Do Mobile Services Provide Consumer Value?
telecoms-mag.com
People buy products and services for any number of reasons -- a nice package,
a familiar name, a low price -- but the decision to keep them is measured against
whether they represent true value.
Thomas Bartlett
The European mobile industry appears to be a perfect example of
how value can be provided to customers. Just look at the benchmarks
-- revenues, penetration rates, subscriber growth levels -- the
European cellular industry's staggering consumer interest level reflects
a region with a keen understanding of its customers.
Penetration rates in the Nordic countries -- the highest in Europe --
are around 40 per cent. In Finland recently, for the first time
anywhere, more than 50 per cent of all telecoms usage came from
wireless services.
In the US, the world's most mature market, wireless penetration is
only 22 per cent. Latin America is beginning to hit its competitive
stride, with about four per cent. And in Asia, despite Japan's love
affair with wireless, penetration is under five per cent.
What has created such demand for service in Europe compared to
other regions? One reason: a highly developed wireless value
proposition.
The European market has developed some unique characteristics. A
single wireless standard (GSM) and a set of consistent services and
dialling procedures allow for simple roaming across the continent.
European customers and carriers also have the benefit of calling party
pays, creating a tool that better fits the personal and business lifestyles
of its customers.
Price is also a factor. For example, competition is forcing operators to
constantly look for new ways to offer services at lower cost. In some
European markets, it is actually cheaper to make an international call
from a mobile than it is over the PTT's landline network. Also, the
widespread deployment of tailored prepay tariffs is making wireless
affordable to a variety of new market segments.
The seeds of digital service and nearly universal coverage have helped
many European carriers grow high quality services that, in some
cases, are better than wireline standards. Omnitel Pronto Italia,
Europe's third largest operator with over five million customers, more
than doubled its customer base in the first three quarters of 1998.
Omnitel's network already covers 96 per cent of Italy, a figure similar
to other markets in Western Europe. In parts of Central and Eastern
Europe, low teledensity rates mean mobile services often provide
broader coverage than landline counterparts.
Most European carriers have developed extensive means for creating
customer convenience. Distribution has moved from a few large
electronics retailers to thousands of local tobacconist shops. Prepaid
SIM cards, rechargeable at local mobile retailers, shops and ATMs,
not only eliminate the need for service contracts and time-consuming
sales processes for many customers, but also they have created a new
sophisticated channel strategy for segmenting the market, reaching
customers through the right channels.
Customer care on the continent has improved vastly. Back room
operations and new billing options are improving timely service to
customers. Extensive intelligent networking platforms, that are
providing operators with greater network control and increased
service flexibility, are becoming the norm.
The breadth of available services continues to improve for consumers
and business customers, with carriers now offering services like
paging, text messaging, Internet access, email, and sophisticated
virtual private networks.
The combination of common standards, price, quality, convenience,
customer care, and breadth of services have created a value equation
most customers had previously found only with their home phones,
blurring the line between wired and wireless. But, for the customer,
wireless service also offers the inherent benefit of mobility.
The result of this value? Wireless communications has penetrated the
very core of everyday life in most of Western Europe, and is quickly
doing the same in Central and Eastern Europe. Cafes, city streets, and
subways teem with nomadic conversations from people in suits, jeans,
and uniforms. No longer a toy for the rich, it is the key means of
keeping employees and consumers connected; a tool which is relied
upon to keep people informed and, in life or death situations, safe.
Mobile data services are being used to monitor and communicate with
ubiquitous, everyday devices such as coke machines, traffic signs,
utility meters and ATMs. The travelling executive, equipped with
laptop and mobile phone, is living the myth of the virtual office. In
short, mobile has arrived and is fulfilling its potential across the region.
Knowing the Customer
As cellular markets have developed, a key advance in the provision of
mobile services has been a marked increase in the sophistication with
which operators segment markets and offer tailored packages and
services to specific audiences. Of key importance here has been the
influence of those US operators which have invested heavily in the
European wireless market. Investments by companies which have cut
their teeth in the now mature, competitive North American market
have enabled their European partners to move quickly up the
marketing learning curve.
