Summary

Telecoms: Predicting the future trends for South African telecoms.

Challenge:

In 2017, Overt was tasked with assisting one of South Africa’s telcos to better understand the shifting consumer and sector landscape, to unpack the challenges the business was facing, and to present a unique proposition to help disrupt the market.

Process:

A rigorous 4-phase process ensued, including an in-depth immersion and opportunity assessment, a comprehensive brand-owned data analysis, and the development of a compelling and disruptive proposition for the telco to pursue.

Outcome:

Overt attained organisational buy-in to the future vision with several of the suggestions and approaches adapted for the telco’s MVNO (Mobile Virtual Network Operator) clients.

In 2017, the South African mobile telecommunications landscape was complex; defined by growing regulatory pressure, digital transformation, and an ever-increasing consumer demand for accessible data services.
Overt’s services were engaged to support one of the country’s telecommunications providers in gaining deeper insight into the evolving consumer and sector landscape, unpacking the key challenges the business were encountering, and crafting a differentiated and disruptive proposition for the market. As an early player in the MVNO market, we were asked to specifically look at how an MVNO could disrupt the industry.
Traditionally, South African telecoms have applied a common set of “rules” when developing products and services; these range from an inverse pricing curve through to product expiration and out-of-bundle rates.  The approach was predominantly centred around a “breakage” model, which culminated in a “Reverse Robin Hood” effect. Tensions peaked with the #DataMustFall movement, with widespread calls for cheaper access to data and mobile services. 
Breakage is a telecoms industry accounting term that refers to the revenue generated from any unused products (such as airtime and data) that a customer has already paid for. By effectively pricing products to incentivise higher quantity purchases, telcos bank on customers buying more than they need. This, in combination with product expiry terms, creates an environment that yields high wastage.  
The inverse pricing curve negatively impacts customers at the lower-end of the socio-economic ladder. Due to their financial constraints and lack of disposable income, they aren’t able to leverage the price-scaling benefits offered. As a result, they effectively subsidise the better rates offered to their higher socio-economic counterparts, this is referred to as the “Reverse Robin Hood” effect.
Faced with an almost inevitable “race to zero” journey, our client tasked us to explore what true differentiation could look like and how consumer perception and needs could shape a highly compelling product and service strategy.

In 2017, the South African mobile telecommunications landscape was complex; defined by growing regulatory pressure, digital transformation, and an ever-increasing consumer demand for accessible data services.
Overt’s services were engaged to support one of the country’s telecommunications providers in gaining deeper insight into the evolving consumer and sector landscape, unpacking the key challenges the business were encountering, and crafting a differentiated and disruptive proposition for the market. As an early player in the MVNO market, we were asked to specifically look at how an MVNO could disrupt the industry.
Traditionally, South African telecoms have applied a common set of “rules” when developing products and services; these range from an inverse pricing curve through to product expiration and out-of-bundle rates.  The approach was predominantly centred around a “breakage” model, which culminated in a “Reverse Robin Hood” effect. Tensions peaked with the #DataMustFall movement, with widespread calls for cheaper access to data and mobile services. 
Breakage is a telecoms industry accounting term that refers to the revenue generated from any unused products (such as airtime and data) that a customer has already paid for. By effectively pricing products to incentivise higher quantity purchases, telcos bank on customers buying more than they need. This, in combination with product expiry terms, creates an environment that yields high wastage.  
The inverse pricing curve negatively impacts customers at the lower-end of the socio-economic ladder. Due to their financial constraints and lack of disposable income, they aren’t able to leverage the price-scaling benefits offered. As a result, they effectively subsidise the better rates offered to their higher socio-economic counterparts, this is referred to as the “Reverse Robin Hood” effect.
Faced with an almost inevitable “race to zero” journey, our client tasked us to explore what true differentiation could look like and how consumer perception and needs could shape a highly compelling product and service strategy.

