I’ve long been a believer that price is only a part of the story for MVNOs. That’s largely because anyone buying a new phone or plan will, nine times out of ten, be looking for more than a good deal. They want reliable service, simple and attentive customer service, a line-up of handsets that’s comparable to those ranged by the big operators, and a little bit of magic that the incumbents can’t or won’t develop.
MVNOs are in a great position to offer something different - a loyalty point boost, a compelling international calling package, a way to gift the minutes you don’t use.
MVNOs know this, but despite it they can still get very carried away with two things: 1. battling on price, and 2. the technology that makes it happen.
Let’s take price first. The economics of running an MVNO mean that a proposition centered around price isn’t sustainable. As tempting as it is to undercut operators, I’ve seen the damage it can do and the speed at which it can cause a challenger brand’s demise.
Of course, there’s a real advantage to making a splash and gaining share quickly but there are other ways to do it. That leads me to the technology argument. It’s intelligent to think that if you have developed great technology you need to wax lyrical about it.
Investors like that kind of thing. But what they like more is an unbeatable proposition – they actually don’t care much about the tech, and nor do consumers. They want to know it works and that it affords true brand differentiation.
That’s why it is so important to ensure the technology isn’t shaping the proposition but supports it. I’ve been on the receiving end of so many pitches from enthusiastic MVNOs who have used the technology as the selling point.
Invariably when you probe deeper you see that the technology makes a great headline but lacks the flexibility an MVNO needs to respond to market changes. In other words the proposition only exists because the technology to do it does. Not the other way around.
This limits the revenue potential. No two ways about it.
I can sympathise though. In an industry that loves its acronyms it’s easy to get carried away.
Why does this assumption on technology matter? Let’s take the last year as a case study. The market opportunity for MVNOs has changed considerably. The fully connected home is now more important for work, play and education. Interest in home entertainment, online gaming and original drama has rocketed. Subscription services for everything from cookery boxes, beer and tea to razors and eco cleaning products have taken off and there’s more appetite for greener energy.
There’s also a strong referral model emerging - options like Bulb are growing that way – and there’s a broader appreciation for getting all ‘utilities’ from one provider. Before the pandemic, 74% of people would take multiple services from the same provider, I would wager that this has only increased.
And at the same time we have 5G rolling out. That’s exciting but very few companies have really uncovered the perfect use case – there could be a gold mine for any MVNO that manages to do it.
As you can see from just a brief snapshot, there are so many trends for MVNOs to exploit. But none of this is about wanting technology, it’s about interests, lifestyle and aspirations.
That’s why MVNOs trying to unlock growth need to have a deep understanding of what drives people to make the choices they do. Only then can they build a strategy that has a compelling customer proposition at its heart, which can be used to define what the hardware needs to deliver.
Getting it right. There are three rules to follow.
Start with how you want to differentiate. Is it in service, price, or offering something unique to your customers?
Then identify who your customers are and if they truly want it. In many of our engagements we have worked with clients to segment their base and/or the market to identify groups of customers most open to their proposition.
Re-evaluate your strategy knowing more about your customers’ behaviour and, if you have a match, assess the hardware to deliver it.
In an ideal world you would segment customers first and then build propositions for them. The days of segmenting customers by postcode and age are long gone. No two people or families living next to one another on a street are identical. They have different demands on budget, hobbies, aspirations. These nuances all need to be understood to make a proposition fit for market.
Some consumer segments are also more progressive in their thinking than others. For instance, some people like technology not because they are young or old but because it is an important part of how they live their life. There are people from all social backgrounds, a wide range of income brackets and age that are happy to self-serve because it saves time or money. Yet there are others who want a person on the end of the phone because they don’t want the risk of something going wrong. That’s a reflection of their disposition not a generational trait.
At Graystone Strategy we have undertaken attitudinal research and developed an easy to use segmentation model. It looks at what motivates a purchase or a way of living, and we have licenced this to make it easily affordable for MVNOs without significant research teams or budgets.
It’s a model that works beyond mobile too, being used in electronics retail, utilities, and grocery markets. It provides brands with a better understanding of the needs and motivations of each attitudinal segment and helps them identify the products they could cross sell to ultimately encourage an increase in the amount a person spends with them.
But things get really interesting when you get sector specific. For instance, almost half of the population would consider buying mobile from their broadband provider and a quarter would buy gas or electricity from their broadband provider. Conversely, a quarter would buy broadband from their energy provider. And interestingly, a third would buy pay TV, and 20% gas and electric from their mobile provider.
With numbers like these, rethinking your segmentation as an MVNO seems a no brainer. Yet very few are doing it, which is why I think it’s an opportunity for quick witted MVNOs to become broader multi service providers and branch out of their existing territory into new markets.
Looking at what you already have. Before getting started on any of that, I’d be using segmentation to help reposition existing products in the market. A lot has changed in the last 18 months and will continue to stay in a state of flux. As such, a number of MVNOs I work with have found that the audience they addressed before the market looks different now, and there are untapped segments to target.
They’ve also recognised that a strategic review is also a chance to not only develop completely new, bespoke offers for a specific segment, but reassert the value their existing propositions deliver.
It’s also an opportunity to look at just how far you can and should go with new product development. For instance, if you are an MVNO that has the brand stretch to offer multi-play services then segmentation will help identify how many services your multi-play offer should run to.
Most importantly of all, it determines which customers you should speak to about it first, and which should be left to enjoy the current services they buy now. What do I mean by this? Well as the names suggests ‘Technology Trailblazers’ will buy many services, ‘Settled Seniors’ won’t be so inclined to. Knowing how your base is made up, and who could join are vital components for any marketing strategy.
What next? I really believe that with some uncertainty still ahead, new purchasing models becoming de facto and 5G landing, any MVNO that acts quickly to review its segments and propositions could steal an early share and make a name for themselves in a way they couldn’t before.
Put simply, MVNOs have everything to gain in the coming years and the operators know it. MVNOs are agile, innovative and progressive. It’s this mentality that brings them success and I believe through savvy segmentation they could find ways to catapult the sector to new heights and compete at a different level.
About the author
James Gray
Managing Director at Graystone Strategy
James has over 25 years of experience working in the telecoms, MVNO and retail industries. He is an expert in subscription based business models, CRM, direct and indirect channel management and major proposition development and launches. He has held a number of Marketing Director & Consumer Director roles with mobile networks and retailers and now advises boards and start-ups on business and marketing strategy.