Tapping new revenue streams through innovation
In a diverse market such as Asia, which has different business conditions and varying degrees of sophistication and development, one would assume that developed nations like Japan, Hong Kong and Singapore would be more “innovative” -- and, generally, rightly so. However, contrary to common perception, the telecom sector in less developed countries like Indonesia can display a greater level of overall innovation.
Technology innovation refers to the level of sophistication in the types of products and services offered. This area is where countries with high broadband penetration like South Korea, Japan, Singapore and Hong Kong have the advantage. The high internet connection speeds and HSDPA/long-term evolution-ready networks enable the latest feature-packed gadgets as well as communication services to be easily accessible. Telecom infrastructure in these countries has reached a stage where there is almost complete communications coverage and support anywhere within their borders.
At the same time, these markets typically have a higher percentage of technology first-movers and higher concentration of wealth, which means a greater willingness to pay for the latest and best that technology has to offer.
The best example would be the operators that won the exclusive deals signed by Apple for its flagship iPhone mobile device. The demand for the device produced a significant spike in revenue but, more importantly, lured lots of subscribers away from their competitors.
A second type of innovation refers to the creative use of pricing and bundling techniques to offer a wider range of services. This does not rely on infrastructure development or the latest and best that technology has to offer. Instead of selling products or services separately, innovative companies can bundle them into combinations of products and services that are more valuable than the simple sum of their parts.
This type of innovation aims to eliminate daily hassle and is usually tailored to meet a specific need, thereby improving the overall customer experience. Such an improvement makes customers “sticky” or more inclined to be loyal to your company or brand. Pricing and bundling innovation also leads to increased revenue in the long run, as companies discover new ways of growing ARPU.
In fact, such innovation not only adds value and differentiation to companies' services but can also serve as a way of justifying premium pricing rather than continued discounts on bundled services. After all, customers tend to be more willing to pay for something they want.
In countries like Singapore where there are only a handful of operators, there is less room for pricing innovation compared to countries like Indonesia and Thailand. In the fight to retain and acquire new customers, Indonesian and Thai operators have displayed astonishing creativity and agility in creating new value propositions for customers.
Take real-time charging for example: in a market like Indonesia where there are a multitude of service plans and bundles, operators benefit from the capability to implement efficient charging models. Indonesia has been a pioneer in adopting the IT based real-time charging approach for the past five years. In this fiercely competitive prepaid market, the largest mobile operator saw the necessity to offer flexible and innovative offerings to prepaid customers. Since then, almost all of the competition has jumped on this forward looking bandwagon. The result is true convergence, which is not only a key market differentiator in the region, but has become the industry standard in Indonesia.
Finally, business model innovation is also another critical differentiator for operators. Today’s operator not only has to offer basic voice and messaging services, but also wireless, broadband, data, sound and video services.
India’s Bharti Airtel, for example, established itself as the market leader by differentiating itself with its focus on building a strong brand through innovation in sales, marketing, and customer service, and an innovative cost-effective business model. Indonesia’s Telkomsel and the Philippines’ top two telecoms operators also moved quickly to take advantage of their unique market conditions.
Filipinos were rapidly won over by the operators’ decision to sell phone credit over the air, dispensing with scratch cards and eliminating print and distribution costs. They also sell this credit at just a few pesos at a time -- akin to selling cigarettes by the piece -- which opens the door to a mass of price-sensitive customers. Subscribers can also remit money simply by sending text messages, reflecting a smart decision to capitalize on the Philippines’ large overseas migrant workforce.
In developed markets like Korea, operators offer reasonable, unlimited data plans that allow subscribers to take advantage of broadband speeds that are among the world’s fastest. This has led to an explosion of demand for next-generation broadband services and applications, including live video streaming and interactive television.
All these serve to illustrate that there are many ways to innovate and evolve in order to tap new customer segments and grow revenue. Especially in the current global economic malaise, innovations like real-time charging can make a significant difference.
Prakash Sadagopan is director of product strategy in Asia Pacific at Convergys.