At the ETIS Billing Workgroup last week in Krakow there was a discussion about how competition is forcing down prices and some operators are now promoting bundles that cost less than €10. Also this week we saw another round of roaming price cuts in the European Union. Is it time for operators to have a fresh look at how they can increase revenues in the face of both competitive and regulatory enforced price cuts?
For my trip to Krakow I flew with Ryanair – the ticket was cheap enough, and like most other airlines these days, I had to pay over the odds for a drink and packet of peanuts. I did, however, manage to resist buying electronic cigarettes, scratch cards, bus tickets and more overpriced drink. Ryanair have said that one day they would like to give seats away for free and make their money on selling other items.
Budget airlines, such as Ryanair, are winning the battle for domestic and European flights. In 2012 Ryanair had 38% share of European flight traffic.
On longer haul flights, we’ve recently seen the emergence of a number of carriers from the Middle East, such as Emirates, Etihad and Qatar Airways. On the Europe to Asia long haul routes, traffic via the hubs of these airlines grew 15% in 2012. According to airline booking / IT firm, Amadeus, “The Middle East airlines have been successful at delivering high levels of service to cater to the needs of premium passengers”.
So, traditional airlines who stand still are getting a beating at the lower end of the market from the budget airlines, and at the higher end of the market, they’re losing customers to newer airlines from the Middle East who are focusing on delivering higher levels of service.
What has this got to do with mobile operators? With prices coming down, with the lower end packages, maybe operators need to look at upselling more. They’ve got the ideal sales and marketing channel – the smartphone. The recent announcement that Telefonica are selling a Firefox OS mobile phone at €69 is indicative of where the market is going. Cheaper handsets will create a demand for data but the entry price point for data may also be lowered. So an option is to sell a base package(with limited options) at a relatively low cost and make money by selling add-ons, such as music, video, app specific offers, add on data blocks and roaming passes. As well as increasing revenues, delivering a range of dynamic services direct to the device can increase customer loyalty and stickiness. So while Ryanair sells electronic cigarettes to people stuck on a plane (is there a better example of context sensitive selling?) operators can upsell additional data enabled services. The best way to do this is by understanding customer context – what they’re doing, what their network experience is, and tie this back to an offer catalog and market, in real-time, direct to the device. In other words – sell more relevant add-ons and value added services.
The service focussed long haul market has shown that the market at the premium end is also there. Operators are seeing this and are bundling in more value adds as part of high end deals – e.g. free 3rd party music streaming for customers on high value plans are becoming more popular. The success of shared data plans in North America shows that customers will pay for innovative and valued services. Operators (and airlines) know that delivering value is not always about the lowest price.
As for billing and charging – from what I saw at the ETIS billing workshop last week, the discussion on new business models and revenue sources, and the ability to make money from them, is very much alive. Billing and charging is moving ahead to a more real-time customer focused model and operators are adapting. Those that are left behind, however, may be reaching for the electronic cigarettes.