Segment and Succeed

Mobile data delivery costs seem to have permanently ended the days of all-you-can-eat plans with guaranteed maximum bandwidth speeds. So instead, service providers are seeking to differentiate their offerings to attract, and retain, subscribers with variations on mobile data quantities, speeds, services and cost.

Mobile data pricing, whether through smartphones, tablets or dongles, is experiencing the early stages of maturity, with operators introducing a variety of plans to determine which ones consumers will value the most. The goal of carriers is to balance mobile data supply, and demand, and broaden packages to best target a diverse set of customers, ranging from heavy users, to those trying data plans for the first time.

Indeed, this process of introducing more targeted offers, and refining pricing models, happens as any consumer market matures. In the packaged goods space, for example, the Crocs shoe company has expanded from its distinctive ‘Beach’ shoe in November 2002, to more than 120 styles of footwear at multiple price points. In the media market, the advent of eReaders and tablets gives consumers the option to subscribe to The Times, and The Sunday Times, as Kindle editions for £9.99 per month. Alternatively, new subscribers can choose from a combination of print and online plans ranging from £2 - £6 per week.

More art than science
Mobile data pricing is more art than science at this stage, with operators experimenting with several variables. The result is a hodgepodge of plans, with new options added to operators’ playbooks every couple of months. For example, 3 Austria offers mobile broadband tariffs with metered or unlimited usage, free roaming on other 3 Europe networks at national rates, and a multi-device add-on package. In Ireland, eMobile sells smartphone data plans with 1GB, 2GB, 3GB and 15GB buckets, along with unlimited data usage. Data overages cost up to €0.99 per day for up to 50MB, with an additional €0.02 per MB thereafter. Moreover, in Poland, operators use numerous offers and incentives, including discounts for bundled voice and USB modem users; unlimited usage during night-time hours; and a free multi-app ‘Social Network Package’, providing usage of Facebook, Goldenline (a Polish professional social networking site), and more.

Such a range of tiered services links customers’ usage and preferences with what they pay, and creates opportunities to increase revenues as usage increases. By combining network and subscriber intelligence with sophisticated policy management tools, service providers can meet the requirements of different customer and market segments with a variety of personalised service tiers that include:

• Bandwidth tiers based on the volume of data. When the quota is reached, operators can charge for additional data as eMobile does, or offer a promotion for the next service tier.
• Application-based tiers have customers pay based on their application usage, such as 10 videos and 20 hours of gaming services per month, combined with unlimited social networking. This approach reflects how customers use applications, and operators can zero-rate applications to allow for their unlimited usage.
• Speed-based tiers, based on varying top speeds, such as O2 Germany’s offers of €15 for 2Mbps download speed, or €25 for 7.2Mbps. Service providers can also up-sell a speed boost for a limited period of time on demand. Speed-based tiers can make cheaper plans accessible to more customers as well. For example, service providers can offer a prepaid plan with a low connection speed for customers on a limited budget, while adding a ‘turbo’ option for users who needs occasional high-speed access for a limited period of time.
• Time-based tiers, defined by the number of minutes the customer spends on the mobile data network. In this model, quality of service (QoS) is essential to ensure that the user is not penalised by slow network speeds. Operators can also use this method to manage network congestion, by applying different rates based on peak hour utilisation, time-of-day and service tier.
• Device-based tiers that apply policy rules to prioritise service delivery on certain devices such as smartphones, which often generate higher revenue per user.

In all of these models, providing customers with notifications is important to help them understand how their usage relates to what they are being charged, and how their priority service is performing. This visibility is critical to ensuring customer loyalty.

Leap forward
While the myriad of options can cause some confusion about which plan is best, it represents a leap forward for the industry, beyond the original one-size-fits-all approach. By offering multiple choices, service providers give subscribers more control over their experience, and allow them to pay for what they value the most.
More good news is that further maturity will means new types of plans in the coming months and years. In November 2010, Vodafone CEO, Vittorio Colao, suggested tiers based on application and service type to better align connection speeds with usage types: "A video tariff guarantees a connection speed that supports video, but then you also have an email tariff for people who are only using small amounts of data,” he said.

In the long run, consumers also benefit, as service providers learn the evolving usage patterns and subscriber preferences across the network. This leads to wiser network investments, more refined offers and an improved subscriber experience.

Pricing is the starting point for determining network usage and uptake of new applications and services. The fact that service providers are refining their mobile data price plans shows that they understand that consumers’ preferences and priorities vary, and that more customised plans will serve a wider customer base. These advances are a welcome first step in mobile data maturity, and will open the door to more price innovation in the coming months and years.

Randy Fuller is director of strategic marketing at Tekelec