New Plastic? You guessed it, the Mobile Phone.
Now your “New Plastic” strategy could take shape in one of two ways.
- You could just build lots of Mobile Apps and distribute them to all your members (Thereby adding to the costs of managing the program), or
- You could turn your Loyalty Program Cost Center into a Profit Center by offering your customers the opportunity to sign up to your branded mobile phone network.
Interested in Plan B? Let’s show you how and why you should be thinking about becoming a Mobile Virtual Network Operator (MVNO).
First, let’s deal with the obvious question. What is an MVNO?
If you take a look at the diagram of the MobCon value chain below you will see a group of activities called Service Provision (i.e. Customer Care, Billing and Marketing). In this MVNO model a third-party steps in and takes over these functions from Telco and “owns” the retail customer relationship.
What this means is you own the customer and the Telco owns the transport system. You provide your customers with mobile phones and plug them into the Telco’s network. You buy wholesale air time and then bill the customer based on the network data records provided by the Telco.
Sounds simple in theory? Obviously it takes some effort to implement but as you will see much later on the financial benefits can make it worth the effort.
Why would the Telco allow this to happen?
Historically the Telecoms industry has struggled with 3 key aspects of customer relationship management.
Firstly their customer acquisition costs are very high. Secondly they struggle to retain these customers. Customer loyalty is poor and consequently the industry suffers from a high level of churn. Then there is the ongoing problem of billing.
The final problem the telcos face is the Voice problem. Essentially they need to increase ARPU on Data to replace the trend downwards in Voice ARPU.
In a nutshell Telcos are very good at building, maintaining and managing the “Dumb Pipes”. What they are not very good at is Customer Relationship Management.
The reality is any organisation operating an efficient and successful loyalty program can address all these issues of Customer Relationship management more effectively than the Telcos.
To begin with the Loyalty program operator has already resolved the customer acquisition and retention problem. They also have an effective customer service and billing platform. The challenge for the operator of the loyalty program is to add value to that customer loyalty by providing them with goods and services which will help keep the customer sticky and more profitable.
Mobile phones add value, deliver a new revenue stream and provide the perfect platform for mobile communications and mobile web commerce applications.
Properly implemented and managed, the SmartPhone not only becomes the perfect customer loyalty platform it can also add tens, if not hundreds, of millions of dollars to your bottom line.
The MVNO model is not for everyone. There have been some well documented disasters over the past 5 years. The most notable being Disney and ESPN. (Om Malik’s piece from 2005 A MVNO Train Wreck Coming?)
The most successful global brand in the MVNO space is of course Virgin. In fact Virgin have been so successful in the US that their Telco has just bought them out. (See Sprint buys out Virgin’s US MVNO business for or around $483m).
The other success story is of course Britain’s Tesco. 2.25% of this national grocery retailer’s profit is now generated by its MVNO business Tesco Telecoms. Today they are seeking to significantly expand their market reach with their investor announcement of plans to double their profits in the sector by pushing into traditional sectors of the Telco market like broadband and home phones (e.g See the Telegraph’s Tesco plans assault on broadband market, The Times Tesco links with Cable & Wireless in broadband and home phones push and UK Compare Broadband’s Tesco aims to be the new BT) and moving into the premium iPhone market (See TechCrunch’s Mike Butcher: The iPhone comes to Tesco — will a price war follow?)
All this success is prompting retailers around the globe to take a good look at the MNVO model. (See Woolworths (Australia) Launches Its Own Mobile Network and Walmart launching own pre-paid cell plans)
Want to see who is getting it right today? Then start your search here at TelecomPaper.Com . Here you will find an up to date list of the MVNO’s and their Telco partners operating in every market around the globe.
So how do you know if you can get the model right? The simple answer is this.
The EGO:ID of CRM or How to profit from managing the customer lifecycle
If you have the EGO:ID of Customer Relationship Management in place then you are ready to profit from introducing a MNVO loyalty program (See Customers for life?).
The quickest and biggest losers so far in the MVNO market (e.g Disney and ESPN) made a fundamental error of judgement. They thought that content was the hook to build a successful MNVO business. As Virgin proved they were wrong. What you need to succeed is great Customer Relationship Management. Get that right and the rest is relatively easy.
The primacy of CRM in the MVNO Business Model is the reason why the MVNO model is not the answer to the future of Newspaper or Web Portals. Yahoo!, MSN, The New York Times and News Corp may have enormous online traffic but they do not have a relationship intimacy with their customers in the same way that a retailer, bank, hotel chain, rental car or airline may have.
I guess you could say they have followers rather than customers. Sadly,the Disney and ESPN experience proves that these online followers do not easily translate into profitable mobile phone customers.
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Darryl Coleman
November 26, 2009
I just stopped by your blog and thought I would say hello. I like your site design. Looking forward to reading more down the road.