Know-How Exchange : Strategy

I just read the forum guidelines so thought I would re submit my query !

A dominant market carrier is seeking to launch a new service to replace legacy products. With over 60% of the current legacy market, significant revenues are at stake.

Traditional segmentation has focussed on a combination of customer size and industry vertical. This may not be appropriate however in a scenario where retention of existing revenue is paramount, regardless of which traditional segment the customer may be resident.

Any examples of where this challenge has been successfully addressed or proposed strategy with supporting theory would be very interesting. My own opinion is that segmentation, should be based upon current share of customer spend with (for example) loyalty incentives (eg. 3 yr term, 2yr price etc.) as part of the mix for high spend customers who we need to retain but different strategies for customers where we have lower share and would be displacing a competitor with the new offer .... Thanks

Where? What country, or international? We'd need more detailed information about the market and customer base to really be able to help. And I can understand why you wouldn't want to post that information on a public forum like this.

For this particular issue, I would really suggest that you take this off-line to a few experts and pay a reasonable fee for their time and attention. That way you can give them the information (with appropriate NDAs, of course) and interact directly to respond to questions with specific answers.

You could use the "Hire an Expert" section of this website (click on "post a project" in the column on the right). Or you could look at the profiles of the top experts in the Know-How Exchange, select the ones you think would be most helpful, and contact them individually.

Or, if you contact me directly using the email address in my profile, I can probably put together a small group for you ... at a reasonable/fixed cost. This isn't the kind of issue that we can address in a quality way without getting into information that probably needs to be kept confidential.

P.S. What is a "dominant market carrier?" What industry?

mgoodman is basically right, of course, but let me take a stab at it, based just on the tantalizing skeleton you provided.

To me, the telling phrase is "retention of existing revenue is paramount." Do you mean the gross revenue across all customers? Or can you refine that to gross margin (free cash flow) across all customers -- that's a healthier way of looking at it. The key question: is your new service disruptive, in the usage explained below? Is the cost structure different? Is the service a radical change of some kind that requires different thinking both on the part of customers and potential customers -- and on the part of your company?

I'm a big fan of "Innovator's Dilemma" and its successor books by Clayton Christensen, and of the consulting practice he founded called Innosight, at www.innosight.com. Briefly, every so often a new technology or business model will arrive in a market. Transistors when tubes dominated. Flat pricing per Y when variable per-X pricing was the norm (Netflix, for example). If your new service changes the rules in some way, offers a new value proposition, changes what "job" it performs for customers (are you removing a source of frustration in their daily lives, or just saying this new service is 15% better, although you'll have to change over all your legacy systems to get that benefit --actually introducing new frustrations!) -- then you need to approach the strategy in a completely different way...

Very interesting post and I would like to add my 2 cents if it's ok :)

You talk much about industry verticals so are we to assume that you are talking strictl about the B2B business sector or are you also looking at the consumer market?

In this day and age of detailed data mining and segmentation, 'Personalization' is really the key.

Even within your B2B business where you sell a major plan to a corporate client, the truth is that the individual users within the company have different usage habits.

Therefore, I would suggest that you really have to come at it from a very personalised usage direction rather than corpoate industry sectors.

Assuming we are talking mobile users, then you can gauge:

Talk minutes
txt message usage
data usage (the lines are getting very blurry here because users are chatting via Facebook applications over data rather than texting now).

Comparing ratios between the different types of consumption and total specnd (ARPS - Average revenue per segment. Much more useful than ARPU ).

Then you can craft usage plans that truly meet the needs of customers and present offers that make sense to them.

The more that the offer you give is matched with the immediate needs of the user, the more you will keep them loyal.

Be ready for users to move from one segment to another quite rapidly when their lifestyle changes so be ready with your loyalty team to spot trends at teh individual user level and contact them with a new offer if need be.

The great thing about mobile operators is that they have the best usage data ever :) it is just a question of crunching the databases to really understand the usage habits at a very granular level.

Good luck.

Please do keep us updated on this post and add your thoughts and progress as it is so nice to know later whether our thoughts and comments have actually helped anyone.

Matthew

We are a telecoms carrier in a leading offshore jurisdiction where the focus of this specific product introduction is the business / government market ranging from small indiginous enterprises through to branch locations of Global powerhouses.

The technology is disruptive, providing existing functionality in a new way and with the potential for extensive value add over the current method of delivering the service.

The crux of the problem is that we have a siginificant base already using the existing technology. Get this wrong and we risk those same customers sticking with the older technology but moving to another supplier. Get it right and we have the opportunity to retain the base, move that base up the value chain and also acquire new business currently with the competition.

As I said in my re post, my sense is that segmentation should therefore be based in some way on current customer value as revenue retention is paramount, with upselling of new value, the way of growing revenue in the base and capture of new customers attracted by the improved utility of the new offer a further way of growing revenue and margin.

I should have also said that these are fixed line as opposed to mobile services

Wow modza !

You're right ... walking into a very conservative boardroom and suggesting a strategy based upon customers who may currently be incidental is going to be tough.

You clearly understand my dilemna and I have just ordered two of Christensens books on the strength of your posts (hope you've got a cut of his royalties).

I think another dimension to the problem lies in the fact that for the vast majority of customers our new proposition will solve problems which (a) customers do not perceive they have or (b) are not high enough the chain of priorities to warrant a change. These customers already have equipment that is providing the basic functionality, it is just that this alternative should offer lower cost of ownership and also open up significant efficiency opportunities because of the ability to unify many other communications tools (IIM, email, etc.)

Your comments have definitely given me food for thought !

The segmentation clearly needs to be based on customers' perceived needs and value. Anything else risks losing otherwise good customers.