Monday 16 April 2012

Ad funded mvno business model and the MVNO industry summit

Ad funded MVNO 

As the MVNO summit is just around the corner; a question that is often asked and/or a comment often made in MVNO conferences is:
  • will MVNO business model X work in Y country/market, or
  • X MVNO business failed so that MVNO model does not work... 

Is the ad-funded MVNO model still viable?

The ad -funded model is one of them, and as such has been part of my new blogs and old legacy MVNO blog for a while and can be found here: MVNO business models. You then of course have the other end of the scale, usually those who argues against MVNOs from the beginning and have now had to swallow their words as MVNOs make bigger and bigger percentages of MNO bottom lines: people who say that MVNOs as a whole  don't work when one happens to fail! Back on the more moderate heckler  let's deal with One of the most frequent is that, if Blyk failed then the ad funded model does not work... This is just plain wrong on a few levels:
  1. 50% of all new businesses fail. In this respect, MVNOs are probably one of the best businesses you can invest in, as the failure rate is actually in single % figures in most countries over time. It has been higher, for example in France at first, when the regulator forced MVNOs, the result was that the network operator agreements were so restrictive that they strangled the first MVNOs... however they were all absorbed by the host MNO, so you could argue it was intentional: if they were proper failures the MNO would have set them out to dry rather than absorbing them. Blyk was also absorbed by its MNO - an MNO has full visibility of an MVNOs activities and potential, and they do not flog a dead horse!
  2. The "ad" is very generic. If you look at the add business over the last few years you will see most of the traditional spend has all but disappeared and been replaced with display ads, Blyk started with a model based on ads that suddenly went into decline.
  3. Mobile advertising is still in its infancy, it has been for 5 years, however this is now changing

Will the Brand MVNO, supermarket MVNO model, etc work in my country? 

In short, what does this mean? well it means that there has never been a better time to launch an ad funded business, as long as you are choosing the right type of ads, when to send them and, like any business, are careful how you spend and manage cash flow.

So, with the biggest MVNO summit to date, now extended to three days, let's make the MVNO Summit about where and how we are moving models like the ad funded model; add funded voice, data and SMS/MMS, to market in new countries, and maybe even take part in the MVNO challenge...

I will be adding to this list over the coming months, feel free to comment, like the  MVNO Facebook page, MVNO Google+ page or follow @MVNO_ on Twitter if you want to be notified of these updates

Wednesday 4 April 2012

Marketing and MVNOs

MVNO marketing budgets, strategies & process

"We don't have a marketing budget" - yes you do, it's called lack of gross margin!

Often MVNOs have said to me "we don't have a marketing budget". My reply is almost inevitably always the same: "yes, you do, its that 10% - 20% of gross margin you are missing by selling on price due to a lack of a marketing plan, and the budget required to fund it!"

Marketing MVNOs in their infancy

MVNOs are still largely in their infancy as a result; they are still at the "white label" end of wholesale, where they are largely marketing on reselling a product and promoting simplicity or price. the opposite end is when you have a huge marketing budget, a great brand, and you can add hundreds or thousands of percent margin. I am not suggesting MVNOs will get their, yet, but there is still a long way to go.

There are emerging, promising behaviours. MVNOs with just a Facebook page, that I have referred to elsewhere on these blogs, however the fact that a client of mine, who has been in the MVNO business for many years and is very successful,  recently asked for help on their marketing strategy 3 days before launch shows the position we are in at the thick end of MVNOs

So why do we not have MVNO marketing strategies in MVNOs?

There are three main reasons MVNOs are not marketing well yet
  1. to market a product successfully, you need to understand the end to end product, where it comes from, how much it costs, what element cost a lot, which ones cost a little (freebies do not pay for themselves) and of those things that cost a lot and a little, which add value and which don't and when. Virgin mobile were very good here, putting marketing people on the board, where they could see management accounts, understand the issues and as such end up with 2 million customers when they expected to have 200,000! As MVNOs are still in their infancy, most of my work in MVNOs is helping clients bridge that gap across the board, let alone finding a single marketing person who will understand this.
  2. The market is still in its infancy and dynamic: I have trouble keeping abreast of the end to end dynamics of MVNOs and I work full time, have done since the beginning and allocate a huge amount of my time and effort to R&D and helping new entrants pro bono, as well as having a blog where every man and his dog who wants to be an MVNO invariably contacts me at one point or another. If you are not prepared to get your hands dirty or get off the clock every so often you stand no chance!

