By Dr Ekkehard Stadie, Partner and Global Head of Telco/IT practice, Simon-Kucher & Partners

When it comes to monetising innovation, 4G LTE should be considered a pivotal opportunity.

4G-LTE-offers-opportunities-to-monetise-innovationHistorically, operators have exhibited anomalous charging: every industry except mobile operators charges for speed.

When 3G launched there was a clear “go-to-market” pattern in most markets.

Prices per month were static or decreased, data allowances remained constant or increased – effectively giving more speed for less money!

So, how do you maximise revenue from 4G LTE?

There’s no general answer: as always, it depends on several factors regarding the operator’s situation and positioning:

  1. Internal perception of 4G LTE: is it driven by technology or marketing?
  2. Data market maturity: what are your subscriber growth expectations?
  3. Operator market position: are you a leader or a challenger?
  4. Current 3G network utilisation: is it almost full or does a capacity surplus remain?
  5. Brand promise/proposition: are you a value brand or a no-frills brand?

Internal perception: Is 4G LTE internally seen as disruptive, describing a new product category – similar to digital replacing analogue cameras – or is it “just” a higher speed level offered for high speed connections?

For example, if the Porsche 911 Carrera is considered too slow, a Porsche 911 Carrera S – with more speed – is launched.

Or are we discussing a high-end status proposition, meaning you don’t bother with the telco equivalent of the 911, going instead straight to the 911 turbo S?

From our experience, the greater the involvement of technical departments in marketing launch decisions, the more a product is seen as a separate, lower status item, although marketed with its own tariff.

It seems unusual that marketing people tend to position 4G LTE as “just more speed” when it has the potential for its own product category with added status.

Apple, for example, would probably position such an innovation as a next generation product marketed at a higher price.

A new iPhone becomes the premium product, while the incumbent is marketed at a slightly lower price. This smart approach is quite common for marketing innovations across various industries.

Data market maturity: A mature data market with a high penetration rate fosters a separate product offer and premium price.

Most customers have experienced network quality differences among operators and coped with the pain of weak, slow and unreliable data connections.

Willingness to pay for using an empty, fast and new 4G network will be significantly higher and can be skimmed through operators.

Operator market position: Challengers will tend to bundle 4G LTE in their data plans (with no differentiation between 3G and 4G) to be perceived equivalent with the market leader.

In most markets challengers will increase 4G LTE investment; teamed with a smartphone focus this can work well.

Incumbents should consider the bold move of launching 4G LTE first.

This provides a clear reason to believe that there’s no need to churn lower-priced operators, whilst launching new integrated voice and data tariff plans.

This would have a distinct data focus – as opposed to voice – and only provide LTE as a complementary offer in higher-priced value plans.

Buyers of entry plans could get 4G LTE but then add the tariff option – at a price.

Current 3G network utilisation:  Many operators face full 3G networks, so there could be an incentive to push migration towards an empty 4G LTE network and the easiest way would be via price.

Monetising 4G LTE for new customers should be the primary target.

From the outset 4G LTE should be used for loyal, high ARPU data customers as a free upgrade; it would then be beneficial to both operators and customers for the latter to keep their high ARPU plans.

Brand promise/proposition: If the operator’s brand has a strong heritage in “best network” and “high value” there’s a tendency to offer 4G LTE on a broader scale in all offered tariff plans.

It’s hard to communicate consistently that the best network is offered whilst customers are not receiving the most up-to-date technology.

Only a “no-frills” entry plan is viable; the main product line-up will include 4G LTE.

Optimal pricing for innovations is always challenging but 4G LTE is part of a new revenue model for the industry that will be more data and service centric.

Voice and text will move to flat fees, but data must be differentiated. 

Picture: (c) N-Media-Images - Fotolia.com

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