Competition has also been particularly important, with some markets
now having as many as three or four operators, forcing service
providers to search for new, untapped pockets of demand. And
billing and customer care systems, with excellent capabilities for the
collation and analysis of customer behaviour data, have enabled
wireless operators to identify usage trends and offer packages
accordingly. The result is often a suite of products that fits customer
requirements far more accurately than before. Carriers now know the
level of service that different market segments expect, the price that
customers are willing to pay for each level, and therefore what cost of
acquisition is appropriate for each segment.
Prepay services are an excellent example of this evolution in
marketing, with consumers having immediate access to mobile
services with a card that is readily available and rechargeable through
numerous low-cost channels. There are no bills or other forms of
administration and no need for the customer to accumulate debt.
Interestingly enough, in most cases, there is virtually no difference
between the total usage or type of use for prepaid and postpaid
customers. The corporate market, by contrast, is looking for infinitely
flexible, customised tariffing, perhaps with departmental billing
options, and will be assessing the benefits of fixed/mobile
convergence. Here, the operator can add value with a direct sales and
customer service team.
It is clearly dangerous to generalise when talking of the European
wireless market: Europe's constituent nations, inside and outside of
the European Union, are at very different stages of development. It is
important to understand these differences. It is a natural cycle to begin
with a process of market education, and there are still a few countries
that have not gone far beyond this stage. Penetration rates of less than
10 per cent are common in parts of Eastern Europe, for example,
typically as a result of only recently launching GSM wireless services.
As markets become more educated about mobile services and the
value they provide, operators can move to the next phase, where
packages, products and solutions are tailored to the specific needs of
customers. This is where operators can offer the specific value, in
service and pricing, that individual customers want. Markets such as
the UK, Scandinavia and Italy are demonstrating this degree of
sophistication; though even in Central and Eastern Europe many
operators, such as EuroTel Praha in the Czech Republic and Stet
Hellas in Greece, are able to target knowledgeable customers with
tailored solutions. EuroTel's Internet Billing service allows customers
to access their bill through the Internet, view up-to-date detail at a
number of levels, or download the information in order to further
manage the data.
Looking Forward
Europe as a whole has done a masterful job of bringing customers on
line. This has been done by showing people the value mobility will
have in their lives. But competition is increasing, and the challenge will
be to keep those customers by constantly improving that value
equation.
Ultimately, the key factor in managing churn and customer satisfaction
is the business proposition that operators put on the table: the controls
that are put in place on the front end as customers are acquired, the
level of knowledge operators have about the customer before they
are signed on, the strength of the relationship that the operator
establishes with that customer, and the quality of the service itself.
While marketing skills have improved, it is critical that operators
continue to segment their markets further, drilling down into the details
of individual needs. As the needs of different customers are identified,
tailored service packages, whether data, Internet, billing, or
fixed/wireless offerings, will be the norm.
As competition slowly drives markets towards a commodity model,
operators will need to differentiate themselves to an even greater
degree than they do already. Customer care is the most obvious area
where this will take place. Obviously, the underlying network
technology needs to be in place for this marketing savvy to translate
into real deliverable services. We will see continued investment in next
generation billing systems and third generation network technologies,
offering new tailored services with even greater data capabilities.
As more businesses become global, the business travel niche will
continue to blossom. Successful operators will move early to align
themselves with satellite service, push manufacturers for multi-mode
phones, and a swift resolution to third generation standards that
support current technologies in markets around the world. This
multi-layered competition will lower the barrier of entry to a much
broader market, offering consumers more choice and extended
coverage.
As interconnection rates decrease, a more level playing field will
unfold between wired and wireless players. In the US, interconnection
is typically below a cent per minute, while markets like Italy still stand
at about eight cents. Competition, therefore, will not only be between
incumbent wireless operators and new entrants, but also between
wireless operators and landline service providers.
This burgeoning competition will push the industry as a whole towards
greater innovation in technologies, tariffs, products and services, and
force individual carriers to prove each day that they are focused not
just on the ever-changing needs of a mass market, but of a market
made up of unique individuals.
European mobile services have developed rapidly, and carriers have
done far better than most regions in creating real value for customers.
However, there is far more ahead of us than behind us in building
institutions that not only add vast numbers of customers, but also
keeps them.
Thomas Bartlett is president and CEO of Bell Atlantic Global
Wireless. The company is a shareholder in Omnitel Pronto Italia.
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