Fixed line telecom companies and their wireless competitors, all striving now to roll out converged fixed and wireless services, will need to pay attention to what customers say they really want: better prices, innovative features, and improvements in basic services, according to a survey by consulting firm DiamondCluster International.
DiamondCluster's survey of 610 consumers in the United Kingdom (a market with a great deal of fixed-mobile convergence activity) aimed to find out whether or not consumers would actually purchase convergent offers, and which features will be valued most, and what barriers might impede adoption.
The idea of fixed-mobile convergence is that business and domestic users alike would be able to use one handset, with one telephone number, one address book, and one voicemail service, to make calls and connect to the internet whether they are at home (or the office) or on the road.
Failed hype
But consumers are clearly not caught up in the hype so far. Key findings in the report, entitled 'Driving Adoption of Fixed-Mobile Convergent Propositions: a Consumer Perspective', included:
- The simple bundling of fixed and mobile services has limited potential because consumers will expect deep discounts. Differentiating convergent phone services from their traditional offerings will require operators to tailor their propositions to the unique needs of specific market segments.
- Cost-management features, such as a single billing statement, are most attractive to consumers. Integrated customer services, such as a single call centre for questions, will be insufficient to drive adoption of convergent offers.
- Fixed line operators have an advantage because most adopters of convergent offers would prefer to keep their fixed line numbers, making it difficult for challengers to fully displace an incumbent provider's service.
- Given the attractive pricing of Voice over Internet Protocol (VoIP) and consumers' general focus on price, some operators may soon be launching bundled VoIP/mobile/broadband services. This could be either an offensive or defensive move. In either case, VoIP risks further cannibalising the traditional telecoms market.
Best segments
According to Milan Sallaba, a partner in DiamondCluster's telecom industry practice, "Smart pricing and the right blend of innovative features will be critical to overcoming consumers' reluctance to switch to a convergent fixed-mobile phone service. Operators will have to determine the right price levers to find the optimal trade-offs between the effects of re-pricing, on one hand, and increased usage and loyalty on the other."
The research identified distinct market segments that appear most likely to adopt fixed-mobile services. For example, the "technophile" segment is made up mainly of males in their late teens to early 30s who are already on a mobile contract, and whose usage of cable TV, VoIP, broadband and mobile phone services are above the broader market averages. Another likely adopter was identified as the "convenience seeker" segment. Customers in this segment tend to be adults in their late 20s to mid 40s in a household with children, and above-average buyers of mobile services.
Implications
The report asserts that telecoms operators planning to capitalise on convergence will have to address three specific challenges: customer segmentation, offer design, and pricing. According to Sallaba, "Operators need to generate new insights, beyond their current customer segmentation efforts, to identify the most likely adopters of convergent offerings, and then carefully tailor offerings that appeal to the needs of those discrete segments."
In terms offer design, the company's research into convergent offerings is quite clear: Consumers were asked about two different convergent offerings. The first was a packaged offer of fixed voice, mobile and internet access with a single contact centre, a single bill, and a single web site to manage bills and enquiries. That offer promised simplicity and cost savings in the form of a price discount on a suite of packaged services.
Consumers were also asked about an integrated offer, requiring a broadband connection at home. In this model, a single, dual network handset would operate as a standard mobile device but at home would route traffic through the broadband connection. Features of this service included a single voice mailbox, a single address book, and a personal diary. Among the benefits would be improved mobile reception at home, various value-added features, and the cost savings associated with fixed line rates for mobile calls from home.
No value?
"Consumers told us they don't perceive much value in the simple bundling of services," said Maria Pecorari, a principal in DiamondCluster's UK telecom industry practice. "But they would like to see operators improve on the basics, such as improving mobile reception at home. That marks a real opportunity for dual mode handset offerings that deliver on the promise of transferring fixed and mobile traffic seamlessly across networks."
Consumers expect significant savings if they can't access high value-added features. In testing the packaged proposition, 47% of respondents said they would expect a cost saving of at least 20% on their overall bill before they would consider the service. An additional 20% said they would expect a cost saving of at least 30%.
Conclusion
"Price sensitivity is a limitation for convergent offerings that only offer limited improvement," Sallaba concluded. "The value lost on up-front selling costs and on price discounts could significantly offset the value created through increased usage and loyalty."
This is an issue, particularly for the incumbent operators, while challengers could be more satisfied with lower margins and adopt more aggressive pricing strategies. The full report is available upon request by sending an e-mail (with your company contact details) to convergence@diamondcluster.com.
|
More Info: |