Customer Value Maximization in Mobile Value Added Services: Indian Perspective
1.1 Indian Telecom Market
Mobile phones today have moved beyond their fundamental role of communications and have graduated to become an extension of the persona of the user. We are witnessing an era when users buy mobile phones not just to be in touch, but to express themselves, their attitude, feelings & interests. People now use their cellular phones to play games, read news headlines, surf the Internet, keep a tab on astrology, and listen to music, make others listen to their music, or check their bank balance. Thus, there exists a vast world beyond voice that needs to be explored and tapped and the entire cellular industry is heading towards it to provide innovative options to their customers.
The success of the market can be gauged from the fact that mobile user base has surpassed the PC user base in India and very soon the Indian market will have more mobile users than TV viewers. India is rapidly moving towards being an evolved mobility market with no distinction between market incumbents and challengers.
1.2 Mobile Value Added Services
Mobile value-added services (VAS) are those services that are not part of the basic voice offer and are availed off separately by the end user. They are used as a tool for differentiation and allow the mobile operators to develop another stream of revenue.
The nature of value added services change over time. A VAS may become commoditized and becomes so common place and widely used that it no longer provides meaningful differentiation on a relative basis. For example several mobility operators & other stakeholders in the industry no longer consider P2P SMS as a form of VAS. However for the purpose of estimating the market size we have taken P2P into account, though we also feel that P2P SMS is ceasing to be a meaningful tool for service differentiation.
From plain vanilla event-based charging, VAS in India is headed for a growth in subscription-based offerings-fixed monthly rentals bundled with download or event-based charging.
The need for proliferating subscription-based services is more important to the operators to increase stickiness to VAS and to get assured monthly revenue. For customers, the incentive to take up subscription VAS lies in the value-for-money provided by operators in terms of incremental offerings, as compared to event/download-based charging.
Traditionally for all operators, VAS offerings fall into the voice, text and data verticals. Text VAS is split into peer-to-peer, peer-to-application and alerts services. Peer-to-peer messaging has long ago become a basic service similar to core voice calls. In all metro/class A circles, peer-to-peer SMS is a near-substitute to voice calls. It is used more as an acquisition tool via bundling of discounted SMS in special packs. Peer-to-peer messaging is not dependant on content and to that extent is wrongly considered to be VAS.
Peer-to-application messaging is driven purely by television reality shows which encourage customers to send out premium rate messages by the millions in support of their favourite contestants. Messaging to operator and content provider short codes has not seen an exponential increase. Alerts have quickly become a largely accepted VAS offering due to the stickiness created by subscription-based model. Airtel, Vodafone and BSNL have been aggressively promoting their alerts services on SMS and USSD.
Data VAS is yet to see major adoption in India. With operators betting big on it and with unravelling of big plans on 3G, and with the recent IPhone launch, the market is waiting with bated breath to see the true potential of GPRS usage on mobile. Currently around 40% of mobile handsets are data-enabled, but less than 15% of them actively use data services. With big circles not yet comfortable to peer-to-peer SMS, data is not the answer to the major incremental revenue, which operators are expecting from the pre-paid segment in the near future. Applications such as wallpaper downloads, ringtone downloads and full song downloads are scheduled to spur data VAS revenue in the future.
Voice VAS is the magic wand in the hands of Mobile Operators to generate incremental revenue in the pre-paid segment. Voice is all-pervasive, handset-agnostic and backed by powerful applications such as music. Voice VAS currently contributes 40% of total VAS revenue for all operators. Caller ring back tone has emerged as a clear winner for operators with a 23% penetration in the pre-paid segment and a market revenue size of Rs 200 crore per month.
1.2.1 Outbound Dialling Services (Automatic Dialler Calling)
This is the service which drives maximum revenue for the company. In this service, operator provides base of customers to be called to One 97. The base is then scrubbed to remove the users who have registered on the TRAI website under National Do Not Call Registry. The base along with the content that is to be played is then loaded on to the centralized server called as E1 located at the premises of the operator in the respective circle.
The prompt played can be
Ø Information on the User and Retention packs, typically the talk time related combo offers from the operator to the mobile users.
Ø Information on the vendor subscription packs.
Ø Thanks giving messages in case of bill payment and promotional schemes.
The end user does not have to pay for any such incoming call and the revenue on this service is derived from the Telecom operator on every successful call. Successful calls are the calls that are picked by the user. The ratio of successful calls to the total calls varies from operator to operator and circle to circle. Typically a conversion ratio of 2-3% is considered good for the business.
1.2.2 Inbound Dialling
These are the services for which the user has to pay depending on per minute charges as set by telecom operator. In these services, say if a user wants to use the Astrology application to know future. User calls to the application specific short code say 53030 or 53030XXX, say 53030123 in this case and listens to a welcome message and is then routed to the live astrologers. During this entire call, user is charged on a per minute basis ranging from operator to operator, Rs 2.40 to Rs 10.00 or even more in some cases.
