early   service   /   starters   pack   that’s   integrated   with   e-­‐Bay   product  prototypes.   and  Paypal  -­‐  or  BT  Tradespace  -­‐  an  online     market   place   for   SMBs   to   connect   and   These   leaders   then   use   outbound   marketing   interact  customers  or  suppliers.     activities  to  speak  to  the  market  for  delivering     the   subsequent   customer   value   propositions  These  significant  changes  have  allowed  BT  to   via   their   distribution   organizations.   This  increase   its   Business   revenue   by   1.6%   in   includes   translating   technical   ideas   into  2008-­‐09,   despite   the   recent   economic   relevant   market   messages;   designing  downturn.   At   an   event   in   June   2009   it   customer-­‐driven   programs   to   stimulate   and  reported   +9%   in   Communication   and   support   the   introduction   of   new   offers;  Infrastructure  sales  (i.e.  calling  and  connectivity   making   it   easy   for   potential   buyers   to   make  services),   +19%   in   Hardware   /   IT   /   Devices   the   right   purchase   decisions.   Such   activities  sales   (i.e.   traditional   CPEs,   IT   devices   and   are  usually  the  domain  of  Product  Marketing,  related   maintenance   and   support   services),   in   close   collaboration   with   Communications  and   +100%   in   Software   and   Applications   and  Sales  functions.  sales  (Salesforce.com  and  other  SaaS).viii       This   complex   process   must   also   be   managed  The   Free   Freebox   and   BT   Business   examples   within   a   dynamic   and   disruptive   market  demonstrate   the   top   and   bottom   line   impact   context,   where   innovation   and   competition  that   developing   great   value   propositions   can   can  come  from  anywhere,  at  any  moment.  In  provide  companies.       this  environment,  speed  usually  matters  more     than   perfection.   This   means   quickly  In   practise,   bringing   new   and   innovative   developing,   testing   and   bringing   to   market  offers   to   market,   that   deliver   better   new  product  and  service  offers,  while  leaving  performance,   is   not   easy.   This   requires   a   room  for  constant  improvement  -­‐  incremental  coordinated   blend   of   specific   skills   and   or   disruptive   -­‐   based   on   changing   market  expertise   across   distinct   organizational   conditions.  groups,   including   strategy,   product                                                                                                                 Companies   like   Google   with   their   ‘Beta’-­‐  Search  Engine  Optimization  4 labelled   services,   and   Apple   with   their  5  Customer  Relationship  Management  Why  customer  value  propositions  really  matter!   12  

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