Roam like Home: Threat or Opportunity? – Graystone Strategy

Mobile Marketing

Graystone Strategy director James Gray says mobile operators should use the abolition of roaming charges as a way of getting closer to their customers.

Today, Thursday 15 June, we’ll see a fundamental market change come into play when Roam like Home goes live across Europe. It’s been a long time since we’ve seen such an imposition on industry pricing, and operators across Europe will nervously wait to see whether the billions of Euros consumers will save opens up a detrimental black hole in the company accounts.

The scenario all the operators dread is that with constraints on pricing gone, holidaymakers will start to use data services far more than they would normally at home, significantly growing the potential loss for the operators. They are right to be worried. Research conducted this May showed that 63 per cent of consumers think that their mobile use will increase now they have no reason to be concerned about inflated roaming charges. This poses a significant problem for the mobile operators, particularly because half of the people surveyed expect to use more data to stream TV and music by the pool.

That’s perhaps not a surprise, as data consumption is already growing rapidly at home, as people take advantage of decreasing monthly charges. This presents a double whammy for operators large and small – exponential growth in the use of Spotify and Netflix abroad and no way to charge for it, plus decreasing monthly incomes that have arisen from healthy market competition at home. However, I fear the networks are approaching this like any other regulatory project, rather than viewing it as a catalyst for a fundamental shift in consumer behaviour.

Play the averages
In general, regardless of regulation, large mobile phone operators tend to play the averages when it comes to pricing and developing propositions. They build offers with broad appeal and bank on the fact that so long as the headlines are strong – unlimited minutes, unlimited texts, decent data for a fair price – they will gain a representative share of the market.

Their response to the Roam like Home compliance has been to take a similar approach. Earlier in the year, we saw operators increase prices by up to 3.2 per cent, which must be in part a bid to cover the losses. Summer marketing campaigns are accentuating the positives of Roam like Home as you’d expect, but leaving the consumer to work out the terms of use in the small print. It’s built on the principle that the many will pay for the few who go full throttle on data consumption.

Of course, no one can truly predict what people will do, and whether the expected £13bn loss in the UK will prove to be a reality or, worse still, just the tip of the iceberg. But seeing this legislation as a tick box exercise and putting in place blanket pricing to cover the loss is a huge risk. Consumers see through it these days, at least the ones who are the most internet-savvy do, and no one can afford a PR disaster with so much money at stake. Consumer group Which? is already warning customers to read the small print and watch out for out-of-bundle charges.

I’m amazed that this approach is still approved by the boardroom. This legislation isn’t a surprise. There has been time to prepare and it could have been used as an opportunity to differentiate and win market share. How? Well, as with any risk to revenue, the key to understanding the exposure must be to understand the customer. Only then can you make a sound assessment on how their behaviour might change the balance sheet. Guess work won’t cut it.

Every operator knows that the ways customers use their mobiles are diverse. There really is no “average” customer anymore. Attitudes and segments are as varied as Smarties. We have seen this with Roam like Home, where studies show customer attitudes running from one extreme to the other. For example, one segment, the Technology Trailblazers, see this as a great opportunity to increase their use of streaming and enjoy their ‘always on’ lifestyle whilst on holiday with no cost implications. They expect to use far more data, with a third of them expecting to spend seven hours a week streaming internet services and sharing social media updates on the beach. That’s a big deal for the operators who have spent millions in marketing campaigns to attract high value customers.

On the other side of the bell curve are the ‘Settled Seniors’. They are puzzled as to why anyone would want to use their mobile phone on holiday. Large data bundles and the ability to stream in the hotel won’t impress them. In fact, they are likely to view it as an expensive extra they just don’t need.

Know your customer
Like never before, Roam like Home has brought into sharp focus just how important knowing your customer segments is. Understanding which people really influence the revenue will change the rules of the game. Clearly, some groups are more costly than others. But I’d argue the operators who sit back and wait to see what happens and hope the price hike will cover the loss will fail in the long term.

There’s a more sophisticated way to approach pricing. The Trailblazers need to be enticed with a new form of flexible, on-demand pricing. When it comes to the Settled Seniors, all that’s needed is a very simple structure that calls out clearly what is included and what is not. In fact, some operators might do well to consider dropping roaming altogether – if it’s not important to your target market why bother to include it when an option to buy roaming for the 10 days a customer needs it will make your brand more attractive overall? This approach may need validation with the regulator but if it’s clear to the customer and they don’t value it, why include it?

That brings me to my next point. Brand appeal. Now is the time to instigate the demise of the “one size fits all” and review not just pricing but also brand value. What would making changes do to the pull of the brand? Which customers are attracted and which are turned off? And how do you attract the ones that are most valuable to you? And that value equation is more than just monthly fees – it’s cost to serve, lifetime value and investment to acquire and retain, all of which will be different by segment.

With questions like these, it’s clear that Roam like Home should be the catalyst for a brand strategy review. Let’s face it, operators are already recognising that one brand cannot appeal to all customers, and one way to address this is to launch more segment-targeted sub brands. We have seen O2 do this with giffgaff in the UK and 48 in Ireland, and I expect to see more of this approach across Europe as operators seek to build differentiated and targeted propositions for appealing to different customer segments.

In the short term I expect most operators will accept the revenue loss and gather data over the summer to review and build a greater bank of knowledge for next year’s roaming peaks. Certainly it will take a while for habits to change but that’s not a reason not to do things differently.

I hope we will see some interesting and bold moves that will turn the burden of legislation into a positive – but crucially, it should only be for those customers that value it. The data that is gathered over this holiday period will be invaluable in defining how the offers and propositions change over the next year. Those operators that fail to delve into the data and find the golden nuggets that could change how people pay for services, and in turn address what people really want, will fail to win market share.