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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?

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(GhaniKunto.me) Download - Mobile operators vs OTT

  1. 1. A!lied Storytelling in MarketingOperator pricing & OTT:When storytelling is a matterof survivalM obile phone’s primary usage shifted from voice to data back in 2010. Industry data shows that global voice traffic has beenstagnant since 2010 while data traffic has been increasing exponentially. In2013 data will surpass voice in revenues as well. The successful operator oftomorrow is the one built around data.Per-minute, per-event charging models will be rendered useless and unlessoperators adopt a more customer-focused mindset, they leave themselvesopen to exploitation by over-the-top (OTT) players. “It’s a strange businessmodel at present where telcos invest huge amounts of money to upgradedata networks and players like YouTube, who gets the revenue, don’t payanything.” Vodafone India’s Managing Director and Chief Executive OfficerMarten Pieters."Around 18 months ago we started noticing that people were using moreSkype, people were using Viber and Whats App," Vodafone Chief ExecutiveVittorio Colao told the Mobile World Congress industry meeting, referring tothree 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 itwas a very simple answer. It was because it was free," he said. "So wedecided to turn the model upside down."OTT players are eating up the market with messaging and content servicesthat drive revenues off the operator bill. As players like Google have already Find articles, case studies and podcast on the role of storytelling in marketing: http://GhaniKunto.me
  2. 2. shown in the fixed line market, incumbents are seriously exposed to gamechanging shifts. In response, mobile operators need to evolve their chargingmodels or end up left on the shelf like the record labels in the 90s.Sustaining vs DisruptiveOperators 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 moreThe first of the two options are reactive strategies aimed at sustaining thecurrent business model. Those are the more comfortable options as theyrequire the least internal change. Those options also leave the operatorsmore vulnerable to players like Google disrupting the market.The third option holds the most promise for operators. To get mobile pricesback up, some operators are planning to charge a premium for faster 4Gnetworks. EE, the first to launch 4G in Britain, has chosen to charge higherprices for new service, but has not disclosed how many customers it haswon.In Norway, Telenor increased ARPU by 2% in 2012 by charging more(compared to a 4% decline in rival Teliasonera). Telenor found that datausage varied widely by user and there was a significant number of customerswilling to pay extra for more data allowances (Telenor’s standard offering was400Mb per month).Young people are the heaviest users of data. One of the reasons youth ARPUhas been in decline since 2008 is because operators have been preoccupiedwith monetizing voice & text while ignoring the potential demand for moreexpansive data offerings. Because operators are not providing data tariffs thatfulfill youth mobile behavior, they are both losing the youth market and itsrevenues.Youth market leads the wayYouth are leading the way in defining the operator charging models of thefuture. Find articles, case studies and podcast on the role of storytelling in marketing: http://GhaniKunto.me
  3. 3. What youth are demanding today will be the mainstay of the mass market in3-5 years. If operators want to stay relevant to the market they will need tobetter understand how these change agents are using their mobile phones ona daily basis.Prior to launching the Red tariffs, Vodafone research revealed that whatcustomers really wanted was a “great network” and “freedom tocommunicate.” Rather than cool ad campaigns, more content from theoperator or deals with OTTs, youth want the common things doneuncommonly well without the fear of uncontrolled spending.Operators should avoid the mistake of offering “youth tariffs.” The future liesin providing charging models that cater for a shift in mobile behavior lead bythe youth market today.35% of youth mobile spending is already going to OTT players throughmobile music, games, video and other forms of data usage (source MobileYouth report 2013). The current trend in OTT usage isn’t about youth seekingout 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 “freedomto communicate” in CEO Colao’s words.Youth want operators to address their fundamental pain points e.g fear ofgoing over data limits, exceeding personal budgets and lack of transparencyin data tariffs. If operators are able to get the youth market right this year, theywill 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 aboutprice because the industry has not created anything else for youth to careabout. Very few operators have actually created steps to involve youngpeople in the storytelling process. Operators have partnered with ad agencieswhen it should have partnered with youth. This resulted in wasteful spendingon big budget ad campaigns that yield no sustainable results.Winning and keeping youth isn’t about creative campaigns and big mediabuys but about generating positive recommendation from existing customers. Find articles, case studies and podcast on the role of storytelling in marketing: http://GhaniKunto.me
  4. 4. Most operators have negative NPS. New data services and charging modelsaren’t the silver bullets to fix negative NPS scores, they are an opportunity todo so.As operators launch new data tariffs, the risk is using cool advertising to sellthem to influencers without fixing the NPS first. In the 21st century, themarketing needs to be baked into the product. A good product is based onsolid fundamentals - reliable networks, billing control and transparency. Youthwon’t talk about tariffs, they’ll talk about these pain points and these are thekey drivers behind churn and influence.Changing its external story from price to reliability and user-control changesthe operator’s price elasticity. However, before a company can change itsexternal story, it needs to change the story it tells internally. In an industrythat has come to believe the fiction of price-based marketing, operators needto overcome the fact that it has turned itself into a mere commodity.   ***Discussion points:As products and technology become obsolete at an accelerated pace, yourbrand story will out last them all. By focusing on creating better storiesinstead of better products, profit leaders like Apple can disrupt markets withnew product lines. Apple’s CEO Tim Cook said, “Our base philosophy is tonever 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 basein 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? Find articles, case studies and podcast on the role of storytelling in marketing: http://GhaniKunto.me