Marketing Telecom Services to Small
Businesses:
The Bundling Paradigm
November 12, 2000
Eugene Bala
Eugene Bala
The Bundle Paradigm
The Bundle Paradigm
• In today's telecommunications business, marketing capability and
business functionality are more important than the hardware platform.
• Combining voice and data traffic over a single digital subscriber line
enables telecommunications service providers to deliver integrated
bundled services.
• One way to lock in customers is by offering a single, convergent bill
that includes bundled products and services.
• Service providers are determined to offer bundled services creating a
need for convergent billing systems that can handle complex
requirements.
Eugene Bala
The Bundle Paradigm
What defines a bundle ?
A product bundle is characterized by the grouping of two or more products
and services into an integrated offering that provides "added value.”
A simple example :
McDonald's Value Meal offering, which bundles a sandwich,fries, and drink at
a lower price than if the items were purchased separately.
A good bundle should provide a mutually beneficial relationship between
the buyer and the seller.
Eugene Bala
The Bundle Paradigm
What makes a good bundle for the customer?
For the customer, a good bundle will be seen as providing additional value
on a number of fronts:
• added convenience
• better value
• enhanced performance as a result of integration
Eugene Bala
The Bundle Paradigm
What makes a good bundle for the company?
For the company, a good bundle is one that increases sales at a lower delivery
expense and simultaneously builds profits by attracting and retaining
customers.To do this, the bundle should provide the opportunity to accomplish
the following:
• Create customer bonding
• Build a deeper relationship with additional products
• Enhance the brand image
• Build targeted market share and share of wallet
• Realize cost savings
• Achieve premium pricing
The Bundle Paradigm
The Bundling spectrum
Unbundled
Two or more services
sold separately
Travel services
purchased
without an agent
Separate business
relationship for each
service
Lower
Bundled
Degree of Integration
Services offered
separately or part of an
optional package
Offerings
Microsoft Office add
on software
components
Relationships
Relationship integrated
to degree determined
and chosen by purchaser
Customer’s Expectations
Services offered only
as package with added
value implied or stated
America Online
no-option package
Single integrated
relationship
Higher
Eugene Bala
The Bundle Paradigm
Bundled services for small businesses - Banking
• Today, most financial services providers offer consumers combined
statements;
• The small business owner needs ready and frequent access to information on
the status of funds, the capability to move funds between accounts, and more
day-to-day tools for cash management and investments than the average
consumer
• Fleet introduced the Corporate One bundle in 1994 to build deeper business
banking relationships. At its core are the most frequently requested business
banking products
• As with the bank's consumer offering, the most powerful and useful
manifestation of this integrated business bundle is the combined monthly
statement combined with the added value of a free ATM/debit card and
premium interest rates on qualified deposits..
Eugene Bala
The Bundle Paradigm
Bundled services for small businesses-Banking
Option 1
Option 2
Option 3
•
•
•
•
•
•
•
•
•
•
10 transactions
5 items deposited
$1,000 cash
deposited
electronic banking
access
Teller Service
•
20 transactions
10 items deposited
$2000 cash
deposited
electronic banking
access
Teller Service
•
50 transactions
30 items deposited
$3,000 cash
deposited
electronic banking
access
Teller Service
Monthly Plan Fee:
$10.00
Monthly Plan Fee:
$15.00
Monthly Plan Fee:
$35.00
Non -Teller Service
Non -Teller Service
Non -Teller Service
Monthly Plan Fee:
$10.00
Monthly Plan Fee:
$25.00
Monthly Plan Fee:
$5.00
Eugene Bala
The Bundle Paradigm
The complete telecom bundle for small business
Combining voice and data traffic over a single digital subscriber line
enables telecommunications service providers to deliver not just bundled
services to the small business market segment,but also integrated bundled
services
Eugene Bala
The Bundle Paradigm
Bundled services for small businesses-Telecom
Eugene Bala
The Bundle Paradigm
The three-ring customer-fulfillment process
Bundle
Delivery
Bundle
Design
Business
Strategy
The bundle of services
Wireless
Cell phones
Data Services
Pagers
Internet and
e-Commerce
Services
Local Voice
Long Distance and Toll Free
Eugene Bala
The Bundle Paradigm
What may cause the bundle strtegy to fail?
• As with any marketing strategy, the bundle delivered should not overpromise
or underdeliver.
• Failure is likely when a bundle's inherent value-cost savings and enhanced
performance cannot be clearly demonstrated and delivered to the customer.
• Weak value or benefits (perceived or actual) beyond those offered by the
single products acquired separately or compared to competitors' offerings.
• Weak relationship with the existing customer (if the basics have not been
delivered well, the customer is not likely to deepen the relationship).
• Complex or confusing bundle (the benefits should be obvious and realizing
those benefits easy).
• Less selection or fewer options than those available through a la carte
purchases.
Eugene Bala
The Bundle Paradigm
ATT’s bundle pricing
Objectives
• track incremental features and services added to the bundle - work pricing
solution
• end-user objectives
• market chain objectives
• competitive objective
• internal objectives - corporate objectives
Eugene Bala
The Bundle Paradigm
ATT’s bundle pricing
The market challenge
• What is the current pricing for individual and bundled services ?
• What should go in the bundle of services, and how?
The internal challenge
• Target costing in price setting (might determine VC, is it significant ?,
etc)
• What end-users and chain members will receive what price for what
technology?
• Determine the EVC (economic value to the customer) of current and
potential new solutions
Eugene Bala
The Bundle Paradigm
ATT’s bundle pricing
SBS economics
ATT economics
Pricing to
share benefits
ATT’s
Competitive
Advantage
Incremental
Value
EVC
Customer
inducement
ATT’s
profit
Purchase Price
ATT’s
Cost
Start-up costs
Post
Purchase
costs
Individual
service
Bundle of Services
Selling price
Eugene Bala
The Bundle Paradigm
ATT’s convergent billing
Objectives
• lock in customers is by offering a single, convergent bill that includes bundled
products and services
• to become total telecommunications providers.
• facilitate a variety of services now and in the future.
• help ATT react to changing market conditions and ultimately overcome the
revenue-sapping effects of customer churn.
Eugene Bala
The Bundle Paradigm
ATT’s convergent billing
The billing system must address 3 network issues:
• develop business systems based on relational databases that support electronic
interfaces that capture customers' requests;
• capture customer-generated events at the switch and at the server, rating the
events, calculating the bills, and feeding the data back to the customer via the
preferred medium;
• meshing customer care with service deployment so a company can develop
a single image of its activities.
Eugene Bala
The Bundle Paradigm
ATT’s convergent billing
Deep behind the bill itself
• Given the investment in legacy computer systems at ATT’s component
companies, the chosen billing platform must be able to work effectively on
different platforms.
•
In today's telecommunications business, marketing capability and business
functionality are more important than the hardware platform.
• Adding new business software to the existing enterprises, or even to a new
enterprise, can be arduous and time consuming.