Treat them fairly and they will come

There was a time when I travelled around the country for a while working at Vodafone, giving presentations to customer groups and sales teams about data ‘Products’. Not sure they have those anymore. There’s just data now.

I used to say that I can present all the strategy stuff you like but it has to be correct from a human perspective. It has to connect with customers at an intuitive level. With that in mind, what if I told you people felt their phone company was mistreating them, and they wanted better services. I think you’d say to me that’s the most obvious thing you have read today.

Below is a question we asked in a recent survey.

People want fairness more than they do entertainment in their plans.

In principle, the argument is simple – make data fair again

As I wrote in an earlier post, there are some self-exacerbating problems in the way telcos manage data which, at least, might be reducing the trust people have in their phone companies. At the same time, the oligopoly structure of the big phone companies means it’s hard for them to innovate and has trapped them in a fight which could be distracting them from the real issue.

So, what do I think the real issue is? I think people want their phone plans to be fairer. Instead of spending millions on content, one option available to phone companies is to do simple things like building the best data plan you can and making data transactions transparently fair. Here’s what I’d suggest.

simple data management facilities are cheaper and easier to build for phone companies and are more desired by customers.

Imagine a Telco who said :

  • Your usage is changing, and you might not have realised it :
    We’ve found out customers are using more data each month.
  • You’ll always get our best price / GB :
    We will charge you our fairest rate for data, whatever your usage.
  • We’ll refund unused data :
    If we charge you for a bundle of data and you don’t use it all, we will refund you the pro rata cost, or you can keep it and use it at any point.
  • If we lower our rates for data :
    We will pass them on to you immediately with no action on your part.
  • We’ll help you manage your data :
    You can use your app to set data limits. Say you use the first 80% of your bundle at 4G speeds and then, when you’re close to your limit, the last 20% at 3g speeds.
  • We’ll give you all the helpful information we can :
    We will send you a monthly email summary of your data trends so you can see visually how much you’re using and what you’re using it on.
  • We will personalise our recommendations to you :
    Our app will provide you personalised suggestions on how to cut down on data if you’d like.

The question is, would you be more likely to stay at that telco than you would if they offered you access to the AFL as part of your plan?

Benefits: Efficient data usage, Reduced churn, increased acquisition, NPS, Improved complaint reduction, improved trust, marketable USP. No expensive content fees (e.g. English premier league $160m)


The problem for companies with large number of existing customers is this

I’ve done the business cases for this sort of thing. When you have millions of customers giving you extra money because they blow their data allowances each month, you get hooked on the revenue. Especially given that, as we’ve seen, it’s getting tougher to be a telco.

That means these data management ideas are expensive to do for incumbents – especially things like automatically optimising plans. The ARPU reduction they’d sustain applies to all customers while each year, only a few will churn if they don’t do it. That’s a problem which will linger for the Tier 1s and a version of the conundrum expressed in ‘The Innovator’s Dilemma’.  This is exactly the reason Kodak didn’t want to make digital cameras – they’d lose the revenue from film.

That creates an opportunity for smaller phone companies

Data management facilities are an acquisition opportunity for MVNOs, especially those with small customer bases. Ideally, the ‘fair data ‘schemes employed would encourage usage. E.g. The first GB when you reach your limit is free. That’s mostly a marketing change that drives usage and feels fair.

Here comes Belong

Hmm. This all seems very fair.

Belong Mobile, a Telstra subsidiary / MVNO recently launched with a ‘data vault’. When you buy data, you get to keep it forever. This is one example of a smaller phone company offering fairer data pricing. It’s a bit annoying really. I’d done these slides and started writing up the concept before they launched. I would have loved to guess what they were going to do.

Who’s the fairest of them all?

This is where you end up if you throw a strategy net over the top of all this. I’ll use Porters seminal quadrant.

Porter's classical view of strategy

TPG seem likely to pursue low cost, broad (mass market) offering. TPG are known for their smaller cost base and operational efficiency. The same position could be an opportunity for Vodafone who seem to be wandering without a strategy at the moment.

TPG’s strategy has been released to shareholders. They will be.

  • Bundling their new mobile services with fixed services :
    They have 360k customers already for their mobile products and 2 million fixed subscribers. Offering bundles seems like an excellent way to go.
  • Have no existing customer revenue to protect.’ :
    This is a direct quote from their shareholder release.  Boom ! Remember that from above? Existing telcos cannot afford to offer fairer data pricing – they’re hooked on the overage charged.

They need to gather around just 500k customers to break even on their network.

There are around 32m SIOs in Australia as of June 16:  So to make the maths work, TPG only needs 4% of the available market.

Unlimited data might be the thing people say they want most. Only 2% of Americans (where unlimited data plans already exist ) have one.

TPG only need 500k customers to break even. They have around 360k customers on their network already.

TPG could well launch an unlimited data plan

That funnel looks like a shot in the arm for Australian telco.

An unlimited plan at around $50 won’t be the whole strategy for TPG, but it might well be the headline we remember. Unlimited alone could give them half of the customers they need.

It would shake the entire industry if they did it. TPG will have spent $600m on their own network, capable of 4G speeds and they will need to recoup as much of that as possible before everyone moves to 5G. They’ll have tonnes of capacity – they own their own backhaul around Australia. Why wouldn’t they offer an unlimited plan – as unimaginable as it currently sounds?

If I were an MVNO, or, for that matter, a tier 1, I’d have a folder in a drawer ready for the time TPG launch with ‘The Unlimited Option’ written on it.

Summing up

There is a massive opportunity for MVNOs to pinch customers from the tier 1s as the self-exacerbating data issues they are facing continue to bite the pockets of customers. Belong has already started to take advantage of it. TPG will almost certainly do the same and may even launch their own unlimited plan.