"All kinds of new business models are possible" said Tomi Ahonen The Economist 13 Oct 2001
Billing, CRM, Churn and
Profits
Tomi T Ahonen, M.B.A.
3G Author and Strategy Consultant
Mobile Billing Systems
IIR, Budapest Hungary
September 27-30, 2004
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Your customer revenues
45
40
35
30
WAP
SMS
Voice
25
20
15
10
5
0
Ja n- Fe b- Ma r- Apr- Ma y- Jun03
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Copyright © Tomi T Ahonen 2003
Jul03
Aug- Se p- Oct- Nov- De c- Ja n- Fe b- Ma r- Apr- Ma y- Jun03
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www.tomiahonen.com
3G Strategy Consulting
What happened in January 2004?
80
70
60
?
50
WAP
SMS
Voice
40
30
20
10
0
Jan- Feb- Mar- Apr- May- Jun- Jul- Aug- Sep- Oct- Nov- Dec- Jan- Feb- Mar- Apr- May- Jun03 03
03
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Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Marketing Reality of 2nd Phone
• The first 10-20% to get second phone are
–
–
–
–
YOUNG
ADDICTED
HEAVY USERS
HAVE A JOB
• They are your MOST DESIRABLE customers
• But if they have another (or 3 or 4) subscriptions, you
will not get all of their traffic
• They are much more knowledgable and they are
among the first to know what marketing efforts your
competitors are doing
• Here is a tip - put each of your subordinates to
different competitor network
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Free prepaid balance via SMS
• Clever direct marketing tool with O2 Ireland
• Prepaid customers can have free requests of their
remaining balance, via SMS
• Service is totally funded by advertising, the balance
report SMS includes space at bottom used for
advertising third party commercial messages, and
also for O2 targetted customer messages
• Customers love getting valuable info for free, as ads
are on bottom of SMS, are no-intrusive in nature
Pearls: Real Mobile Services
collected by Tomi T Ahonen
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
This is how a social network looks
like...
Slide courtesy Xtract
circles
lines
= people
= friendships
Example real-world social network of U.S. schoolchildren (Newman, 2003)
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Lets define Alpha User.
An Alpha User is an Early Adopter
who is also a socially active
network hub of some community.
The Alpha User is both an Early Adopter by
technology orientation, and an activist in a
community dimension
The Alpha User is the optimal new service
launch target.
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Slide courtesy Xtract
penetration
The Alpha User tells his immediate
contacts
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Slide courtesy Xtract
penetration
They then spread the word
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Slide courtesy Xtract
penetration
Much more slowly the innovation
spreads to the Alpha User
[Red node indicates a person who’s
adopted your product!]
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Slide courtesy Xtract
penetration
Only after Alpha User has discovered
it, can service spread fast
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
The business impacts are huge...
At 1 Euro / subscriber / month equals 69 million Euro in direct revenue increase
-- not counting related effects like winning market dominance etc.
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Formula: how much money lost?
X = A x B x 5.75
where
X = opportunity cost of suboptimal launch vs Alpha
User launch
A = price of new service tariff per month
B = total subscribers at saturation of service adoption
ie 2 Euros x 2 million customers x 5.75 = 23 million
Euros lost because suboptimal launch
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Alpha User impacts
• Was a theoretical concept for many years
• Data mining has tried to identify and isolate
• Was impossible as counting most connections yields
massive amounts of false positives and misses many
of the true Alpha Users
• Now we can identify them
• It will drive all future service launches within telecoms
• BUT it will ALSO drive future launch of most other
consumer industries
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
The sheer power of communities
• Peaceful revolution.. A mobile swarm appeared in
minutes and grew to over a million peacefully on the
streets in the Philippines, over four days, forcing
Joseph Estrada from government after charges of
corruption in 2001
• Protestors communicated via SMS, including
coordinations for food, etc
Source: Embracing the Digital Age, Spring 2004
Pearls: Real Mobile Services
collected by Tomi T Ahonenc
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
SMS kills Popular Movies
• Movies such as the Hulk, Charlies Angels 2, and Gigli
have suffered greatly at the box office because the
youth is now using SMS text messaging to tell each
other of movies not worth seeing
• This is an example of the power of SMS in word-ofmouth
Source: The Independent 20 August, 2003
Pearls: Real Mobile Services
collected by Tomi T Ahonen
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Member get Member, m-Banking
• If you let users send money via mobile phone to
others, this is good way to get receiving person
to sign up to the m-Banking service
• Receive message "You have received money
from Mr X, you can retrieve it directly on your
mobile phone if.."