Various inbound services offered are
Ø Live FM and Radio exclusively for Reliance Users and Music and RBT, CRBT across the operator.
Ø Recent feather being live commentary during the just concluded second season of IPL
Ø Astro, Career counselling and education portal.
Ø Results of various educational institutes like CBSE, ICSE, and State Boards for class 10 and 12.
Ø Services like Joke, Mythology and devotional.
Ø Exclusive portal for women.
Ø Rural portal to cater to the needs of operators.
1.2.3 Subscription Services
Subscription based services offer periodic (monthly or yearly or seasonal) use or access to content such as news, jokes, stock etc. VAS Vendors offer a number of value added services (VAS) in Subscription based packs thorough various telecom operators. The customers can select a pack of their choice and get content through SMS or voice on regular basis. There are different types of content packs available like news, jokes, astrology, health, stock, cricket etc. The content is delivered either through SMS or by VOICE. The price of the packs varies from Rs 10, 30 & 50.
* By sending SMS to 53030, for example if customer wants to subscribe for Masti Pack he/she has to send SUB <space> Masti to 53030.
* An automated call is dialled to customer's number to offer the pack. The customer has to press relevant key to subscribe the pack.
* A customer can also dial a short code to subscribe for various packs
The amount of the pack will be automatically deducted from customer's mobile balance in case of pre-paid account holder. In case of post paid the same will be included in the mobile bill. The validity of each service depends upon the price of the service. Packs are available with different prices & validity like Rs 10 for 10 days, Rs 30 for 30 days etc. Renewal of a subscription may be periodic and activated automatically unless un-subscribed explicitly by the subscriber.
1.3 Customer Value Management
Customer value is a strategic weapon in attracting and retaining customers and has become one of the most significant factors in the success of both manufacturing businesses and service providers (Gale, 1994; Zeithaml, 1988; Zeithaml et al 1996; Woodruff, 1997; Parasuraman, 1997). As many researchers have suggested, firms should reorient their operations towards the creation and delivery of superior customer value if they are to improve their CRM performance (Jensen, 2001; Day, 1994; Slater, 1997). Customer value management is managing each customer relationship with the goal of achieving maximum lifetime profit from the entire customer base. Customer value management enables companies to take full advantage of the economics of loyalty by increasing retention, reducing risk, and amortizing acquisition costs over a longer and more profitable period of engagement.
To expand market share and close a gap behind competition, as depicted in 1, companies must understand their relative market position and then influence that position usingcustomervalueanalysis (CVA). The vertical axis in 1indicates volume from the point of view of a corporation or firm. If a firm's volume is growing faster than the market, the firm is gaining share. If its volume is growing slower than the market, the firm is losing share. And if volume is growing at a rate equal to the market, the firm is basically holding share. The horizontal axis indicates a return on investment. A corporation or firm can earn less than, more than, or the equivalent of their cost of capital. Ideally, thereturn on capital is greater than the cost of capital, and the volume growth is greater than that of the market (the top right quadrant).
Customervaluemanagementis a systematic approach to: understand what causescustomerpurchase and repurchase behaviours, predict the future purchase behaviours ofcustomersand potentialcustomers, and maximize future purchase behaviours by managing the predictors. The overarching strategy of CVM is to deliver a bettervalueproposition than the strongest competitor in each targeted market segment. The premise is that avalueproposition is at work, and CVM provides a systematic methodology of modelling thevalueproposition relative to competition by operationalizing the results through process improvements, communicating these improvements to the employees andcustomers, and linking them to financial performance.
According to (Yonggui Wang, Hing Po Lo, Renyong Chi and Yongheng Yang 2004), it is important to understand how a firm achieves superior CRM performance by creating and delivering superior customer value and emphasizing some dimensions of customer value based on the role they may play in influencing CRM performance. Although customer value management seeks to increase the aggregate value of the customer base, this is accomplished customer by customer. Not every individual customer will be profitable, but each must be managed to maximize overall profit, even when the management consists of identifying which customers have little value to the business, and focusing development and retention efforts elsewhere.CVM shifts the focus of the enterprise from managing products or marketing campaigns to managing the profitability of each individual customer over the entire life of the relationship. While CVM can and does lead to better product offerings and more targeted campaigns, a customer value manager will ask different questions than a traditional marketing manager. Instead of asking, “Who will respond to a 10% off promotion?” a customer value manager is driven to understand, “Who is this customer, and what can I offer to increase their lifetime value?”
Customer value management relies upon customer value assessment to gain an understanding of customer requirements and preferences, and what it is worth in monetary terms to fulfil them. Although firms may be able to accomplish the first goal without any formal assessment of customer value, it is increasingly unlikely that they will be able to accomplish the second goal without it. Simply put, to gain an equitable or fair return on the value their offerings deliver, suppliers must be able to persuasively demonstrate and document the value they provide customers relative to the next-best-alternative for those customers.
Customervaluemanagementis a process that enables businesses to determine how well they address the expectations and needs of prospective and directcustomers, distributors, and distributors' end users relative to competition. It is the next generation in the pursuit ofcustomerexcellence.
