2. Background - Key Facts
• Players:
– According to the Cellular Telephone and Internet
Association, the five top players are:
• Cingular Wireless (55.8 million customers),
• Verizon Wireless (51.3 million),
• Sprint Nextel Corporation (48.3 million),
• T-Mobile USA (22.7 million), and
• Alltel (10.6 million).
3. Background - Key Facts
• Features
– Phone Conversations
– WEB browser
– Push-to-Talk (business, families, youngsters)
– Camera
– Music Player
– Text messaging
– Photo Transmission
4. Background - Key Facts
• Plans
– Nr. Free Minutes
– Number of Lines (Family or Group Plans)
– Caller ID
– Call Waiting
– Conference Call
– Long Distance
– Free Roaming (within the network?)
5. Background - Key Facts
• Fixed Costs
– Network Capabilities
• Improved and stronger networks
• Use of Infrastructure to provide additional functionality (data
transmission, content, music, video)
• Challenge:
– Reach the optimum level so there is no unused capacity
but maintaining offered (advertised) QoS levels
– Reliability
6. Price
Level
Pricing
Policy
Value Creation
Value Communication
Price Structure
Economic Value, Offering Design, Segmentation Value Creation
• Reference Value
– At the beginning, following a Disruptive Innovation
behavior, prices were high and early adapters paid for
that innovation
– Prices came down as technology and infrastructure
improved
– More mature consumer overtime expected more value
and paid the premium
– Basic plans present reduced prices (phones and more
minutes)
The Reference Value is dynamic in a
fast growing technology-based industry
7. Price
Level
Pricing
Policy
Value Creation
Value Communication
Price Structure
Economic Value, Offering Design, Segmentation Value Creation
• Differentiation Value
– More quality in the reception
– More flexible plans (family plans)
– More free minutes in low peak hours
– Wider off peak periods
– New innovations (features and bundled services)
8. Price
Level
Pricing
Policy
Price Structure
Value Communication
Price Structure
Value Creation
Economic Value, Offering Design, Segmentation
• Segmentation by Buyer Identification
– Business
• Less price sensitive??
• Predetermined plans according to job position??
– Individuals
• Build their own plan
• Different Economic Value Estimation ® (trends, complementary
services)
• Segmentation by Purchase Location - Chanels
– On line stores offer special deals in plans and phones
• Less costly to serve that customer
• Price Sensitive - Special prices
• Less Price Sensitive - Availability of “new” models
9. Price
Level
Pricing
Policy
Price Structure
Value Communication
Price Structure
Value Creation
Economic Value, Offering Design, Segmentation
• Segmentation by Purchase Quantity (minutes & phones)
– Business
• Corporate Plans
– Individuals
• Family or Group Plans
• Segmentation by Product Bundling
– Integration of Voice, Data, Images, Music, new gadgets
(accessories) and new equipment (phones)
• Segmentation by Time of Purchasing
– Early Adapters (Innovator’s Dilemma)
– Time of use (peak vs. off-peak minutes)
10. Price
Level
Pricing
Policy
Price Structure
Value Communication
Price Structure
Value Creation
Economic Value, Offering Design, Segmentation
• Segmentation by Tie-ins and Metering
– Not Tie-In
• You buy the phone with the provider and activate it,
• Or buy it on eBay, activate it and use it
– Tie-In
• Add more services to the same phone or add more
minutes and get more “benefits”
• Segmentation by Product Design
– New Features offered only by new phone models
11. Price
Level
Pricing
Policy
Price Structure
Value Communication
Price Structure
Value Creation
Economic Value, Offering Design, Segmentation
Plan Based:
Free Minutes anytime, Weekends and evenings, etc
Free X mins.- Long Distance Calls (within network, after hours)
Phones and Network based (Functionality):
Free new phones
Additional Services (Caller ID, Call Waiting, Call Forward,
etc.)PLAN A
PLAN B
Basic Fee 49.99 Basic Fee 69.99
Free Minutes 500 Free Minutes 2000
Price per Min Total Mins Price per Min Total Mins
Peak 0.22 239 Peak 0.22 239
OffPeak 0.1 890 OffPeak 0.1 890
Long Distance 128 Long Distance 128
International (Reference) 35 International (Reference) 35
Text Messaging
Text Messaging
Call Forward
Caller ID
Call Waiting
Call Waiting
Data Transfer
12. Price Structure
Price
Level
Pricing
Policy
Value Communication
Tiered Offering -Asymmetry in Price
Price Structure
Value Creation
Economic Value, Offering Design, Segmentation
Full
High
2000 Fre
Mins &
WT
500 Free
Value
Mins
Basic
Low
Price
Natural fences between segments based on variations
Value Added in the Basic Plan by offering new plans or phones
New sub-segments depending of customer behavior
Efficient use of the existing infrastructure
13. Price
Level
Pricing
Policy
Price Structure
Value Communication
Price Structure
Value Creation
Economic Value, Offering Design, Segmentation
Explore your customers base to identify potential new
needs to do further segmentations
(Tiered offerings based on Perceived value and features)
www.letstalk.com
14. Price
Level
Pricing
Policy
Value Communication
Value Communication
Price Structure
Value Creation
Economic Value, Offering Design, Segmentation
• Businesses:
– Economical Benefits
– High Search (Procurement, predefined plans based on job)
– Communication Strategy
• Economic Value Assurance (#2 - Framework)
– Reliable network and support
• Individuals:
– Psychological Benefits (trends, fashion, peer pressure)
– Economical Benefits (basic plans users)
– High Search (complex plan selection process)
– Communication Strategy
• Psychological End-Benefit Assurance (#4 - Framework)
– Free phone and build up your list of wanted features
15. Discussion Questions
• Prices won’t probably see further dramatic
reductions. Where do you think growth will come
from?
• New services (music, data applications, etc.) are
reasons for customers to “churn” to another
provider?
• Permeable fences between substitute products. Is
that possible?
16. Pricing Strategies
• Attract more subscribers by offering them more minutes
and marketing family plans with discount in additional
phones
• Integrate more services/features
• New phone models (Attract new generation of users)
• New plans according to network traffic statistics (free
minutes within certain hours, within certain geographies,
etc.)
• iPod integrated with cell phones or Cell phones playing
video/music