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Case study: How to improve digital service user retention?

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Juniper Research estimates that mobile operators will generate $9 billion in revenue by 2022 from carrier billing. The main growth drivers for the volume increase are music and video streaming merchants.

The dominant business model used by such merchants is subscription billing, where access to entertainment is sold on a daily, weekly or monthly basis and users are automatically charged at the end of the previous cycle.

However, a significant number of subscription payments for these merchants fail and the customers churn out. The primary reason is insufficient account balance as most consumers in emerging markets use a prepaid SIM card.

In this case study, we take a look at how Fortumo is resolving the problem together with telcos to increase user retention and maximize revenue for all sides involved.

Fortumo is a digital enablement platform for app stores and digital service providers for user acquisition, monetization and retention. The company connects service providers with more than 350 mobile operators across Asia, Europe, Latin America, the Middle East and Africa.

Service providers use Fortumo’s platform to manage the end-to-end customer lifecycle of mobile users on these networks through the company’s bundling, carrier billing and messaging solutions.

Fortumo’s platform is used by thousands of leading digital merchants including Google, Spotify, Electronic Arts and EasyPark. Founded in 2007, Fortumo has offices in San Francisco, Madrid, Beijing, Delhi, Singapore, Estonia and Hanoi. For more information, please visit https://fortumo.com.

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Case study: How to improve digital service user retention?

  1. 1. HOW TO IMPROVE DIGITAL SERVICE USER RETENTION? Case study by Fortumo Copyright © 2018 Fortumo
  2. 2. Juniper Research estimates that mobile operators will generate $9 billion in revenue by 2022 from carrier billing. The main growth drivers for the volume increase are music and video streaming merchants. The dominant business model used by such merchants is subscription billing, where access to entertainment is sold on a daily, weekly or monthly basis and users are automatically charged at the end of the previous cycle. However, a substantial number of subscription payments for these merchants fail and the customers churn out. In this case study, we take a look at how Fortumo is resolv- ing the problem together with telcos to increase user retention and maximize revenue for all sides involved. HOW TO IMPROVE DIGITAL SERVICE USER RETENTION? Mobile Operators Carrier Billing Revenue (USD) $2.9 BILLION $9BILLION 2017 2018 2019 2020 2021 2022 How to improve digital service user retention?
  3. 3. In emerging markets, the majority of mobile users own a prepaid SIM card. For example, in Asia 95% of users are prepaid and just 5% are postpaid. The capability of prepaid users to make online payments through carrier billing is limited by the amount of money they have available on their account. When users attempt to make a payment without enough account balance, the charge fails. In case of one-time payments, this problem can be resolved by the user through recharging their balance and retrying the payment again. However, with recurring payments for premium digital services, failed payments usually mean that the user churns out. Because the charges are done automatically, the user may not actively be engaged on their phone and may decide not to resubscribe to the service once they discover the subscription has been stopped. The combination of low account balance and relatively high pricing of streaming services compared to SIM card balance averages leads to a frequent failure of recurring payments. For example, aggregated data from Fortumo based streaming services live in Indonesia, the Philippines and Thailand shows a 53% payment failure rate for recurring payments. Out of these failed payments 96% are due to insufficient balance. THE CHALLENGE The amount of money streaming services charge for content is usually much higher than the average amount of money users have on their SIM card1 : 1 Data sourced from local telcos. INDIA INDONESIA PHILIPPINES THAILAND VIETNAM INDIA INDONESIA PHILIPPINES THAILAND VIETNAM 0% 20% 40% 60% 80% 100% Prepaid SIM market share Postpaid SIM market share 95% 98% 95% 83% 89% $0.75 $2.2 $2.5 $5.2 $2.6 53% 96% 0% 20% 40% 60% 80% 100% How to improve digital service user retention?
  4. 4. THE SOLUTION Insufficient balance failures can be mitigated by re-attempting payments once the initial charge fails. In case of these “retries”, the charge is attempted again several times during a certain time period (e.g. 4x in 48 hours). The goal of retries is to collect the payment once the user has recharged their account balance. In order to reduce customer churn during retries, merchants can put in place a “grace period” for users. This means retaining access to the service for the user during the period in which retries are attempted, instead of unsubscribing them immediately. This reduces the amount of people who need to re-subscribe to the service manually, thus increasing conversion. INSUFFICIENT BALANCE RETRIES USER MAKES A PAYMENT PAYMENT FAILED PAYMENT SUCCEEDED 4x How to improve digital service user retention?
  5. 5. THE RESULTS Fortumo has implemented payment retries for recurring payments wherever mobile operators support them. For this case study, we aggregated data from streaming services using recurring, monthly payments with our telco partners in Indonesia, the Philippines and Thailand. Here is how retries with these telcos impact customer retention and revenue: Recurring payments succeed during the first try in 47% of cases Out of users whose payment fails, 12% of charges are successful during a retry If we take a random pool of 100 users of a digital service, this means: Initial amount of users Users charged on 1st payment Users charged with a retry Total amount of charged users Revenue uplift Without retries With retries 100 100 47 47 0 6 47 53 13% This means telcos can increase digital service revenue by 13% simply by giving merchants the capability to attempt payments several times after initial payment failure. In fact, the amount of retries that need to be done is not large at all: Average amount of retries needed to a successful payment: 1.5 Median amount of retries needed to a successful payment: 1 93% of successful retry charges are done with less than 2 attempts How to improve digital service user retention?
  6. 6. SUMMARY Retry attempts are one of the most effective ways for telcos to increase digital service revenue without making any additional investments into marketing and promotions. Merchants can further reduce churn of users by enabling grace periods for users who are in the “retry flow”. Beside retry attempts, we recommend telcos to look into the following aspects of user retention management to overcome the significant challenge of failed payments: Proper error message mapping that allow users to understand why their payment failed Follow-ups through telco channels (e.g. SMS) reminding users how to solve their issue Applying dynamic spending limits for postpaid customers with a positive risk score Providing micro-loans to users who attempt to pay without money on their SIM card How to improve digital service user retention?
  7. 7. ADDITIONAL READING How to increase payment conversion? Report: How to maximize subscription revenue with carrier billing? White paper: Carrier bundling for user acquisition and marketing Read more Read more Read more Fortumo is a digital enablement platform for app stores and digital service providers for user acquisition, monetization and retention. The company connects service providers with more than 350 mobile operators across Asia, Europe, Latin America, the Middle East and Africa. Service providers use Fortumo’s platform to manage the end-to-end customer lifecycle of mobile users on these networks through the company’s bundling, carrier billing and messaging solutions. Fortumo’s platform is used by thousands of leading digital merchants including Google, Spotify and Electronic Arts. Founded in 2007, Fortumo has offices in San Francisco, Beijing, Delhi, Singapore, Estonia and Hanoi. For more information, please visit: https://fortumo.com https://facebook.com/fortumo https://twitter.com/fortumo https://www.linkedin.com/company/fortumo-ltd This document is for informational purposes only. Fortumo and the authors make no expressed or implied warranties in this document. Fortumo and the author(s) make no representation or warranty in relation to the accuracy, completeness or reliability of the information contained in this document. Any opinions expressed in this document are subject to change without notice. This document may be based on a number of assumptions and different assumptions could result in materially different results. This document should not be regarded by recipients as a substitute for obtaining independent advice and/or the exercise of their own judgement, and is not to be relied upon by recipients. Fortumo and the authors, and any of their members, directors, employees or agents do not accept any liability for any loss or damage arising out of the use of all or any part of this document. Copyright © 2018 Fortumo | All rights reserved. How to improve digital service user retention?

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