Simplicity key in shared data plans
Numerous telcos are examining when and how to bring shared data plans to market. However, with the exception of consumers in the US, the notion of multiple subscribers sharing a single data allowance is completely alien to most mobile customers.
In fact, the concept of sharing data either by the “connected person” or the “connected household” has even proven difficult to get across to some telco executives.
The most important consideration for telcos when devising shared data plans is to keep them simple. However, even if they manage to do this, shared data plans need to be extensively and simply marketed to consumers and sales teams, which will come at a cost. A number of telcos are currently in the process of reviewing their shared data plans, which is unsurprising considering that many are either too complex or not well marketed.
Keep it simple or shared data plans will not be understood
The golden rule when pricing telco offerings is “keep it simple.” While this message continues to be overlooked by some telcos when making general pricing decisions, it cannot be ignored as telcos look to introduce shared data plans. A plan that is too complex will fail, and operators must not underestimate the considerable design and marketing efforts required to ensure that shared data plans are understood by consumers.
Some operators will deliberately make shared data plans unattractive to dissuade too many of their customers from switching to the new tariffs. For example, one telco with a sizeable big-screen mobile broadband business fears that subscriber losses due to account consolidation would be too great if it aggressively marketed shared data plans. Another mobile-only operator has launched a shared data/Wi-Fi offering in an effort to fill its fixed-line product gap. In short, there are many business cases being developed around shared data plans.
As we argue in the forthcoming report Shared Data Plans: Benefits Outweigh Challenges, one of the greatest barriers to launching shared data plans is that most telcos do not have the back-end systems to support them. Back-end systems – including provisioning, billing, policy management, and customer relationship management – need to be aligned to ensure that customers have a satisfactory experience when purchasing a shared data plan. However, numerous telcos will fall short in this area because of bottlenecks in their back-end systems.
When done well, shared data plans increase customer stickiness
As with all new pricing mechanisms, there are inherent challenges associated with shared data plans. One of the main concerns for telcos is subscription revenue loss. For example, a telco would lose revenues if a customer with a dongle and smartphone opted for a shared data plan since it is cheaper to have one single account than two separate subscriptions.
Ovum believes that telcos should view shared data plans as a long-term anti-churn management strategy, especially for telcos in mature markets where customer retention is the main focus. A user with all their accounts and their families’ accounts on one shared data plan offers a valuable lifetime customer opportunity for telcos. The dual financial benefits of enhanced customer stickiness and the ability to bring devices within a household that are either currently or going to be connected to rival networks (at a reduced acquisition cost) outweigh the short-term subscription revenue losses.
However, operators must be aware that they are unlikely to see the same success that US operators Verizon and AT&T are having with shared data plans. Verizon, for instance, has more than 30% of its postpaid customer base on shared data plans. These operators’ success is an exception rather than the rule. In Verizon’s case, LTE customers that want a subsidized smartphone have no choice but to take a shared data plan. Moreover, the US has a high disposition to sharing telecom services, with approximately 80% of the market already sharing voice and text across a single account.
Nicole McCormick is a senior analyst for industry communications and broadband. For more information, visit www.ovum.com/