An essential undertaking in customer value management is building customer value models, which are data-driven estimates of what a present or prospective market offering is worth in monetary terms to targeted customers relative to the next-best-alternative offering. Some suppliers have built what they regard as customer value models, but these models have the character of being “data light” and “assumption heavy”. Quite naturally, customers are sceptical of such models, claiming that they do not accurately reflect their businesses. In contrast, customer value management stresses building customer value models that are “data heavy” and “assumption light”. Wherever possible, suppliers gather data to minimize the number of assumptions made and to ensure that the assumptions that are made are reasonable.
2. Need for Mobile Value Added Services
With the increasingly intense business competition and the strong trend of globalization, the role of the customer has changed from that of a mere consumer to a multi-faceted role as consumer, co-operator, co-producer, co-creator of value, and co developer of knowledge and competencies, which implies a much more important position of the customer than ever. As a result, there has been a substantial increase in interest in the creation and delivery of value to customers and the effective management of customer relationship. In particular, firms are seeking to retain existing
customers and attract new customers by targeted value creation activities. Delivering superior customer value is now recognised as one of the most important factors for the success of any firm now and in the future because it has a significant impact on the behavioural intentions of customers and because it has an important role in providing managers with insights into how to achieve superior CRM performance. (Yonggui Wang, Hing Po Lo, Renyong Chi and Yongheng Yang 2004)
In this diagram, “emotional value” refers to the utility derived from the affective states that a product or service generates; “social value” refers to the social utility derived from the product or service, “functional value” refers to the utility derived from the perceived quality and expected performance of the product or service, and “perceived sacrifice” refers to the loss derived from the product or service due to the increment of its perceived short-term and long-term costs.
The growing intensity of competition in the Indian Telecommunication industry has led to more services for the end user at lower prices. This has had an effect of stimulating demand and thus increasing the category adoption rate. As more users have been added to the subscriber base, it has led to a further downward pressure on operator costs. This has led to further cost benefits to the end user, fuelling further growth in the subscriber base.
Spoilt by choice, the mobile phone subscribers are beginning to choose their operators on the basis of the value added services they offer. The increased importance of VAS has also made content developers burn the midnight oil to come up with better and newer concepts and services.
The growing subscriber base has also augured well for industry revenues, which have risen consistently over the last four quarters. However the other side to this growth is that ARPU's (Average Revenue per User) have been correspondingly declining quarter on quarter. The average industry ARPU has fallen to an estimated Rs. 212 for Mar 09 quarter from Rs. 251 for Mar 08 in case of GSM and from Rs 159 for Mar 08 to Rs 102 for Mar 09.
Revenues & ARPU
While the decline in ARPU' has been accelerated by the recent marketing interventions like lifetime-free schemes; this has been a consistent trend for some time.
Mobility operators in India have been faced with two clear challenges:
Ø To address customer retention in the high churn pre-paid market
Ø To develop alternative revenue streams as voice has become commoditized and has ceased to be a tool for differentiation
This is where the role of VAS (Value Added Services) comes into focus. Operators are facing immense competition and with the call rates in India being one of the cheapest in the world, the margins are very low. Therefore they are looking at VAS as the next wave for growth.
MVAS has become the flywheel of telecom growth and a large chunk of revenue for operators is likely to come from VAS services in the years to come. According to an industry estimate, VAS accounts for around 7.5% of Operator Revenue and is poised for a consistent growth. Revenue from VAS is expected to be The VAS industry is expected to reap Rs 5460 crore by June 2009.
2.1 Environmental factors driving VAS
2.1.1 Booming economy
India has maintained its position as the second-fastest growing major economy after China, as rising consumer and government spending taking place. Consumption and infrastructure spending are driving the growth. This booming economy has created job opportunities and increased the spending power of an average Indian. This has resulted in higher disposable incomes and faster acceptance of new technologies with a willingness to spend for them.
2.1.2 Increasing comfort levels with basic mobility services
There is now a critical mass of users in the Indian mobile telephony market who are experienced mobility users. These users are very comfortable in using their phones and want to exercise the option of doing more on them beyond basic voice applications. The first phase of growth for VAS has come in from these converts; and these users will continue to drive the market and evolve into more advanced applications. At the same time the basic VAS applications will also continue to appeal to the new mobility category initiates.
2.1.3 Decrease in ARPU despite increase in MOU
Though the subscriber base is growing at a rapid pace and has positively impacted industry revenues, operator margins also have shrunk owing to competition and lower “Average Revenue per User” (ARPU) as the major growth is coming from bottom of the pyramid. As ARPU declines and voice gets commoditized, the challenge is to develop alternative revenue streams and retain customers by creating a basis for differentiation in high-churn markets.
2.1.4 Need for differentiation:
There is a greater need among the telecom operators to differentiate themselves from each other.
