We'll Take Anything, so long as it's Free

David Murphy

Consumers see absolutely no limits in terms of the services that can be offered via their mobile phones, but almost 40 percent say that they would not be prepared to pay a premium over and above their current bill to receive these services. Thats the key finding of a survey conducted on behalf of KPMG International by Taylor Nelson Sofres. The market research company conducted 3,576 interviews in Asia Pacific, Europe and North America, with consumers who own and use mobile phones, in order to develop a detailed perspective on the experience base, attitudes, behaviours and preferences associated with various electronic information and entertainment services, particularly as might be delivered via mobile handheld devices.
The results will no doubt send a shudder down the spine of the network operators who are charged with increasing ARPU (Average Revenue Per User) figures in order to claw back the billions invested in 3G licences.
The survey, says KMPG, shows that attempting to exploit converged services purely to squeeze more cash out of consumers on a traditional subscription model will not work. Cell phone companies would find themselves offering upgraded content but without necessarily being able to secure the premium subscription rates which they would hope for. Instead, the company says, operators should think of converged services as a churn reduction tool.
This would allow them to present a much more stable, loyal subscriber base which should be attractive to advertisers and digital commerce partners says Sean Collins, Global Chair of KPMGs Communications practice and partner in the U.K. firm. In its most basic terms, its a case of moving from a wallet share model - aimed at extracting more cash from each customer to a wallet sharing model. The latter will use these enhanced, converged services to deepen their customer relationships in ways that allow other parties to reach them.
A key factor behind consumers reluctance to pay a premium for converged services, says Collins, is the Internet.
This is a generation of consumers raised in the internet era, where content is perceived as being free he says. Therefore, service providers need to follow the internet example themselves. What this report advocates is no different to what the major internet search engines have been doing for years; providing a service offering so compelling that it attracts hundreds of thousands of eyeballs which in turn are attractive to third party advertisers. We tend to forget that this is a very young industry - just ten years old in fact. This shift will represent the next phase in its adolescence.
The KPMG International survey presents a picture of a global consumer who is very comfortable with existing converged services such as web surfing, instant messaging and interactive gaming. There is no apparent limit to the types of services which can interest and attract consumers, including movie previews, video dramas and sports updates. In fact, there is no multi-media capability, no matter how sophisticated, which strikes the surveyed people as being infeasible or inappropriate for mobile consumption.
These are interesting times for mobile service providers says Collins. Our survey respondents exhibited an overwhelming preference for a single service provider. However, as converged services become an increasing reality, there may only be room for a few players owning the relationship with the customer. It is likely to become increasingly important to manage this change of business model correctly in order to earn the right to own those relationships.
This will be a challenge for everyone involved. Marketing strategies will be needed to further educate consumers about the value of converged services. Service providers will need to be weaned off traditional subscription models in favour of a revenue model based on presenting a well-groomed subscriber base. Investors will also need to reassess their perceptions of service provider revenue models and start considering the likely return on investment brought about by the shift to wallet sharing. In such a competitive marketplace, any business which is slow to consider these possibilities is likely to quickly fall behind.