Telecom: How to Price Your Next Product [The Price Migration Strategy]
Launching a new product? Understanding all the factors behind the change is pinnacle to meeting target revenues, gaining a competitive edge, and maintaining customer retention. Make the most of your marketing efforts with a data-driven price migration strategy.
Consider the Situation
Product life cycle management and the resulting adjustments to the product portfolio can be accomplished in anonymous markets almost on a daily basis—and in a relatively silent manner.
However, in the telecommunication industry, with a direct contractual connection to the customer, the situation is often a lot more complicated, or at least perceived as such.
Many points have to be taken under consideration, such as:
- Does the customer have a special right of termination if we terminate a legacy plan, option or service?
- How should we deal with existing contracts with third parties?
- What impact does this have on my (billing) systems?
- Will it upset my customer if they receive more content or data volume in the future, compared to their old product, for the same price?
In the center of concern certainly stands the question, how will the turnover develop? If a customer is being forced to migrate into a new product—will cannibalization take place in the end?
Ultimately, It’s a Commitment
Can a Price Migration Strategy ultimately even have a negative emotional and monetary impact on the valuable customer relationship that has been cultivated over the years?
To be fair, the question must generally be answered YES.
In particular, companies often miss their mark only due to their reluctancy, obtained through the mentioned reasons above, to take on this supposed ‘Hercules’ task or are only implementing it half-heartedly.
The positive answer is that Clintworld developed a Price Migration strategy which has already been implemented successfully for several clients, supporting them with the pricing analytics and simulation platform Clintview, going forward to ensure the portfolio of service plans and offers are optimized for their basic goals and target segments, including a precise prediction of future basic charge and ARPU for each contract.
Reasons for a Price Migration
The reasons for undertaking a price migration can be versatile.
On the one hand, there are market-driven reasons that make it necessary to adapt one’s own product portfolio to the ever-changing market conditions and therefore to innovations, new technical possibilities and the resulting usage behavior of customers.
Simply said: When you recognize that the network, devices and content have changed the usage patterns for your market, have you optimized new service plans accordingly?
Examples include convergence products, household solutions, requirements such as data sharing in B2B or product innovations such as E-SIM and 5G.
Often, however, the current product portfolio is simply no longer up to date, profitable or can hardly be managed due to the variety of tariffs, options, discounts and services—which can happen in any department, be it billing, marketing, product or sales management.
With billing in particular, this can lead to an enormous amount of data maintenance issues, including incorrect invoicing if the high number of old tariffs, services or discounts—often granted on a temporary or promotional basis—are not correctly invoiced, leading to problems in the area of revenue assurance. In these cases, it’s necessary to transfer customers to a simpler, more transparent portfolio, ultimately simplifying all business processes.
A further and increasingly frequent reason for Price Migration arises through Mergers & Acquisitions (M&As). Here it is necessary to consolidate the existing customers of a company under one roof and to transfer them into a uniform product and system, which requires a high degree of sensitivity and precision, since legal and regulatory requirements must be fulfilled.
In the last-mentioned case, a Price Migration is almost always (also) connected to a consolidation or migration of the billing systems. This major consolidation and migration is going to require time in advance of the actual billing system migration to set up and analyze iterative marketing campaigns. This is part of correcting the data, before migrating it to the new billing system.
But for whatever of the named reasons a Price Migration is initiated, take your time to install the system, analyze the data, simulate expected usage and future ARPU against the legacy ones, run test campaigns with friendly users then migrate specific segments of subscribers, remove the legacy plans with no active subscribers and finally, run Quality Assurance by comparing it to the legacy portfolio.
Or simply, in one sentence:
“Get the pricing right BEFORE the migration.”
Price Migration Challenges
Carrying out a Price Migration project in the telecommunication industry is always connected to a high degree of complexity and scrutiny for the company, as well as a need for project management know-how, since generally large parts of the company, as well as external service providers are involved.
A product portfolio that sometimes has grown over a period of more than 20 years, is characterized by an enormous amount of product variants as a combination of tariffs, options, services and discounts.
