Tuesday 27 August 2013

MVNO product development - post pay vs. prepay part 1: launch

MVNO Product Development - Prepaid MVNO vs Postpaid MVNO

When launching an MVNO, simple and low risk is key "keep it green" :)
One thing that has been a bug bear of every MVNO process has been keeping things simple, which invariably means prepay only for launch. Yes, there is a reason why pretty much all the successful MVNOs that are still here launch pre-pay only; when you are new to a market (most MVNOs are new to mobile) it pays to keep your front and back end processes as simple as possible.

Which leads to the next bug bear which is trying to base your launch product on other players follow-up and mass-market products. Just because your competitors have moved to post-pay does not mean you need to launch post-pay and or even compete with their prices.... (this will be another post...)

Keeping things simple in MVNO is easy, right? 

So back to keeping things simple: Everybody buys into it, yes, but not everybody gets it, and even those that do are easily distracted: It's a bit like being a good citizen; some will never get it, and you should keep them as far away from anything important as possible; others need reminding often, and others only the threat of prison makes them adhere to the rule. The analogy is important here, as most people the fear of failure, like the fear of prison,  is the only way to keep them on the straight and narrow!

Evidence of this is when you get comments from people who you thought got it like: "that cannot have taken long, look how simple it is" or "why are we launching with just pre-pay again?" Simple takes time; anybody can take a collage of other products, jam them together and come up with a half decent proposition in a day, the problem is it will cost you a lot to market, a lot to service and will cost even more in lost sales and churn, and most likely it will fall into the 50% of new businesses that fail and cost the highest business cost of all: failure!
Simple takes time, a lot of thought and often counter-intuitive - but achieves success
So back to why keeping it simple is important? I will start with one of the best comments of the last MVNO conference in Rome by Adam Holt of Tuenti at the last MVNO conference, who said that if they did it over again they would not have done post-paid, as it lengthened the product cycle. I will deal with this in another post, let's just stick here to the precursor of this which is launch:

Basically, before  launch you will need to build a product set that fits with your business model, your strategy and your marketing plan and investment. The variables here are huge alone, but simple will in short be easier to manage, cheaper to market and quicker to implememt. I have seen months' delay from just one billing product complication in run up to launch causing a no-go.

Launch and post launch prepaid mvno benefits

The critical time however comes at launch and post-launch. Here you will be dealing with configuring of a new billing system, running reports hourly at first and trying to work out not just problems, there will be supposed problems that are not actualy problems but have you in a tizzy anyway and real problems as well: It's all so much easier when the product is simple. There will be over performing and underperforming tariffs that need revising up and down, there will be customers who fall short of the next bundle up who will need targetting, and guess what- its all very easy, and very profitable, if the product is simple.    I have seen a first consignment of overcomplicated bundles never make it to acual customers: The offer was well concieved and attractive, unfortunately so much so the SIMs sold very well - to fraudulent SIM box use that was not even in the country of origin within days: the losses were not just the fraud on the network, but the marketing that excited real customers who could not get a product...

Do I need to be a post pay mvno at all?

Then there is the recent developments: I have been using the above slide for over 10 years now, but since then we have seen products like the Oyster Card on the London underground, targeting some of the most affluent people on the planet with pre-pay only, and Starbucks as well with their closed user group that is pre-pay only, with average revenues way above average post-pay mobile bills. The important point is that they do not market the product as pre-pay, and do not allude to the fact, nor hold back on their marketing based on assumptions of post-pay being on the horizon.
Why do mvnos go post-paid at all then?
Most MVNOs may eventually benefit from postpay, the key word being eventually. The 80 / 20 rule, is key here - if you want to get all your customers, some my want a contract, and part of being simple is not making the pain of adoption any more difficult than it has to be, however there are other considerations at this point such as can you afford, or do you want to afford, the higher subscriber acquisition cost? Remember MVNOs live and die by acquiring customers cheaper and keeping them longer, post-pay may lend itself to the latter, but is very hard on the former, as well as being the MNOs bread and butter.

So, even if you cannot keep it simple... At least start it simple, and your chances of sucesses, as well as those of avoiding failure will be much higher, mostly because your marketing budget will have gone further and attracted better customers (you see where I am going here) let alone the fact that your boss / shareholders will not have been breathing down your neck while you are pulling 15 hour days on the red boxes on the slide above!

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