• Number of Licensees: With increasing number of licensees (98 UASL, and 37 cellular licenses) in the telecom space the average numbers of operators in many circles have increased to 5-6 operators offering more choices to the consumer. Thus the competition among the operators has increased tremendously. Therefore it is very important for them to differentiate themselves from the others. Now that voice has got commoditized these operators are using MVAS for their differentiation and marketing these services heavily for creating awareness among the consumers.
• Decreasing Call Rates: In order to attract consumers with relatively low purchasing powers primarily from Semi Urban and Rural India the operators have drastically reduced the call rates making it affordable to even the lower segment of society. The tariff in India is one of the lowest at Rs.1 per minute as compared to the tariff in developed nations like USA and UK where the call rates are Rs.13 and Rs7-8 respectively.
Table 1: Country and Tariff Charges Source: Broadband and Internet India Mar 09
• 3G bidders who are non operators: The arrival of new technologies will give rise to greater competition as many non operators are also bidding for the 3G licenses. Department of Telecom has planned to allow five 3G operators in each circle depending on the availability of spectrum. Therefore there would be a greater need to differentiate in order to attract new customers and retain the existing ones.
• Saturation in Metro and Urban Market: The metro/urban areas offer high level of penetration and have significant mobile subscribers. In such a highly saturated market with the entry of MVNO's the competition will get fierce. Therefore capitalizing on value added services will give operators opportunity to increase ARPU by providing premium services.
Table 2: Mobile Penetration in selected circles Broadband and Internet India Mar 09
· Increasing need and demand from consumers: In addition to the above supply side reasons the ‘pull effect' from consumers asking for more than just basic telephony is also a key driver for MVAS services. Today most of the consumers are seeking more from their communication device apart from just mobility and desire to stay connected.
2.1.5 Personalization of the digital world and digital devices
With increasing pressures and stress on individuality, mobility users also want to carry forward their individuality to their mobile device. Thus for a large number of users the mobile phone has become a truly personal device and VAS has become an extension of persona. The enormous success of Caller Ring Back Tone (CRBT) is an excellent example which illustrates that users are ready to adapt to any service which offer them the option of personalization.
2.1.6 Market efforts driving VAS
For the operators, success of VAS has become important for their growth. This has led to a sharp focus on marketing & tie-ups and a somewhat limited focus on development of content. Most operators are now trying to innovate in their VAS offerings and create sharper differentiation for their offerings.
2.1.7 Focus on movies & music
Movies & Music are the passion of India. Most of the rich content available to the end users revolves around these two, with Ringtones of popular Bollywood songs, Wallpapers of movie leads and games developed around movie themes.
Given that Youth account for a large segment of users & also dominate the pre-paid category, the focus on entertainment has been a strong hook to develop the VAS category and operators & content aggregators have been sharply focused in their efforts to pluck this low hanging fruit. It has been helpful that the film industry in India is very prolific and there are endless options to develop content around
2.1.8 SMS contests
Television is another culturally entrenched constant in the life of the average Indian. Typically TV viewing has been a passive affair; however following the global trend TV channels have been focused on making programming interactive. Thus programs, especially music & contest shows have started giving the option to their viewers to participate through SMS.
Detailed understanding about the industry and discussion with industry experts about the VAS industry and the various services.
Conduction of initial interviews with the people involved in the various stages of VAS business model and the ecosystem.
The initial interview exercise helped in understanding some general product offering and the services that comes under VAS. This led to an understanding of the technology behind the Subscription services, product life cycle and the best selling subscription products.
Along with the general understanding of product life cycle, there was identification of the key parameters to acquire new customers and the main reasons behind customer churning out of the system.
This was the stage of consolidation of the analysis that was done during Stage 3 and 4. The entire study was structured to form a Customer Life Cycle Model, covering the different stages and the various touch points.
Based on the Customer Life cycle Model, a strategy was put forward to improve customer retention. This included the various results and recommendation concluded in the study.
4. Findings and Analysis
4.1 Marketing Mix
Any VAS built around Bollywood is an instant hit, whether for ring tones, CRBT, games, wallpapers, alerts etc. Mainly because Indian film industry produces more than 1,000 movies a year and attracts nearly 2 Bn viewers, Approximately 5+ Bn tickets, 12,900 cinema halls and the reach has moved beyond India's boundaries to Non resident Indians across US, UK, South Asia, Middle-East, Africa and Europe. Satellite television, radio, internet, and mobile has helped cinema reach out to a larger audience.
Music claim one of the largest shares of India's mobile VAS market size, to the tune of 35% including CRBT and ring tones as the major applications. Airtel Music has recently claimed to be the biggest music selling company. Vodafone) & Idea introduced ease of use for CRBT by allowing users to copy another user's CRBT by pressing * while listening to it. Movie promoters and producers starts building mobile games and wallpapers based on their movies and release these applications just before the movie release. The up selling of these applications has resulted into huge profits for the promoters.
After movies, the most obvious best selling application is based on crickets. In India being a cricket fanatic country where cricket is a religion services both content and contest based on cricketers and cricket have been offered by virtually all the operators. Companies like Reliance, Airtel and Vodafone continue to build their communication strategy around being the lead sponsor of major cricketing events.
