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Report: New Schemes to Buy Customer Loyalty

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Report: New Schemes to Buy Customer Loyalty
June 25, 2009
By Vivek Naik, TMCnet Contributor


Vivek Francis Naik
U.K. mobile operators are now extending contracts to 24 months for plans including a handset, and to 18 months for SIM card Only plans, according to the latest market research survey by Strategy Analytics’ tariff department, Teligen.

 “This is in response to the continued demand for low-cost monthly plans in the UK market,” said Angela Toal, Senior Tariff Analyst at Teligen of Strategy Analytics (News - Alert). “Operators are being driven to offer plans at ever-lower monthly prices, or with increased inclusive allowances. With this move, operators are hoping to reduce customer churn and attract new customers to their services, as long as consumers will accept a longer contract in exchange for these extra benefits.”
Research analysts at Teligen said in the report, titled “New and Restructured Offerings from UK Mobile Operators,” that not only have service providers extended their range of tariffs, but have also offered additional benefits, better handsets and lower monthly rental charges for customers willing to sign up for 24 month plans rather than 18 month plans, and O2 has gone two steps further by introducing 36 month with mobile plans and the 18 month SIM card Only plans.
“With this move, operators are hoping to reduce customer churn and attract new customers to their services, as long as consumers will accept a longer contract in exchange for these extra benefits,” Toal said in a statement.
By way of comparison, a popular plan from an Austrian operator has no strings attached, no hidden costs, no ‘billing shocks’, no monthly rental, no minimum flat rate. It’s no surprise that the subscriber sign-in is growing at the rate of nearly 14,000 per month on average, or more than 460 per calendar day. The plan also provides mobile telephony over its mobile network and is a common factor in all product bundles, and allows the customer three SIM cards.
Another study revealed that services that offer and deliver loyalty incentives and rewards keep customers in a much happier state of mind. For example, 75 percent of all O2 pre-pay and pay-monthly customers acknowledge receiving rewards while the overall industry average is only 60 percent.

The study also noted that the average pay-monthly expense dropped below $43 in 2009 from a little over $50 in 2008. In addition, the pre-pay average monthly expenditure is holding steady at a little over $19. Churn, service provider switch and customer loyalty are all interlinked and stand at 17 percent for pay-monthly and 12 percent pre-pay and “Bill Shock” for usage appears to be a No. 1 dissatisfaction factor.
“No Bill Shock” is the European Union’s stern directive to all telecommunications service providers in the EU to keep their mobile users informed live on their usage and current billing amount in accordance with the EU’s regulations on international roaming call charges within the 27 EU countries to prevent “Bill Shock.”

 The EU’s ruling originated from complaints by substantial roaming EU business community and holiday makers who received huge bills charged at international roaming rates within the EU boundaries. That goes against EU’s founding mantras, promises and visions of one community, one currency, one market, and fairness to all EU citizens in all manner of activities and transactions.

“Having previously succeeded in switching customers from 12 month to 18 month agreements, operators will now focus on subsidies as a means of driving the transition to 24 months,” said Phil Kendal, director of the global wireless practice at strategy analytics, in a statement. “Consumers wanting large handset subsidies will be forced to choose between signing longer contracts at lower price points and accepting higher-priced contracts at the existing 18-month term.”
The current trend of diminishing usage and service swapping was more or less predicted when an earlier report indicated that mobile phone companies and associated vendors are planning to showcase their mobile software stores and utility offerings in a hustle and bustle bid to boost flagging sales while at CTIA Wireless 2009, and the possibility of lowering plan rates to at least retain customers and is seen as a realistic acknowledgement of the hard economic times everyone is going through.
At that exhibition, service providers and technology originators were attempting to leverage other means of keeping associated mobile services afloat by showcasing new mobile music offerings, since that business stream is predicted to fetch etch a revenue of $4.4 billion by 2012 and is a hundred percent more than what it was by end 2007, and also futuristic technologies such as NFC enabled payments that could prompt users to replace wallets with mobiles.
Another area of concern for revenue losses and customer shift was that the current rate of data usage that is between $30 and $60 per month is steep for consumers, and companies will be attempting to find fixes during the show.

Vivek Naik is a contributing editor for TMCnet. To read more of Vivek's articles, please visit his columnist page.

Edited by Amy Tierney

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