Analyzing, unravelling and simplifying this , requires a great deal of cross-departmental expertise, starting from product marketing, moving on to finance and IT, and going as far as the sales sector, which has to implement the planned measures e.g. via inbound and outbound channels.
In addition to the analysis of the existing product portfolio, with a view to the future marketability and profitability, defining the target portfolio, outlooking future sales etc., the definition of rules and regulations for the migration plays a decisive role. These can be designed as heterogeneously as the motivation to carry out a Price Migration as well as the customer segment, which has to be brought into focus.
As part of M&A projects, it is usually necessary to transfer the entire customer base into a new product world, in which the set of rules to be applied is determined by regulatory and/or legal requirements. After migration, the customer must not find themselves in a worse position then before—regarding price and content of their product.
Rule in this case: Same or more content for less or equal price.
A product clean-up, or simply a pruning exercise, often only focuses on certain old tariffs, e.g. if these are not compatible for new marketing opportunities due to technical or content related restrictions, or if the migration effort and future administrative expenses are to be reduced in the course of changing to a new billing system. In this case, only part of the customer base must be transferred to a new product world, so that completely different sets of rules shall be defined for up-selling or winback campaigns, depending on the customer life cycle or customer value.
Rule in this case: More content for more (upsell) or even less price (winback).
“You do not want to add another complexity before reducing the current situation.”
The complexity of price migration can hence be enormously high, so that it makes sense to get an experienced partner on board who has already successfully accompanied various migration projects the the past.
Clintworld Price Migration Services
Clintworld offers to support your Price Migration process and can help you lead your subscribers from a bloated legacy product portfolio into a lean and mean one, that prepares your company for the digital future.
Clintworld offers two approaches in order to have end to end support, as part of a price migration project. A ‘Fast Migration’ support, for a period of 7 months, and a so-called ‘Cascade Migration’ support, which is scheduled for 24 months and also delivers the first tested migration proposals at individual contract level after 7 months.
Clintworld’s scope of work can primarily be described as follows:
- Analysis and preparation of customer data and legacy product components
- Definition and iterative determination of target portfolio and migration rules together with the client
- Providing migration proposals, precise revenue predictions for each customer
- Supervision of physical migration process
Additional services included in the Cascade migration service:
- Commercial post implementation review and analysis of migrations
- Delivery of additional recomputed migration proposals over a time span of up to 18 months
and optional for this approach:
- Modelling of price adaptability on usage
- Call center interface for outbound and inbound contacts
- Simulation of competitor products that are impacting proposals
Latter by applying the so called ‘ClintKPIs’ which determines the amount of potential savings that induces price-dependent churn on each individual contract.
If the time frame for a price migration allows it, we suggest running test campaigns on a small sample population within each segment of each service plan of the target portfolio.
During this phase, it is necessary to analyze how each target service plan is performing for the segment and if it is serving well, in order to ensure that the target portfolio, the migration rules and last of all, the migration offers are meeting the acceptance goals, and once accepted, are producing ARPU within an acceptable range of the simulations.
Summarizing the related activities of an end-to-end support of migration:
How Would a Price Migration Look at Your Telecom?
If you’re facing a up-and-coming merger, or just looking to decease your dependency on legacy portfolios, Price Migration is exactly what you’re looking for.
It will help you:
- Increase up-/cross-sell without inducing churn.
Design preferred tariff offers that are insight lead and reflect customer price sensitivity.
- Increase customer satisfaction.
Nurture a proactive customer understanding that mitigates wrong offerings, reflected in positive call center calls, high NPS, and improved brand loyalty.
- Lower operational costs and revenue loss.
Create a lean customer lifecycle, removing bloated legacy portfolios, optimizing for ARPU, customer growth and discount spend.
And don’t forget: you’re not in it alone, Clintworld’s team of consultants with 15+ years of Telecom experience, utilizes the latest and most innovative digital and virtual migration execution methods and tools to help you deliver.
Want to build your own Price Migration Strategy?
We’d be happy to help.