SMS services are innovatively being used by the VAS vendors for applications like Automatic Vehicle tracking when integrated with GPRS, Fleet Dispatch, Inventory Management, Ticketing Services etc.
Youth centric applications generate maximum revenue across the operators and thus efforts are made to develop innovative youth centric products aimed to capitalize on the behavioural attributes like Love, Music, and Education etc.
Product is offered for both SMS and Voice mode of subscription. For the SMS mode, content is pushed in the form of SMS to the end user where as in Voice mode; user first subscribes for a voice based product and then hears the content by calling on a dedicated short code. SMS subscription is preferred over Voice subscription, almost 85% of the revenue comes from SMS subscription.
Preparing a BCG matrix for the current applications based on the growing subscriber base we find that applications catering to Youth like Music and LKD features as the star products. The products catering to rural and regional contents are still in the nascent stage, as of now they are showing good numbers in both in terms of revenue and subscriber growth, hence they feature as question marks. Products like story, bhoton ka tandav etc have a very less popularity and are generally sunset applications. A timely decision has to be taken to decide on the future of these applications. News has been a cow application which has been giving good revenues in past but now the base has been declining. The product needs a revamping in terms if content and innovative so that the same can attract subscribers in future as well.
188.8.131.52 SMS Blast
Sending bulk SMS through a dedicated SMPP server worth a SMS sending capacity of as high as 300 SMS per second are used to send the promotional SMS messages for subscription and other U&R applications typically know the miss calls, Special tariff vouchers, best plan option available. It is a highly reliable and traditional mode of promotion of the various services.
Ø Cost effective
Ø Large number of subscribers can be reached in very less time
Ø Not very effective conversions since the number of messages delivered cannot be tracked at Vas vendor end.
184.108.40.206 AUTOMATIC DIALLER CALLING subscriptions
Automatic Dialler Calling or the outbound dialling subscriptions is the promotions of the services through voice. Calls are made to the subscribers and told about the various service packs like Astro, News, and Entertainment etc. Promotion of various Indial services is also done typically like the information on availability of results on the voice portal which can be listened by dialling on premium charged short code say 53030.
It is a hit in the rural areas where literate population is less. This population cannot be targeted since subscribing through SMS mode of subscription cannot be done by people who cannot read and write.
Ø Information on the User and Retention packs, typically the talk time related combo offers from the operator to the mobile users.
Ø Information on the One 97 subscription packs.
Ø Thanks giving messages in case of bill payment and promotional schemes.
A WAP browser provides all of the basic services of a computer based web browser but simplified to operate within the restrictions of a mobile phone, such as its smaller view screen. WAP sites are websites written in, or dynamically converted to, WML (Wireless Markup Language) and accessed via the WAP browser.
The Wireless Application Protocol (WAP) is the de-facto world standard for the presentation and delivery of wireless information and telephony services on mobile phones and other wireless terminals. The WAP specification uses the best of existing standards, and has developed new extensions where needed. The WAP forum is also working with many other standards organizations to develop or modify standards related to new technologies, which need modifications for wireless environment.
WAP Push has been incorporated into the specification to allow WAP content to be pushed to the mobile handset with minimum user intervention. A WAP Push is basically a specially encoded message which includes a link to a WAP address. WAP Push is specified on top of WDP; as such, it can be delivered over any WDP-supported bearer, such as GPRS or SMS.
Unstructured Supplementary Service Data (USSD) is a technology unique to GSM. It is a capability built into the GSM standard for support of transmitting information over the signalling channels of the GSM network. USSD provides session-based communication, enabling a variety of applications.
* USSD is instead session oriented, unlike SMS, which is a store-and-forward, transaction-oriented technology.
* Users do not need to access any particular phone menu to access services with USSD- they can enter the Unstructured Supplementary Services Data (USSD) command direct from the initial mobile phone screen.
* Unstructured Supplementary Services Data (USSD) works on all existing GSM mobile phones.
Offerings are made to the end users in various price bands according to the usage and the customer response to the price points. Typically the price points are set in terms of Re1, 5, 10, 30, 50.Rs 5 priced packs being the most revenue generating packs, contributing to almost 58% of the revenue
Price clearly has a relation with the deactivations and the churn. More the price of the product more is the churn. 73% churn against the respective subscriber base of the application was among the packs priced at more than Rs 10.
96% pulses were generated on Toll free subscription short codes with 64% landing for Music FM, clearly making Voice subscriptions a successful product.
Pulses in %
De activation of voice packs
Sub packs of indial applications
Love & Youth Centric
Total Toll Free Pulses
Call diverted to 53030
News and election Updates
Subscription for education portal
Total Charged Pulses
Table: 3 Pulse distribution at application and charging level
Subscription Products have been fairly successful across the 23 telecom circles across the operators for both SMS and Voice subscriptions. The penetration has been fairly good in the Hindi speaking states than other language states particularly down south.
