Know your customers. That’s an old maxim, but it’s taking on new relevance in Latin America (LATAM) and the Caribbean, where wireless carriers increasingly are using market segmentation to reduce churn and increase ARPU.
The industry-wide migration toward IP is one driver behind the trend toward segmentation. With service delivery platforms (SDP) and IMS, operators now have the ability to offer a wide range of services to all of their customers instead of just those with, say, the latest and greatest handsets. This ability is important because non-voice services such as messaging, Internet and multimedia are driving more revenue for LATAM carriers, with voice relegated to commodity status.
Those non-voice services must be carefully segmented, a process that identifies customer usage and then develops offerings to match those patterns and preferences. For example, with segmentation, a carrier could identify its heaviest messaging users and then offer them a special promotion or service plan, such as a lower per-message rate when they sign up for a bundle that includes 500 messages combined with a data plan. That promotion would boost ARPU, and it could help minimize churn in that customer segment.
Another example centers on the growing number of service providers in LATAM and worldwide that are bundling wireline and wireless or offering converged fixed-mobile services. An operator could use segmentation to target its DSL or cable broadband users with a promotion that provides an extra 250 free wireless minutes per month if they upgrade to the fastest broadband service. In fact, operators in Argentina, Brazil, Chile, Mexico and Peru already are segmenting triple- and quadruple-play services.
Both examples also show how market segmentation can reduce the cost of reducing churn. Simply understanding the behaviors of certain users and then tailoring packages and promotions accordingly is less expensive than the $200-$300 it costs to replace or acquire each user who churns. Segmentation also ensures that marketing dollars are spent only on customers who are most likely to be receptive to a particular offer, instead of an expensive, wasteful, scattershot approach that blindly hits all users.
Market segmentation can be used to take services that already are highly profitable to the next level. For example, heavy users of both data services and peak-time minutes could be encouraged to upgrade to a plan with more peak minutes and more megabytes/gigabytes by offering them an extra discount on a new handset, or by providing premium services available exclusively to high-end voice and data users. A Colombian mobile operator used this and similar segmentation strategies to increase the volume of peak-time calls by 12.5 percent in the campaign’s first 90 days. Over the same period, its data volume increased 25 percent.
Segmentation also directly affects a service provider’s operating expenditures. Many of today’s customers prefer self-service offerings, where they can manage their communications needs on their own, such as through a Web portal. That reduces opex by reducing customer care staff levels.
With segmentation, operators can identify which customers have Internet access, whether it’s on their handset or their PC, and then create self-service portals designed to provide a good user experience on each type of device. Operators also can use segmentation to create self-service offerings such as parental controls, where parents can use a Web portal to control how many minutes or text messages are available to their children, or create black and white lists for Internet sites that their children can or can’t access from their mobile phones.
In fact, some operators in Colombia, Guatemala, Mexico and Peru already see self-service Web portals as a natural extension of their existing parental-control services — one that reduces their opex because parents no longer have to involve a customer care/service representative to make changes. That’s one more example of the power of segmentation.