• Make sure sign-up is easy, few steps, and initial
acceptance is click-to-order
Pearls: Real Mobile Services
collected by Tomi T Ahonen
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Pay money to recruit friends
• Finnish newcomer mobile network Saunalahti is
cashing in on its market visibilty and the new number
portability
• Latest gimmick is to promise 10 Euros (about 7 UKP)
for any subscriber who brings in a friend who stays
as a paying customer with Saunalahti for three
months or more
source: Kauppalehti Nov 13, 2003
Pearls: Real Mobile Services
collected by Tomi T Ahonen
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
A few words on Churn
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Churners
• Four main types of customers relating to churn:
–
–
–
–
Joiners
Leavers
Changers
Stayers
• Good churn vs Bad churn
• Hidden churn
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Churn Insights..
• Artificial Sense of Security: "Customer Satisfaction"
• Actually if a customer says he is satisfied with your
service, he may still leave you very soon
• Mercer Management Consulting reports that 80% of
telecoms customers who churned said they had been
satisfied with their service!
Source: Swisscom Presentation at Telecoms Forecasting conference,
Prague June 29-30, 2004
Pearls: Real Mobile Services
collected by Tomi T Ahonen
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
UK Churn findings 2003
• UK Regulator OFTEL has found lots
of interesting statistics and facts over
the years. In 2003 it says:
• 25% of mobile phone users in the UK have switched
networks
• 10% switch annually
• A 34% savings would be needed on average to
entice a switch of network providers
Source: OFTEL Mobile Services Market Report Sept 15, 2003
Pearls: Real Mobile Services
collected by Tomi T Ahonen
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Role of Price in Commodity Biz
• Telecoms industry has recently identified about 10%15% of all customers being "price shoppers" in
various studies
• Telecoms is not as intensely competitive as for
example the airline business
• In airlines, SAS says today 45% of all customers
make the purchase decision solely on the basis of
price
• This is likely to be near future direction of price
shoppers also in telecoms services
Source: Kauppalehti Aug 24, 2004
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
Pearls: Real Mobile Services
collected by Tomi T Ahonen
3G Strategy Consulting
MVNO Cut-Throat Competition
• The Orange group is pulling out of Denmark
• It cited the local competitiveness - Denmark has 19
operators including MVNOs - as the primary reason
for selling its operation which was third largest in
Denmark behind TDC and Sonofon
• The operation was sold to TeliaSonera which now
has 1.1 million subs in Denmark
Source: Financial Times July 9, 2004
Pearls: Real Mobile Services
collected by Tomi T Ahonen
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Omega Customers - Hidden
Profits
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Look at Traffic Balance
Originating (green) Traffic
billed to caller on your
network
Terminating (red) Traffic
billed to caller, and
termination revenue
generated if it comes
outside your network
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Extreme Case: Same SME
Typical Salesrep
Traffic shows up on
phone bill: High ARPU
preferred customer
Copyright © Tomi T Ahonen 2003
Typical Tech Support
Traffic accumulated onto
interconnect revenue
only: Stealth Omega..
www.tomiahonen.com
3G Strategy Consulting
Calls from fixed networks
Fixed Network
Other
Mobile
Network
Our
Mobile
Network
Fixed
Network
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Look at Traffic Balance
Originating (green) Traffic
billed to caller on your
network
Actually any traffic
terminated outside your
network pays termination
fees to your competitor
Copyright © Tomi T Ahonen 2003
Terminating (red) Traffic
billed to caller, and
termination revenue
generated if it comes
outside your network
Is most profitable if traffic
arrives from fixed network
www.tomiahonen.com
3G Strategy Consulting
Bring in 80:20 Rule
• Assume 20% of customers generate 80% of traffic,
and equally 20% of customers receive 80% of traffic..
High originate
Highest Profit
calls, high
Customers
phone bill
Low originate
calls, low
phone bill
High monthly
bill, yes but not
always highly
profitable as
disproportionate
payments of
outgoing
termination
Stealthiest Omegas,
profitable but hidden
High receive
calls, high
Termin. fees
Copyright © Tomi T Ahonen 2003
Low receive
calls, low
Termin. fees
www.tomiahonen.com
3G Strategy Consulting
Assume 1/3 is "real" termination
•
•
•
•
•
•
•
Assuming of total traffic revenue accounting, 2/3 based on billed
outgoing traffic, and 1/3 on both own network terminated own traffic,
and accounted for termination into other mobile and fixed networks
All Omegas would deliver
33% of total revenues
High originate
calls, high
20% of Omega revenues
phone bill
would be totally hidden
with low-phone bill
customers
Low originate
4% of all customers would
calls, low
be both low billing and high
phone bill
High receive
Low receive
Omega, delivering 16% of
calls, high
calls, low
Termin. fees
Termin. fees
all Omega revenues (red box)
These hidden and forgotten 4% would deliver thus 5% of total revenues
They currently get no targetted marketing and are not billed for
terminated traffic, almost no costs. Very high profit on this traffic
Assume 2x normal profitability, 4% hidden customers -> 10% of profits
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
If you are interested...