Sub Base Distribution
Table 4: Circle wise subscriber base distribution of a VAS Vendor VAS_Vendor.
VAS_Vendor Voice subscription services have been generating good pulses and revenue from the Hindi speaking and the northern states of India.
Table 5: Circle wise Voice Subscription pulse and revenue split
4.2 Customer Life Cycle Model in Subscription
Woodruff (1997) defined customer value as a customer-perceived preference for, and evaluation of, product attributes, attribute performances, and consequences in terms of the customer's goals and purposes. Traditionally, customer value has been understood in terms of quality and price.
However, other ways of creating and delivering superior customer value are now being explored. As Sweeney and Soutar (2001) have indicated, it is imperative that firms enquire about other factors that might constitute perceived benefits and sacrifices, and the managerial implications of these factors, if they are to understand the perception and evaluation process of customers and recon their resources and activities accordingly. For example, Kotler (1997) argued that customer value can be understood in terms of product value, service value, employee value, and image value. However, this approach is largely derived from the standpoint of a firm, not that of customers, researchers have tried to understand relationship length, depth, and breadth in terms of customer retention, intensity, or usage level of services or products over time, cross-buying or add-on purchase, and word of mouth (Blattberg et al., 2001; Reichheld and Teal, 1996; Bettencourt, 1997), which usually implies a fundamental increment of customer lifetime value or customer equity. However, little is known about how customer value affects these customer behaviours, although many theoretical studies have indicated that superior customer value, as perceived by customers, has a significant influence on the purchasing and repurchasing intentions of customers and their decisions to retain a close relationship with a firm.
Age-on-service is a major challenge faced by operators on subscription-based VAS. Given the trend of operator-push promotions ruling the roost in the last financial year, gross additions have been the focus point as opposed to churn management. Due to this the percentage churn on subscription VAS is anywhere between 20-30%.
On top of it, the average pre-paid balance is around Rs 25 which brings along with it high chances of customers having insufficient balance at the time of rental charging. Hence operators are re-aligning their net addition strategy on VAS and focusing more on retention.
At the core of effective VAS churn management are the following elements-
* Giving age-on-Service-based offers: Predictive churn models are fast evolving in subscription VAS. Operators are getting into effective data mining to make offers at the most probable exit point to retain customers. The usage components of Subscription VAS-song changes, voice browsing minutes and text alert content are offered free or at a 50% discount
* Segmented initiatives to increase Usage-A major reason for Customer initiated de-activation in VAS is low usage. Tracking past usage trends of each customer in terms of usage duration, frequency and content and language preference is absolutely critical for planning promotions to induce usage.
* Win-Back Offers for churned customers: At least 30% customers churning out due to low balance are prone to coming back if re-targeted with a correct combination of pricing, content and campaign style. The typical campaign which works as a win-back is a one month rental waiver pitched in a customized out-calls with an offer feel.
The pre-paid kitty is very meaty in terms of the volume of customers. The strategy for successful VAS sale to pre-paid customers and in turn for increasing overall pre-paid ARPU should be to skim the pre-paid balance with techniques which are also customer-friendly along with being revenue-friendly for the operators.
4.2.1 Life Stage Model of Customer Interface and Finally Churn
The high cost involved in the acquisition of new customers makes the early stages of a new customer relationship unprofitable (Reichheld and Sasser, 1990). Only in the later stages, with the decreased cost involved in serving a loyal customer, does such a relationship become more profitable. There are divergent streams of research on the concept of loyalty. One is the stochastic approach, in which loyalty is considered behaviour. According to this approach, the individual who buys the same brand consistently is said to be “loyal” to this brand (Kuehn, 1962).
However, this approach cannot distinguish between true loyalty and spurious loyalty. The other approach treats loyalty as an attitude, rather than a mere behaviour. For example, Assael (1992) defined brand loyalty as a favourable attitude towards a brand, thus resulting in consistent purchase of the brand over time – a view supported by Keller (1993). Assael (1992) had a view in defining brand loyalty as a customer's favourable attitude towards the provider, thus resulting in repurchasing behaviour.
1) Need Realization: Arise of a need may be because of
§ genuine requirement of some service,
§ a gap to fulfil the current and future expectation in work,
§ to get timely update,
§ peer pressure: “All my friends have so why not I ”
§ Liking the service when saw commercial on TV, promotion in form of Automatic Dialler Calling, SMS, USSD, WAP etc and so why not try once.
Impact of promotions on the activations can be clearly understood from the unique user trends over a period of 1 month. The spikes clearly show a relationship with the SMS promotional activity.
2-3) Key reasons for choice:
* Price: According to an IMRB research, Indian telecom user with 80% prepaid base maintains an average balance of less than Rs 50 per customer and hence pricing of the application is a key parameter.
* Packaging: Coupling the application with some extra unstated needs that might suit the taste of the subscriber adds to the acceptability of the service.
* Content: The quality of content and the liking of the same by the customer make an impact on customer acquisition. Local adaptation need to be done to suit the flavour of the customer.
