Summary
1) Many UK (and US) providers have traditionally leveraged their products layered with short-term discounting and a push marketing strategy. The needs to change.
2) To meet the challenges of maturing markets and build long term value (i.e. enhance loyalty) - a more ‘pull based’ customer led strategy focused on leveraging consumer insight is required.
3) Shortened development cycles and limited product innovation has seen the relative importance of content, and indeed exclusive content, in providing differentiation. However, m:metrics reported the low likelihood that users will pay a subscription for video.
4) Major wireless operators need ‘exclusive content deals’ and innovative products to distinguish their service. However, the major media companies require significant upfront payment and possibly a share of resulting revenue for exclusive content deals.
Analysis
·Many UK (and US) providers have traditionally leveraged their products layered with short-term discounting and a push marketing strategy. Although successful in growing sales; this has resulted in organizational friction, churn spikes at end of offers and a customer perception of providing poor service. In addition, the rapid commoditisation of the voice market (fixed and wireless) continues with the ever expanding bundles of free minutes and free texts – and consumers ‘churning and surfing’ to the provider who has the best deal.
·Consumers are spending a greater proportion of their budget and leisure time on online and mobile devices. They are faced with an increasing array of new products and technologies from which to choose from. In this environment, providers must become more customer centric and better understand their customers and prospects to develop appropriate products and services - whilst offering good value for money. Japanese and South Korean providers seem to have cracked this model with value added services driving increasing usage and nontraditional revenue. However, poor product experience, poor usability and cultural differences seem to have stymied growth in European and US markets. Though, gaming as content category is growing rapidly in developing markets and the ability to replicate a console like experience is not long away.
·To meet the challenges of maturing markets and build long term value (i.e. enhance loyalty) - a more ‘pull based’ customer led strategy focused on leveraging consumer insight is required. To drive this, providers need to: a) improve their existing product portfolio to deliver sustainable competitive advantage, b) focus on leveraging the bundle (of products and resulting convergent services) and c) deliver customer focused product development. This can then help break the vicious circle of requiring greater number of new customers to compensate for high churn.
·Shortened development cycles and limited product innovation has seen the relative importance of content, and indeed exclusive content, in providing differentiation. Mobile Media reported in February that TV/video and music were the mobile content categories that attracted the most deal-making year to date. Clearly this is being driven by the growth in provides offering subscription mobile TV. However, m:metrics simultaneously reported the low likelihood that users will pay a subscription for video. In the US 3.2% were reported as very likely, whilst in UK 2.5%, Spain 3.9%, Germany 1.0% and France 2.2%.
·For most providers quality of service is indistinguishable at a macro level. There may be some minor geographic differences, but in the whole voice quality and service have not been driving purchase decisions for many years. The exception in the UK – may be with the fifth largest wireless operator and sole 3G provider Hutchison 3 – who have experienced significant churn given poor coverage and signal strength as well as significant churn spikes given heavy discounting for acquisition promotional offers. Bundles of free minutes and texts – coupled with handset form factor and ease of upgrade have been driving consumers. I think it is still too premature to state that "we're continuing to see content and data services become more of a factor." A weekend spent in a mobile retail outlet speaking to consumers will confirm this.
·The major wireless operators such as Verizon and Vodafone need ‘exclusive content deals’ and innovative products to distinguish their service. However, as related to content the major leading media companies such as Disney, Sony, Viacom and Time Warner require a significant upfront payment and possibly a share of resulting revenue for exclusive content deals.
