Free article: Bundles should be at the heart of future mobile services

Despite the advent of 3G networks, many operators are struggling to maintain voice ARPU and to grow data services beyond messaging. Bundled pricing will be a valuable tool as mobile operators attempt to kick-start growth. With bundled pricing, mobile operators offer a defined usage allocation of one or more services for a set monthly fee. Service bundles have unique benefits over alternative pricing schemes and can have both short- and long-term benefits for mobile operators.

Affordable bundled pricing has been fundamental to mobile operators in the USA, which have achieved average voice usage that is over five times higher than in Western Europe. Bundled pricing can be even more effective when extended to multiple voice and data services within a bundle. For example, bundled pricing can be used to stimulate increased usage of existing services, such as text and picture messaging. It can also be used to encourage take-up of new services – music downloads and mobile TV, for instance – by adding small allocations of these services to existing bundles. This will be particularly valuable as mobile operators attempt to encourage take-up of services that subscribers have never used before.

Beyond driving take-up and usage of services, bundled pricing can also have important strategic benefits for mobile operators, such as helping them to strengthen their relationships with customers, to reduce churn and to avoid price competition. By establishing ongoing communication with customers and offering incremental refinements to their service bundles (see Figure 1), mobile operators can strengthen loyalty and may be able to migrate customers to higher-value bundles over time. Ultimately, when billing and customer relationship management systems have the capability, operators could evolve towards customised service bundles for individual customers.

Figure 1: A process for using bundles of mobile services to develop strong customer relationships and maximise ARPU

A particular benefit of bundled pricing is that it reduces the emphasis on the price of individual services, making it more difficult for customers to compare prices among competing operators.

Our new report Pricing Mobile Services for Success: towards a bundled future defines seven golden rules for mobile pricing, as a framework for maximising overall ARPU and profitability. It shows how bundled pricing can be applied to deliver major benefits to mobile operators in both the short and long term. The report also evaluates flat-rate pricing and shows where it should and should not be used.