* Scheme-led choices: Coupling of the services with free content or free talk time makes an impact on the customer and influences the buying behavior. Typical U&R promotions of getting Calls free for 2-3 minutes a day for 30 days on doing a recharge of Rs30.
* Timeliness: The timing of the information makes an impact on the subscription. If the content of Astro pack pushed to the customer early morning lead to a better acceptability than sending it in evening.
* Persuasiveness: Increased promotions through Automatic Dialler Calling, SMS, USSD, WAP etc reaching the customer leading to an increased interest/ mind share of the customer.
4) Formalities in subscribing: High point of service initiation and builds further confidence in the brand and enhances the chances of staying with the service
* Voice Automatic Dialler Calling subscription is an easy and quick tool for subscribing since an introduction to the service is given which helps in gaining mind share of the customer and then by giving key press activation an impulse reaction can happen and subscription happens.
* Similar is the USSD promotion since being a Session based service a continuous interaction is done with the customer and hence easy to use.
* Subscription through SMS blasts has concerns and low conversions due to high percentage of the population finding it difficult to read and write message. Also Pull SMS has not gained ground in India
* Acquiring new customer happens through different promotional means, most common being Automatic Dialler Calling, Indial. Web, Telecalling etc. Automatic Dialler Calling forms the most common of all mainly because of its direct nature and is driven by impulse action and reaction to the prompt played.
Till this stage there has been no point of dissonance happening in the consumer's mind…in fact the expectation graph has been accelerating. With usage starts a kind of a second phase of the interaction…this is the expectation phase. This is the tickle point when there occur disconnect between the customer expectations and the value received that is the experience. Customer slowly becomes dissonant and starts turning passive to the service and at one point may stop the service.
5) Usage experience with the brand.
Once the user starts using the services, the real experience phase begins to happen. The expectation had already built up in the mindset of the customer and with the usage, the user starts comparing the experience against the expectation and hence there occurs a possibility of user not liking the experience. Henceforth the process of churns starts. The problems primarily occur at two levels. The honeymoon period doesn't last for long…as shock setting in with services showing discrepancy with expectations
* Technical Front: The network issue may happen in delay of the information when it is actually supposed to be delivered. For instance, SMS services like stock alerts and related information is expected to reach early morning so that the same can help in taking a decision in trading in the stock market. Another instance can be in the Voice subscription services like Astro service that makes sense when the customer receives such “Know your day” or “Pandit ji (interactive Astro service)”in the morning just before the customer leaves for the work. This makes sense more for the users like traders whose decisions get influenced by the astrologers.
* Value Management Services: The subscriptions happening through the Automatic Dialler Calling are influenced by the impulsive and quality of the prompts played. Later the user realizes that he/she has been cheated and made fool if there exists disconnect between the services offered and the delivery. Often it happens that the user subscribes to packs of higher prices and then realized that there need to be more offerings. Percentage churn is seen more in packs pegged at higher price. VAS vendors are slowly adapting to the model of giving more services in the price of one pack of higher price. Generally it may be offering 3 news alerts in place of promised 2 and more often the user can ask for more alerts by sending in a pull message at a lower cost. Thus providing a feel good to the customer.
6) Billing Experience and other touch points: Typically it happens that the unsubscribing happens more often when the date of renewal approaches and the user does not have sufficient balance and hence unsubscribe. This happens more in case of services when there is auto deduction of balance at a specified time say every 1st of every month which is normally due the date of renewal of the CRBT service or hello tune in layman terms. Voluntary churn happens more on the last 2 days of the month. Another similar kind of an experience happens when the customer interacts at the call care centre for enquiry of any service. Already felt cheated by a service, an improper customer interaction all the way makes a customer even unhappy and finally deactivates the service. Some patterns can be
* Consumer on a ‘faulty plan' & hence expectations not matching with their bill
* Consumer expected lower tariffs and hence over used
* Consumers did not understand the value plan at time of initiation
* Unsatisfied by the quality of touch points.
Consumer helpless can be summarized as
At this point, customer faces a shock and hence proper shock management need to happen to retain the unsatisfied customer. The main reason for churn to happen is the poor shock management approach that is adopted by knowingly or unknowingly by most of the operators. An aftereffect of the customer care interaction can be
* Customer lives the feeling of being overcharged or cheated or fooled.
* Irritation and sense of disbelief builds up.
* Repeated interaction with the customer care centre leads to an increased frustration and finally exits from the system.
Billing confusion can be attributed to arise from Consumer behavior and a mix of Consumer perception and consumer experience. Consumer behavior can be typically unsuitable plan adoption, consumer often not able to synergize the optimum service price as per the usage and arrives at a conclusion post the money is deducted. However the faulty billing or money not deducted according to the service plan known to the consumer puts the consumer in a state of mind when it is assumed that there has been a cheating, a typical consumer perception. It can however be an actual mistake also from the end of operator that can be treated as actual consumer experience.
