Saturday, August 30, 2008

Reverse Mobile Subsidy Model

Consumer Brands potential to establish a consistent and persistent customer relationship using Mobile Push Coupon...of course with respect to consumer privacy

Monetary credit subsidies are utilized by wireless operators to lure in customers (subscribers) to sign-up ("subscribe") to their wireless services. These subsidies are credits to customers either that come in the form of cash-back via a Visa, Mastercard, American Express or store-value cards that can be applied to subsidize the cost of a mobile terminal. Subsidies are contractual obligations that customers must agree to a period of service sign-up, e.g. one, two or three years. These subsidies can carry an early lure but have more of a damaging effect to customers and wireless operators alike. It requires customers to commit to the period of service that after the initial set-up, the service could suffer from quality of service (QoS), terrible customer service, and incomprehensible bills/invoices. For carriers, it pressures them to manage supply lines, inventory, terminal innovation and software applications that is not their core business. Their core business should be to grow and upkeep wireless infrastructure, effective customer service and ubiquity of their wireless services. So, in this post I will comment on the need to remove wireless carrier subsidies to liberate customers and wireless carriers from a relationship of mistrust and continual suspicion that has no future to a relationship of reward, loyalty and equitable distribution of the business by invoking the Reverse Mobile Subsidy Model ("Reverse Subsidy").

The Reverse Subsidy Model objective is to eliminate wireless carrier subsidies and thereby establish and invoke a persistent and continual customer relationship. The Reverse Subsidy Model involves consumer brands to participate in the actual consumer experience to acquire their product and services in the brick and mortar stores. It allows consumers (hence customers' of wireless carriers) and the brands to equally exchange decisions to buy and decisions to provide. For consumers the Reverse Subsidy Model consists of two parts: a product or service discount, and a wireless service credit paid by the consumer brand and/or the retail store to the customer of the wireless carrier. Starting with the discount, it is provided by the consumer brand for their product or service to the wireless customer. Hence, the discount can be increased by the participation of the retail store making the total discount a significant consumer motivator. The total discount is applied to the product or service the consumer purports to purchase. The wireless service "subsidy" is accredited to the customer when the coupon has been redeemed ("Conversion Rate") to a retail sale. The wireless subsidy can be applied by customer to offset or reduce their wireless carrier service, or can be applied to acquire wireless carrier content and services.

This Reverse Subsidy sounds good, but what happen to customer right to privacy? Guarding privacy is the responsibility and makes good practice for customer relationship that wireless carriers, consumers and retailers need to respect and protect. Respect and protect can create customer loyalty in its purest form which brings me to explain how the Reverse Subsidy Model can be the right approach to respect and protect customer privacy. Customers will need to have the right and easy-to-use online portal with the tools to decide how they would like to participate in the subsidy model. The portal should be provided by the wireless carrier within their own website or could be linked within popular email portals, e.g. Yahoo!, MSN, GMail. The aim of the portal is to allow customers to choose which consumer brand they would like to receive coupons/promotions, when, how and the ability to Opt-out at will. Additionally, the customer will have the power to decide the frequency of coupons being sent in a balanced exchange that will allow the customer of the wireless service to determine on which brand they will sign up that has the best number of dollar subsidies they would like to receive as credits to their wireless service.

Use Case Scenario of The Reverse Mobile Subsidy Model:

Brand XYZ wants to introduce a new and improved product X. It wants to target 100,000 consumers in the South Florida metropolitan service area (MSA). Product suggested selling price $50. It will provide 10% product discount or $5, plus a $2 wireless carrier credit to customers. Will pay the usual messaging carrier fee of $0.20 plus a commission of 5% on the conversion rate to the carrier per transaction.
  1. Brand XYZ via its media buyer selects two carriers
  2. A messaging program is created using simple SMS (soon mobile instant messaging) that embeds a WAP link; or a message via MMS that has no WAP link but the coupon itself
  3. Brand XYZ develops media campaign to announce in the MSA the mobile campaign for product X
  4. Brand XYZ provides the mobile campaign to the two selected carriers
  5. Carriers include consumer brand campaign BUT enhances it with a Portal to Opt-in/out for promotions in their websites, billing envelopes, etc.
  6. Carrier launches campaign and waits to see the number of Opt-ins where it receives 100,000 registrations
  7. Carrier ready to send messages to to targeted MSA consumers
  8. Messages are broadcasted to the 100,000 consumers
  9. 90% response rate of customers receive the message, or 90,000
  10. 20% of the 90% or 18,000 customers redeemed their coupons
  11. 18,000 customers will receive $2 subsidy that is applied to their account
  12. Consumer brand will pay carrier: $20,000 for messaging fees, $1800 for conversion commission fee and $36,000 in customer subsidies, or $57,800. Cost for the creation of the Mobile Message WAG at $10,000. Total Cost to Consumer Brand ($57,000 + $10,000) =$67,800 or $0.678 per customer.
The cost per customer or subscriber, $0.678, is much less than traditional media (TV, Print, Radio), that hovers around $200,000 (network broadcast, creation, etc.), does not stale as print and radio. Inasmuch, more effective than online media (the Internet) as mobile is one (advertiser/marketer)-to-one (consumer/customer) versus one (advertiser/marketer)-to-many (MSA).

Consumer Privacy
Yes, the inherent right to personal and uncontested privacy. Regardless of offline and/or online advertising best approach to reach consumers, an ad approach/campaign is meaningless if the campaign does not have thorough consistent process to protect consumer privacy...more so using mobile to reach consumers. Enough abuse by the financial services industry who are the source of consumer privacy violation. The Glass-Steagall Act that was repealed by Congress to allow banks, insurance companies and investment retail houses to cross sell and establish separate reporting subsidiaries as well as to conduct interstate commerce, and use the toothless Gramm-Leach-Bliley Act as a smoke and mirror federal financial services policy to supposedly allow consumers to opt-in or opt-out of having their data shared internally and externally -- has created a feeding frenzy to use this data in all possible ways. These ways have resulted breach of consumer data due to lost tapes, server hacks, and plain internal employee criminal activities. So why all the rant here? Because mobile operators can learn from the mistakes of the financial services industry that equals the same market size, and can use privacy as the loyalty and trust stickiness that is missing from all other industry segments. The mobile operators have the biggest opportunity to create customer loyalty by providing the right and the "intuitive tools" for consumers to protect their data, hence their privacy. Consumers should have the "power" to choose how they want to be marketed to by the brands; in essence the consumer will establish control of his or her advertising profile, and whereas the mobile operator will adhere and respect the consumer profile, and will certainly enforce violators ultimately resulting in the grandest consumer loyalty carriers will see since post telecom deregulation.

The Reverse Mobile Subsidy Model could allow the customer of the wireless service to sign-up (Opt-in) to various consumer brand campaigns the best fits the customer needs to subsidize their wireless service. This could involve receiving three-five campaigns per month that equal to $1, $2, or $3 per subsidy received that could total in $5+ in subsidies. For carriers, the model represents a method to remove mobile device subsidies and focus on their core business, a robust network and innovative services that are relevant to total customer satisfaction. For consumer brands, the model represents real-time metrics of consumers (customer) buying behaviors and most importantly a valid and robust method to measure in real-time the effect of advertising and marketing dollars as more and more CFOs are demanding accountability for these types of spend. With ending this summary, all three members of the ecosystem: carriers, consumer brands and media buyers should always deploy best practices to safeguard consumer's right to privacy by giving consumers the easiness to opt-out/in when the customer needs change.