So what are the classic three MVNO marketing mistakes:

  1. The MVNO is a brand and already has a marketing department. All well and good, but selling mobile wholesale is a specialist product and does not relate well to other services, except maybe wholesale food, where supermarkets have been moderately successful. however, to be a successful food marketeer, which supermarket marketeers generally are, as per point one above, you need to have your head in commodities you are selling, and wholesale minutes, mbs and messages will only be a distraction / part time job at best: it needs dedicated resource
  2. The MVNO hires and ex MNO marketeer: this is ironically often the worst mistake, as they are either junior and never had the foresight to understand the end to end process of the MNO, and therefore will struggle to grasp the process in the MVNO, or they are senior enough to have been exposed to the whole marketing budget and reporting process and will inevitably be bored of the lack of MVNO budget sooner or later. That is assuming they can make the jump from MNO (essentially an manufacturer of mobile, high cost production, high margin, depreciating asset) to an MVNO which is at the other end of the industry (low cost production, low margin, no depreciating assets) - the whole paradigm is just very different. hence, you will not see supermarkets poaching marketing staff from their suppliers!
  3. The MVNO has no marketing budget, understanding of market or desire to. I have seen this at the highest levels, where a CEO, 2 years in will ask the marketing person: what's the difference between above and below the line again? My reply, which you will be glad to know I invariably keep to myself, is "your results and your bonus". This lack of understanding usually results in one of two things: too much budget, and it is squandered on above the line, or two little budget and nothing can be done.

How to Market MVNOs more effectively...

My advice for MVNOs, based on having helped many MVNOs to market over the last 10 years, and thankfully they are all still in business, is to start small, measure success and grow the budget in line with results. The reason for this is that I have seen people in mobile spend money to acquire 100,000 25 year olds and achieved 500,000 43 year olds... on evaluation, the result was no where near as "cool" but the fact is that 43 years-olds have more money to spend on mobile than 25 year-olds and are more loyal: keep spending!

Leverage social, leverage on-line! 6 to 7 out of 10 sales in fully fledged and marketed MNO sales are online, this is up from less than 1% in just 2007. Companies such as Telmore in Denmark have grown to 800,000 subscribers in a country with a total population of just 4 people (or so!) mostly online, however:
  1. to do this you need to be "web 2.0 aware" a terrible phrase, but true. Social is cheap as you basically outsource your marketing to the public. the stronger your brand and the better your product, the better you will fair, but as you grow you need to be able to manage this.
  2. To sell MVNO online, you need to be online, that is, you need data and Value Added Services (VAS), another bug bear of MVNOs and a key subject of upcoming MVNO conferences, and one I cover here.

MVNO sales and marketing process:

  1. get an initial budget: to do this you need to be honest about your Subscriber Acquisition Cost (SAC) and attribute an appropriate proportion of that to marketing, I have used different amounts to different success over the years based on the growth plans, size of MVNO, stage of its development, brand, product and market position
  2. hire someone young, enthusiastic, with the capacity and desire for very, very steep learning curves, but for god's sake keep them on track with:
  3. Report on results, this can be growth figures, but also tenure, spend, what customers it attracted. being online and social can help here as the metrics are freely available and easy to process, fixed channels take longer and require full time data crunchers to analyse. Make sure you are keeping churn in check!
  4. re-invest accordingly. A key here is how the MVNO has structured their agreement with suppliers, as if done wrongly, certain types of growth need to be monitored and marketed very carefully as they can cause cash flow issues! I have been asked to assist with MVNOs that have become a victim of their own success, unfortunately it has often been too late...
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