• Contact Xtract Limited
• at www.xtract.info
• They have solution already in production with major
banks and leading mobile operators
• They isolate Alpha Users, Omega Customers,
Multiple subscriptions, Churn candidates etc etc etc
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Flat Rate tariffs coming
• Competitive pressures working..
• Since KDDI introduced flat rate pricing to its
CDMA 2000 1x RTT network in Japan, now
NTT DoCoMo is copying the idea
• NTT DoCoMo's flat rate on its 3G FOMA
network on W-CDMA, is priced at 3900 Yen
per month (36 USD)
• Service will be available from June 2004
Source: Global Mobile Daily March 17, 2004
Pearls: Real Mobile Services
collected by Tomi T Ahonen
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
But wait - There is still More Info
”In a connected age sharing information is power.”
Tomi T Ahonen in Services for UMTS 2002
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Crystal Balls..
•
•
•
•
•
•
•
Fixed telecoms competition USA
Mobile telecoms Finland, Sweden, Italy, Israel
Mobile competition UK, Hong Kong, Denmark
Fixed Internet USA, Canada, Finland, Sweden, Korea
Mobile network compatibility Israel
Advanced telecoms segmentation Finland, Sweden
Fixed-mobile convergence Finland, Sweden,
Denmark
• Mobile Internet Finland, Japan, Philippines
• 3G Japan, Korea, UK, Italy, Austria
• Developing economies: Czech Rep, Chile, Philippin.
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Good sources of information
• Biggest free 3G info site - www.the3Gportal.com
sign up for their free daily 3G newsletter !
•
•
•
•
•
•
•
•
•
•
Free on-line experts community - www.ecademy.com
Disruptive and engagement marketing - www.smlxlarge.com
3G and 2.5G training, Oxford - www.conted.ox.ac.uk/electronics
SOMs and Advanced Segmentation - www.xtract.info
Tariffing, Revenue assurance - www.compwise.com
Partnerships knowhow & tools - www.metaccord.com
Business applications - www.verista.com
Mobile Data Association - www.mda-mobiledata.org
UMTS Forum Reports - www.umts-forum.org
More free service idea “Pearls” - www.tomiahonen.com
More information send e-mail to tomi@tomiahonen.com
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Good Books
• 3G Marketing, Tomi T Ahonen, Timo Kasper & Sara Melkko
333 pages, John Wiley & Sons, 2004
• Mobile Commerce, Paul May, 302 pages, Cambridge 2001
• M-Profits, Tomi T Ahonen, 380 pages hardcover, John Wiley &
Sons 2002
• I-Mode: A Primer, Nik Frengle, 483 pages, M&T Books
• Services for UMTS, Tomi T Ahonen & Joe Barrett, 378 pages
hardcover, John Wiley & Sons 2002
• Economist Guide to Business Modelling, John Tennent &
Graham Friend, 266p hardcover, Economist/Profile books 2001
• The City in Your Pocket, Timo Kopomaa, 143 pages,
Gaudeamus, 2000
• Ultimate Telecoms Futures, Stephen McClelland, 232 pages,
Horizon House, 2002
• ...And of course The Dilbert Future by Scott Adams..
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
3G Strategy Consulting
Tomi T Ahonen, 3G Strategy Consultant
Competitiveness, Business Case, Marketing, and Profitability
"Service creation and marketing will be key to 3G," Ahonen said. Total Telecom 12 October 2000
•
•
•
•
•
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Provides 3G business case audits and 3G service
marketing plan workshops for mobile operators, and
value chain analysis for content providers, bankers etc.
Provides general business case presentations to isolate
profit opportunities for interested parties.
The world's most prolific new mobile service evangelist,
has introduced over 500 new service concepts at public
conferences; his books include 300 service ideas.
Quoted in over 100 press stories in a dozen languages
expressly on 3G/mobile services topics, presented/
chaired at over 90 major conferences on six continents.
Lectures at Oxford University on 3G Business
Available as a motivational speaker in telecoms
marketing, sales, product development and innovation.
You can buy his books “m-Profits", "Services for UMTS”
and "3G Marketing" at all major bookstores and Amazon
website: www.tomiahonen.com
e-mail: tomi@tomiahonen.com
Copyright © Tomi T Ahonen 2003
www.tomiahonen.com
Earlier Tomi Ahonen has set up &
run Nokia’s 3G Business
Consultancy. Previously he
worked for 3 operators where he
created the world’s first fixedmobile service bundle and set a
world record for taking market
share from the incumbent
3G Strategy Consulting
•
Selected TomiAhonen Workshops
Changing Customer Needs in Mobile Most requested workshop
currently, includes “steps” to addiction, “split” personalities, time to change..
