Loyalty-based plans: Six degrees of mobile data plan innovation
Aug 27, 2013
In this sixth installment of the Six Degrees of Mobile Data Plan Innovation blog series, we examine loyalty-based mobile data plans. With loyalty-based plans, subscribers get rewards for keeping up active relationships with mobile network operators. Operators can use these plans as the basis for retaining subscribers, encouraging increased spending and data usage, or forming mutually profitable partnerships with retailers.
RAISE the bar
Airlines offer them. So do hotels, credit card companies and, yes, mobile network operators. “They” are loyalty programs that reward customers for making frequent purchases. Airlines, hotels and credit cards tend to stick to the script, offering free flights, nights and merchandise. Mobile network operators have no such script. Today, operators reward loyal customers with voice minutes, text messages, accessories, ringtones, discounted device upgrades or even dining, shopping, travel and spa services. As mobile network operators’ business models grow more data-centric, the creative use of mobile data will become essential to ensuring that their loyalty-based plans remain relevant.
Operators constantly search for new opportunities to differentiate, capture and retain market share, and fight off over-the-top (OTT) competitors. Loyalty plans can help operators stand out and succeed in an increasingly crowded and competitive field. For example, attractive reward offers can entice subscribers to spend more and churn less. Rewards created in conjunction with partner retailers can attract new business from the retailers’ customers. What’s more, because awards aren’t general discounts, they can help prevent commoditization and encourage subscribers to buy more profitable mobile services.
Operators typically award loyalty points when customers reach spending thresholds, refer a friend, recharge a pre-paid account early, upgrade to a new device, or purchase additional products and services.
Rewarding loyal subscribers with mobile data is a logical next step for operators that already offer voice- or SMS-specific rewards. These operators could simply add mobile data to their existing award options. However, a loyalty-based program is intended to spur certain customer behaviors. It’s important for operators to determine what behaviors they want to encourage with mobile data rewards. For example, offering mobile data for upgrades to specific smartphones can steer subscribers toward high-margin devices. Forgiving the occasional overage for long-term subscribers with large data plans can encourage uptake and use of these larger plans. A reward of free turbo boosts for a limited time may tempt subscribers to try turbo boosts and buy them in the future. Using an analytics based approach to understanding how subscribers are using mobile data can help mobile operators identify what rewards will be of value to subscribers and drive desired behaviors.
Mobile data as a third-party reward
These incremental additions to loyalty plans are essential, but mobile operators can make even better use of mobile data as a reward. As noted above, many industries offer loyalty programs. Mobile operators can enlist partners in other industries to offer mobile data as a reward in their own loyalty programs. Each partner would pay the operator for the data it awards to its customers. This scenario extends the third party pays concept discussed in the last blog in this series. Retail partners strengthen their programs with a new reward that will appeal to their customers. The operator gets a fresh revenue source and an opportunity to reach a new audience of potential mobile subscribers.
In January 2013, Alcatel-Lucent conducted primary research into the idea of incorporating mobile rewards into partner retailer loyalty programs. Respondents were told that they would earn points to use toward mobile data rewards each time they made a purchase at a participating retail store. They could then convert these points into megabytes in their data plan, a discount on their mobile bill or a gift of mobile data to friends or family.
As shown in the table below, many respondents reacted positively to the prospect of earning mobile rewards from retailers. This positive reaction should capture the attention of mobile operators.
Source: Alcatel-Lucent Wireless Nomad Primary Market Research, January 2013
Rewards that benefit subscribers and operators
Third-party mobile data rewards enable subscribers to consume more data than their budget or data bucket allows. These may be subscribers who need to slow their mobile data consumption as monthly data caps loom. A data reward keeps the data flowing by giving subscribers the freedom to continue using mobile data. Where subscribers purchase larger data plans as insurance against overage charges, a data reward can help right-size monthly data plans and cover occasional overages.
A partner mobile data reward can be implemented so that it lets subscribers accumulate mobile data then decide when and how much of their reward to consume at a given time. This flexibility offers more value to subscribers than immediate data rewards that may come when subscribers have no need for extra data.
For their part, operators get a new revenue stream from partners that pay for large blocks of data. They may also attract new subscribers from partners’ customers who are pursuing mobile data rewards. Moreover, because mobile data loyalty rewards aren’t completely predictable, most subscribers won’t downsize their mobile data plan. What all of this means is that third parties that fund mobile data rewards are providing operators with truly incremental revenue streams.
Putting data back into roaming
Most international travelers turn off data roaming on their smartphones because they don’t want to incur massive data charges. They seek Wi-Fi® connections at every opportunity and get frustrated that the threat of bill shock keeps them from using mobile data the way they normally do.
Third-party mobile data rewards can remove some of the fear from data roaming. For example, a hotel could offer mobile data rewards to international guests in partnership with a mobile operator. These rewards could provide a small data plan for guests to use when they are away from the hotel’s Wi-Fi connection. This would help the hotel attract guests while providing new revenue for the mobile operator. The amount of hotel loyalty points required would vary based on factors like the destination and desired data allowance. It may be challenging to secure the right roaming agreements, but this opportunity seems ripe.
Key ingredients for loyalty-based plans involving mobile data
As is the case for today’s loyalty programs, mobile network operators will rely on a loyalty and campaign management system to administer their loyalty programs. For rewards involving mobile data, this system will process reports from the operator’s online charging system and feed the results into a billing support system so that proper billing can occur.
A partner offering mobile data in its own loyalty program can be thought of as having purchased a large shared data plan. Program participants are treated as individual plan members.
For mobile network operators, the most important ingredient for a successful loyalty-based plan involving mobile data is a clear understanding of what they want to achieve and how the loyalty rewards offered will drive the desired subscriber behavior.
This blog post was initially featured on TMC Net, as part of an eight-part blog series. In this series, Rich Crowe answers these questions by presenting six degrees of mobile data plan innovation that can help operators build closer relationships with customers and grow data revenues.