Operators Risking Large-scale Churn With Opt-in Ad Programs

Mobile operators have significant opportunities to boost revenues by offering deals via SMS, but risk large-scale churn if they chase third-party advertising income, according to independent research among 2,198 consumers, commissioned by Upstream and conducted by YouGov.

The 2011 Upstream Mobile Marketing Consumer Attitudes Report found that 59 per cent of consumers would actively like to be contacted by their operator with offers, such as plan and handset upgrades or discounts. The offers most popular with consumers included personalised suggestions for plan upgrades (15 per cent); general discounts (13 per cent);  proposals for a handset upgrade (8 per cent); and personalised notifications of new service launches (4 per cent).

When asked in what ways they would like to be contacted with these offers, the most popular format was text message (61 per cent). However 51 per cent also said that they would like to be informed within pre-existing service messages such as top-up confirmations (9 per cent);  missed call and voice mail alerts (8 per cent); and balance updates and roaming notifications (7 per cent).

“It’s clear that by using the mobile medium itself, a great opportunity exists for operators to cross and upsell their own products and services at minimal expense,” notes Upstream CEO, Alex Vratskides. “In Upstream’s experience, personalised messages, which are contextual and feature utility- and transactional-driven rewards can have a significant impact on an operator’s average revenue per user – particularly when these offers are included in messages the operator is already sending to the customer. As they are not promoting third parties, operators have de facto opt-in; they also have an enormous amount of customer data pre-gathered, as well as an in-depth knowledge of their own products – all of these factors can allow them to be highly targeted in their promotions.”

In spite of this demand, the data makes it clear that consumers will only accept a limited number of such messages, with 38 per cent saying no more than one per month and 31 per cent saying less than that. 14 per cent were prepared to receive offers up to twice a month, but there was a notable disparity between the ABC1 (8 per cent) and C2DE (20 per cent) demographics in this regard.

The research also reveals that consumers have a high level of trust and purchasing confidence in mobile operators as opposed to third-parties. 52 per cent of consumers said they would trust their mobile phone company, compared to just eight per cent of consumers who would trust a third-party retailer when redeeming a deal via SMS.

“Consumers will only tolerate a finite number of these extremely personal contacts via mobile, and operators must be cautious not to abuse the clear trust that consumers have in them,” says Vratskides. “Offers can clearly have great value when delivered via the mobile but this is not like the ‘Daily Deals’ phenomenon we see with brands like Groupon. As far as mobile marketing is concerned, less is almost always more when it comes to generating consumer response.”

Although 66 per cent of consumers said they would opt-in to receive third party advertising if offered discount incentives, such as £5 per week off their bill (27 per cent) or a fifth off their monthly bill (22 per cent), as many as 88 per cent said that they did not think it was acceptable for mobile operators to feature third-party advertising.

Indeed, even if they would be prepared to opt-in if incentivised, as many as 72 per cent said they would be more likely to consider leaving their operator if they started featuring third-party ads, with 21 per cent saying they would do so immediately.
“Many in the industry have been talking about how operators can partner with third-party advertisers to boost their revenues, but it’s clear that this approach is fraught with risk,” concludes Vratskides. “To create opt-in databases, you inevitably have to heavily incentivise customers with discounts, but the truth is, bribery has no long-term value; it simply creates ‘phantom’ customers who are only interested in getting money off their bills. Looking at the number of customers who say they would switch operator as a result of receiving third-party advertising, it seems fair to say that opt-in databases are a false economy. Operators are the guardians of marketing contact with their customers; if they abuse their position, it can only lead to customer churn.”Opera