In all these cases, there may be following possible understanding in the mind of customer
* “Against what I had thought”àConsumer Behavior
* “Not according to my usage”àConsumer Perception
* “Operator admitting the fault” àConsumer Experience
By this time there has been a complete change and the sweet camaraderie that built during the expectation stage has turned upside down and after the actual experience this phase ends up with a feeling of disgust and a sense of being cheated.
Therefore when we try to map the expectation and the Experience there is a visible disconnect between the two.
To summarize there is high expectation when the user hears Automatic Dialler Calling, word of mouth or through any promotion. In the start, there is good content delivery thus experience matches to expectation, but with time passage there exists a mismatch when content is not modified and changed innovatively, lack of value for money to the customer, billing and charging issues. Overall, discrepancy in the Expectation-Experience equation…initial expectation and experience, fizz out halfway through.
Thus churn happens on two critical dimensions: Emotional and Functional. Functional churn happens when there are issues with the content quality, content delivery and problem in the service offered whereas Emotional Churn happens when the customer starts feeling disillusioned and feeling of being taken for a ride.
Overall churn percentage to the total active base across the circle on application level was found to be 11.71% for both voice and SMS mode of subscription
Table 6: Churn Measure on May09 for One97 Subscription services
Maximum Blended churn for both SMS and Voice subscriptions happened for acquisition mode as Automatic Dialler Calling and Indial. However the churn for SMS subscriptions was considerably high for activation mode as Automatic Dialler Calling and for Voice it was Indial.
Automatic Dialler Calling
Operator Automatic Dialler Calling
Table 7: Acquisition Mode based Churn Measure on May09 for One97 Subscription services
An analysis was done to key factors contributing to an increase in churn on Voice Subscription service and it was found that call disconnection was still high for less than 30 seconds and there could still be an improvement made so that the average call duration increases.
1) 52.13% of the revenue was actually coming from calls less than 2 min and was contributing to 78.79% of the total revenue
2) 38% of the revenue came from the application with MOU usage less than 1% of the total MOU.
3) If the failed call customer were able to stay connected and generate at least 1 pulse each then there would have been incremental revenue of 44%.
4) 94% of the subscribers call for less than 2 min out of which only 22% go to an application.
Specifically for application L, it was found that
1) 86% calls were disconnected less than 1 minute.
2) Main menu even for repeat user is over 1 minute.
3) Instructions, whenever appear, do not guide clearly
4) No session was created for user, no profiling
5) Promotions and product USP synchronization may not be there
Call Disconnection Analysis
Table 8 (a): Call disconnection analysis for Application L
Current Average Call
Average call less than
Average pulses generated
by these calls
Additional pulses in
Table 8 (b): Call disconnection analysis for Application L
4.3 Recommendations to increase customer retention
* Focus should be on acquisition but the customer retention should not be neglected since the penetration with respect to the subscriber base has its own limitations. Maximum revenue comes from renewals and hence customer retention a must. Often it happens that the performance of the VAS vendor is good for some time but the inability to adapt to the change in customer interest and the changes in the macro business environment lead to shift of business from one vendor to another. Thus the competitors need to be closely monitored and the model of success of the competitor needs to be analyzed and if possible replicated to counter the macro environment changes.
* Value management: faith of the end user need to be maintained. For doing this effort should be made to understand the unstated needs of the customer both current and future anticipation. An effort need to be innovate as and with the changing customer needs, a proactive change in anticipation to customer requirement is always a necessity.
* Benchmark the performance and a continuous updating need to happen to grow and reduce churn and grow.
* Aggressive Promotion is definitely need of the day but an over aggressive policy with promises made that are far from realization need not happen. An effort should be made to continuously fit on the promised services.
* “Innovate, Innovate and Innovate else perish” need to be the only mantra to remain in business.
* Effort need to be made to create a delightful customer experience at all the touch points in virtually all the circumstances.
* Billing related details need to be communicated as clearly in order to maintain customer retention.
* Waiver Promotions and Bundling of services can be done to grab consumer mindset and providing “feel good” experience to the customer.
· Adapting to Airtel's recent START and STOP services aimed to give a “Customer is King” feeling to the consumer providing the option of both activation and deactivation of a service to customers wish. It is estimated that nearly 20 Lac deactivations happened in the first 2 days of the START/STOP service launch.
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a) Future of Mobile VAS in India, 2007 Stanford University & BDA
b) Mobile Value Added Services in India, A report by IAMAI & e-Technology@IMRB
c) Online Opportunity & Overview of Mobile Industry in India, Oct 2006
a) Cellular Operation Association of India www.coai.com
b) Association of Unified Telecom Service Providers of India www.auspi.in
c) Telecom Regulatory Authority of India www.trai.gov.in
g) Telecom Watch tariff databank Feb 2009
h) New Growth Engine for India Telecom: VAS by Pricewaterhouse Coopers
i) BDA-CII White Paper - Wireless India - 06June2007
j) Value Added Service: Sector Report by AMBIT Capital July 2008
k) Broadband and Internet India Mar 09