There comes a point in any business lifecycle where margin growth achieved through customer growth slows or is no longer sustainable.
This is especially true in telecoms and specifically the MVNO market where the margins are thin and the cost to acquire customers is still relatively high.
Every MVNO launch sees meteoric growth in the early days. But very quickly competitors will swipe customers and churn will kick in. It’s at this point you find yourself wondering if break even is possible.
But there are things you can do to boost your numbers and improve margins.
- Optimise your channels
At launch, the KPI is always customer numbers. There will always be a strong push to grow the business fast and every play from volume discounts to intensive calling from sales agents is worked hard. Before long, you will know which channels deliver the best numbers and you’ll consider it as an indicator as to where you should focus effort.
Not so quick. Over time you will start to accumulate data on your customers and understand their lifetime value as well as the quality of the customers your channels are giving you. At this point you may find that the highest volume channel with the apparently reasonable cost per acquisition is actually driving cost and not margin.
This is when I always recommend segmenting your customer base so you understand which customers to go after. Do this and you won’t sink resources into unwanted and unprofitable volume.
- What’s happening in customer care?
Loving your customers and driving an impressive NPS is a surefire way of gaining low cost acquisition. Recommendations are priceless, especially as they go hand in glove with retaining customers. It’s the perfect formula if you don’t have the cash to overly invest in retention programmes.
But the customer care landscape is changing.
Certain customer segments would rather self serve than call the round the clock call centre, so it’s important to understand if your customers value personal interaction. Money spent on call centres could be better spent on self-care apps and designing a better user experience.
UK MVNO giffgaff serves well over 2m customers yet they don’t have a call centre. Members manage their queries on forums and a host of useful online resources – customers take care of themselves easily and at their convenience.
But, based on the Graystone Strategy Market Segmentation, it’s very possible there will be people that want someone at the end of a phone. That’s when it’s best to have a look at how you can drive efficiency through blending skills and, most importantly, ensuring rigorous processes to deal with customer complaints or requests for compensation. Time will be money.
- Innovate your cost model
The vast majority of cost in any MVNO business case is going to be the wholesale costs. However, there is always an opportunity to increase your margins through better traffic management.
Moving a percentage of your traffic away from traditional GSM channels and onto an alternative bearer can drive substantial savings. US MVNO Scratch Wireless follows a WIFI first model, where they seek to carry calls and data over paid for WIFI before they utilise the more expensive macro GSM network. This approach allows them to post 70% gross margin.
Similarly, technology provider Audio Codes, who works with UPC (amongst others), claims that an MVNO can save €300k per month for every 50k customers simply by running voice over a data solution.
- Build targeted Add-Ons
Part of running an effective MVNO business is gaining a deep understanding of the requirements of customers, and that means constantly innovating your proposition.
The more you understand your customers, the better you can tailor your offers. The simplest offer to have in the armory is ‘add-ons’.
This could be anything from a targeted international calling bundle to something entirely complimentary like micro loans, payments or money transfer solutions.
The important point here is to build this around the needs of specific groups of customers and then use your touch points and customer relationship to sell the add-on. You could do this through targeted in-app advertising on a self-care app, old school bill inserts or a targeted next best activity programme with your call centre agents (if you still have any).
Spanish MVNO Simyo states that its add on strategy increased ARPU by 5% or €5m per annum.
- Assure your revenue
Telecoms is a fast moving and extraordinarily complex business. With so many different call classes and entries on the charging manual, I have yet to find a telecoms business that has not “found some money” when undertaking a revenue assurance exercise.
The opportunity in wholesale charges is almost always going to yield some upside, as typically wholesale contracts are 3-5 year agreements and seldom reviewed after the initial signature.
The same can often be said for the wholesale charging manual. Although the rates are regulated they will change on a monthly basis and can become a black hole if you don’t monitor them. I recall an example from an MNO wholesale revenue assurance review where over £1m of incorrectly (under charged) revenue was identified.
So that’s five relatively easy areas to examine and assess to find some extra margin for your business. At the core of many of these strategies is an understanding of the needs of your customers and a strategy to build the appropriate offers, channels and customer experience.
If you would like professional help in delivering one or more of these strategies then please contact us, and if this article has spurred you on to make changes that do improve your margins then I would love to hear about it. You can call me on +442078460276 or e-mail me at email@example.com.
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