On May 26, Digital News Asia (DNA) released its first Deep Dive report, which looked at the telecommunications space in Malaysia. Over these next two weeks, we will be publishing the articles from the PDF report on our portal, plus other stories. To download the Telco Deep Dive, click here. In this article, Melanie Bockemühl and Helge Hofmeister of the Boston Consulting Group write about how telcos can generate new revenue streams by making their assets and related services available to their business customers.
Telcos have assets that can help retailers, banks, and other businesses
But to seize the opportunity, they will have to overcome two challenges
DIGITISATION continues to recast telecommunications, presenting both risks and opportunities to industry participants.
A potentially sizable opportunity for many players resides in the provision of digitally based support services to traditional, brick-and-mortar-based industries.
Telcos possess assets – namely, access to a large customer base, a degree of control over the growing number of smart mobile devices that their customers use, and significant related data – that can help retailers, banks, and a host of other businesses increase the efficiency of their marketing and sales efforts.
By making these assets and related services available to these companies, telcos can help them drive business growth while securing for themselves entirely new revenue streams.
To seize the opportunity, telcos will have to overcome two challenges. The first is addressing consumers’ sensitivities regarding the use of their personal data. The second is building the organisational skills and capabilities necessary to identify, develop, and support these new, highly innovative services.
Today’s telcos are quite good at delivering on their raison d’être – the efficient, large-scale provision of connectivity. But many lack the entrepreneurial spirit and agility necessary to successfully build these new businesses, which fall decidedly outside telcos’ main focus.
Telcos’ value proposition
For most companies, maximising the payback on their marketing and sales investment is a perennial quest. That investment is indeed vast: We estimate that the retail, insurance, banking, and travel industries in the United States and Europe alone spend more than €500 billion (US$682 billion) annually on marketing and sales.
Telcos’ vast connections with, and knowledge of, their customers can prove a powerful aid to these companies, providing the foundation for a much more targeted and nuanced approach than most companies currently employ.
Specifically, telcos can provide services that help traditional companies on three fronts.
One is in the generation of marketing insights. Companies’ existing customer data can be augmented and re-contextualised by the data that telcos hold. This enables a greater understanding of what drives consumer behaviour and a commensurately greater ability to seize the identified opportunities.
The use of subscriber geolocation analytics based on telcos’ network information, for example, allows a retail company to analyse footfall and conversion rates in a given outlet or branch far more easily and efficiently than through conventional analysis. It also provides a degree of specificity.
A second way that telcos can help traditional, brick-and-mortar companies improve their marketing and sales efforts is by improving and expanding communication with customers and prospects.
A telco’s customer base within a given geographic region is likely to be second to none in terms of size, and these companies are in regular contact with and conduct ongoing transactions with their customers. Telcos also enable their customers’ smart devices and have a strong understanding of customer usage patterns and user preferences (including downloaded apps).
Together, these two assets allow telcos not just to provide a powerful link between traditional companies and consumers in aggregate but also to facilitate tailored, ‘segment of one’ communication.
Some telcos have already dipped a toe in the provision of such services. Verizon Selects, for example, enables participating retailers, advertisers, and other companies to deliver targeted marketing messages to Verizon customers who opt in to the programme and agree to share their personal information, such as location, app usage, and browsing data. (AT&T Alerts is a similar offering.)
Verizon is planning to take the idea a step further by offering its customers discounts on their phone or pay-TV bills if they agree to have ads delivered on their mobile devices. The company is also developing a scheme to auction space on the home screens of customers’ mobile devices to advertisers.
A third way that telcos can help drive traditional companies’ marketing and sales efforts is by shifting purchasing transactions into the digital space.
NTT DoCoMo and Tokio Marine Nichido’s One-Time Insurance service, for example, allows DoCoMo subscribers to use their mobile phones to quickly secure discrete amounts of insurance for travel and special events, such as auto insurance for an uninsured driver who borrows a friend’s car for a weekend trip. (Participating insurers, in turn, leverage available subscriber and context data to calculate and price risk for each transaction.)
The service represents a new sales channel for participating insurers and has also spawned new insurance products.
From the perspective of traditional companies, telcos’ value proposition on these fronts stands to be quite compelling. The challenge for telcos will be to deliver on it.
Overcoming concerns, possession of the ‘bit pipe’
In order to provide a credible offering to traditional companies, telcos will need to address consumers’ concerns about the use of their personal data. Indeed, our research indicates that fully 70% of consumers are concerned about this issue. (See “The Value of Our Digital Identity
,” BCG article, November 2012.)
Telcos will also need to ensure that consumers view the ‘loan’ of their personal data as not just safe but also advantageous to themselves.
To clear both hurdles, telcos will need to design services with several objectives in mind. One is trust. Consumers must be convinced that their personal data will be secure and not used to their disadvantage. Another must-have is transparency. Consumers need to know which personal data will be accessible to a given company and how it will be used.
Additional imperatives are control and convenience. Consumers must be allowed to see and use ‘their’ data. The service must also make it easy for them to opt in – or out – of the agreement and control which specific data is shared. And the service must be simple to use and understand.
A final necessary element in the design of such services is real benefits. In today’s model, consumers usually get a service, such as a ‘free’ e-mail address, in exchange for the use of their data. The value of the service to consumers is potentially far less than the value that the company derives from the use of their data.
Telcos can help consumers and companies understand the data’s real value, with the aim of compensating consumers fairly – possibly with a direct monetary payment or a credit to their account.
Provided it meets these imperatives, telcos’ offering to traditional companies could actually become a win-win-win, because consumers will reap advantages as well. By acting as an exchange, or data hub, that facilitates the use of personal data by both consumers and companies, telcos would be filling a void and adding considerable value for multiple stakeholders.
Other players could establish similar, competing services. But telcos have two compelling advantages here (beyond their access to a large customer base and related data).
First, they sit on the ‘bit pipe’ through which all the data flows. This allows telcos to control which data (for example, a consumer’s browsing history) actually reaches third parties.
Second, as our research
shows, telcos often enjoy a relatively high degree of trust among consumers, especially relative to ‘over the top’ (OTT) players, or Internet service providers.
The combination affords telcos a powerful competitive edge in developing winning new products and services. Telcos could, for example, offer fully encapsulated security mechanisms that limit the use of any personal data collected by OTT players. They could also, with consumers’ consent, offer services that use personal data for specific purposes.
Next Page: How telcos can take the idea forward