•
Revenue Sharing and Profitability of Partnerships New workshop
incorporating latest research and knowhow, can include building a model
•
New Mobile Service Creation From ideas to money-making, for mobile and
fixed, for operators, vendors, content partners etc, includes 5 M’s and Early 8
•
Business of Mobile Telecoms (2G, 2.5G and/or 3G) Popular workshop
over several years now also adopted for Oxford University
•
Forecasting and Business Modelling in Telecoms Popular workshop
featured at numerous forecasting and modelling conferences
•
Segmentation and Customer Understanding Ahonen’s most popular
workshop held already on 6 continents since 1997; may be run with Xtract
•
Pricing for Profit in Telecoms Another of Ahonen’s long-standing
workshops, run since 1996; may be run with Tariffing specialists Compwise
•
Launch Marketing for 2.5G and 3G New workshop on how to achieve
market success in saturated conditions; also adopted for Oxford University
•
Competitiveness in Telecoms Workshop either based on lectures or for
groups of 16-25 using Nokia’s Equilibrium telecom competition simulation:
• Workshops are very cost-effective ! Write tomi@tomiahonen.com for more.
Copyright © Tomi T Ahonen 2003
3G Strategy Consulting
www.tomiahonen.com
3G Marketing: Communities and
Strategic Relationships
by Tomi T Ahonen, Timo Kasper and Sara
Melkko, with foreword by Mike Short of O2
(333 pages, softcover, John Wiley & Sons, 2004)
JUST RELEASED 2004
"Insightful look into capitalising on customer
data and developing targetted marketing
propositions."
- Jan-Anders Dalenstam, Ericsson
"Packed with useful and practical techniques
to achieve success in competitive
marketplace"
- Steven S K Chan, MobileOne Singapore
Copyright © Tomi T Ahonen 2003
World’s first book on the marketing and sales of
3G and other advanced wireless services.
Covers Market Intelligence, Segmentation,
Service Creation, Distribution Channels,
Promotion, Bundling, Tariffing, Billing, and
Churn. With up-to-the-minute theories of
cellular telecoms including Reachability, the 5
M’s and the Early Eight, this book covers the
“how” of new wirless services.
Available at major bookstores and Amazon.com
in the Summer of 2004.
www.tomiahonen.com
3G Strategy Consulting
M-Profits: Making Money from 3G
Services
by Tomi T Ahonen
(360 pages, hardcover, John Wiley & Sons, 2002)
“Good read for industry professionals,
operators, bankers and analysts.” - Voytek
Siewierski NTT DoCoMo
“Only book to give comprehensive view of
marketing and revenue.” - Sophie Ghnassia
France Telecom
“Great guide to making money in mobile
services.” - Joao Baptista Mercer
Management Consulting
“Makes complex theories easy to
understand.” - Mark Weisleder Bell Canada
Copyright © Tomi T Ahonen 2003
World’s first book on the money side of 3G
became world's bestselling 3G book Oct & Dec
2003. Covers revenues, revenue-sharing,
pricing, profits of mobile services. m-Profits
includes 170 service ideas and 50 real services
in use around the world. Written with a clear
money focus, m-Profits includes mobile industry
issues as Money Migration, Hockey Sticks, and
the 5 M’s theory. The book covers service
creation, revenue sharing, content partnerships,
telecoms economics, and includes contrasts
among all major wireless technologies.
Available now at all major bookstores and at
Amazon.com
www.tomiahonen.com
3G Strategy Consulting
Services for UMTS: Creating
Killer Applications in 3G
Edited by Tomi T Ahonen and Joe Barrett
(373 pages, hardcover, John Wiley & Sons, 2002)
“This book provivdes a framework for
launching UMTS.” - Mike Short mmO2
“A must read.” - Dr Roberto Saracco Telecom
Italia Future Lab
“Welcome change from technology led
literature.” - Dr Didier Bonnet Cap Gemini
Ernst & Young
“Explains some of the compelling services.”
Jeff Lawrence Intel
Copyright © Tomi T Ahonen 2003
World’s first book on 3G services is also the
world's bestselling 3G book in Oct 2002. Covers
200 service ideas with lots of illustrations,
statistics, charts. Written by 14 leading 3G
experts, for the non-technical reader. Includes
the 5 M’s theory, service creation, content
partnerships, revenue sharing,
marketing and competition in
3G. Covers all major service
groupings such as SMS, MMS,
m-commerce, mobile advertising, video, music, gaming,
infotainment, B2B, B2C, B2E...
- also translated to Chinese Available now at all major
bookstores and at Amazon.com
www.tomiahonen.com
3G Strategy Consulting