Page 10 - TelecomReseller JanFeb 2016

10 Telecom Reseller January/February 2016

McPHAIL
continued from page 3

revenue per user (ARPU). Many companies that To address this, the company performed their superior value proposition. ey also
rely on recurring revenue streams feel trapped in They don’t want to reduce prices for internal and external benchmarking for services re-energized the high end of their rate card
their current pricing models, especially regarding and quality delivered across their range of market by lowering prices on the highest end of their
future revenue streams. ey don’t want to fear that the “lost revenue” will never options. ey strategically balanced expected portfolio.
reduce prices for fear that the “lost revenue” will ARPU vs. incremental costs. ey used strategic e carrier was able to stabilize sales on their
never be recaptured.
be recaptured
pricing to understand the price-to-value ratio
lower tier plans while increasing overall sales
ere is a better strategy that most companies of their product set and to optimize their sales activity on high-end plans by adding in more
neglect to pursue: maintaining prices and mix. In this example, both ARPU and overall value (minutes, data, texts, etc.) on the low- and
adding value on the lower end of the rate card sales increased from the pre-test to post-test mid-tier plans; and by lowering the price on
to maintain a relevant value proposition; while subscribers at the low/mid tier of their product period leading to a 2% increase in ARPU, more higher end plans. Originally, 42% of sales came
simultaneously adding value but lowering prices portfolio but the high end of their rate card subscribers, and ultimately more total revenue.
from mid-high tier plans and that increased to
on the high-end of the rate card. is serves to was not driving volume or impact to overall 48% without sacri cing sales volume.
shi the sales mix and loading to higher-end acquisition. e speed and quality of the higher CASE #2: FACE YOUR COMPETITION
Businesses focus on expenditures and o en
service plans. Ultimately, this approach serves end products were better than the lower end A national wireless carrier was unsure how to make tradeo s for pricing as it relates to cost
to increase ARPU at a faster rate than expenses. products, but the price premium did not justify respond to increasing price competition in the versus bene ts. By studying the nuance of tiered
is article will highlight two examples of a the service di erential. e result was that lower-mid tier of its rate card. Matching price pricing as it is currently structured, you should
strategic approach to pricing that have brought higher end, higher margin product sales were drops would result in a rapid decline of 15-20% nd there are opportunities to shi low-, mid-,
success and protected revenue.
arti cially depressed from a sales perspective; in ARPU over a few months; so instead, they or high-end pricing structures in a way that
and customers self-selected lower end products added more value to their entry-level o erings. maintains the customer’s value perception while
CASE #1 – CHANGE THE MIX
because the price-to-value equation was not By increasing value, they didn’t have to chase also protecting—or even growing—your ARPU
is operator was successful in attracting
justi ed on a comparative basis.
the price cuts and could legitimately explain
and total revenue. ■

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10/1/2015 6:02:32 PM