Process

Overt went through a rigorous 4-phase process to meet the project requirements. Key to achieving the deliverables was an understanding of the current industry, the trends (both locally and internationally), and the future profile of the consumers that would be engaging with the products and services. 
Our initial point of entry was a thorough investigation of available third party data and research. We focused on understanding the industry, the dynamics in the consumer landscape, and identifying what owned-data we might be able to obtain from the operator. 
After this initial phase, we moved into a focused interrogation of the existing telecoms customer journey for first-time, returning, and switching customers. This was to build out a comprehensive view of the key pain points, bottlenecks, and gaps from both a process and customer experience perspective.
These would later help us identify “wow” moments and opportunities to dramatically improve the customer journey.
For our final piece of research, we focused on immersing ourselves in the day-to-day context and culture of the selected target market segment, including both one-on-one customer interviews and focus groups, curated day-trips into key customer spaces, and attending social events and gatherings at locations frequented by the target audience.
The final phase focused on consolidating the findings, insights, and opportunities into a strategic narrative document, which was presented as a conceptual value proposition model for what a future MVNO might look like. This included supporting material outlining the vanguard customer segment, associated brand identity, and refined digital-first customer journey.

Process

Overt went through a rigorous 4-phase process to meet the project requirements. Key to achieving the deliverables was an understanding of the current industry, the trends (both locally and internationally), and the future profile of the consumers that would be engaging with the products and services. 
Our initial point of entry was a thorough investigation of available third party data and research. We focused on understanding the industry, the dynamics in the consumer landscape, and identifying what owned-data we might be able to obtain from the operator. 
After this initial phase, we moved into a focused interrogation of the existing telecoms customer journey for first-time, returning, and switching customers. This was to build out a comprehensive view of the key pain points, bottlenecks, and gaps from both a process and customer experience perspective.
These would later help us identify “wow” moments and opportunities to dramatically improve the customer journey.
For our final piece of research, we focused on immersing ourselves in the day-to-day context and culture of the selected target market segment, including both one-on-one customer interviews and focus groups, curated day-trips into key customer spaces, and attending social events and gatherings at locations frequented by the target audience.
The final phase focused on consolidating the findings, insights, and opportunities into a strategic narrative document, which was presented as a conceptual value proposition model for what a future MVNO might look like. This included supporting material outlining the vanguard customer segment, associated brand identity, and refined digital-first customer journey.

Process

Overt went through a rigorous 4-phase process to meet the project requirements. Key to achieving the deliverables was an understanding of the current industry, the trends (both locally and internationally), and the future profile of the consumers that would be engaging with the products and services. 
Our initial point of entry was a thorough investigation of available third party data and research. We focused on understanding the industry, the dynamics in the consumer landscape, and identifying what owned-data we might be able to obtain from the operator. 
After this initial phase, we moved into a focused interrogation of the existing telecoms customer journey for first-time, returning, and switching customers. This was to build out a comprehensive view of the key pain points, bottlenecks, and gaps from both a process and customer experience perspective.
These would later help us identify “wow” moments and opportunities to dramatically improve the customer journey.
For our final piece of research, we focused on immersing ourselves in the day-to-day context and culture of the selected target market segment, including both one-on-one customer interviews and focus groups, curated day-trips into key customer spaces, and attending social events and gatherings at locations frequented by the target audience.
The final phase focused on consolidating the findings, insights, and opportunities into a strategic narrative document, which was presented as a conceptual value proposition model for what a future MVNO might look like. This included supporting material outlining the vanguard customer segment, associated brand identity, and refined digital-first customer journey.

Outcome

From the research, it was clear that customers felt taken advantage of by the available offerings. Further diminishing customers’ expectations through fair use policies, obscure costs, and confusing products, only left them feeling more frustrated. To combat this, Overt proposed simplicity and transparency as core principles. A single price for minutes, for SMSes, and for megabytes - no scaling benefits, no bonus night-time data, and importantly, no expiration. We developed a sliding scale mechanism to allow customers to set their budget, define their service split, and engage with the product when and how they wanted. To overcome expiration challenges, we adopted a payback model, where unutilised products were credited to the customer through a mobile wallet, where they could earn interest, redeem and transact on services, both telco related and beyond. The business model looked at customer usage trends, factored in potential increase in utilisation through price optimisation, and explored additional value-added revenue streams that could enhance the customer experience. These ranged from paying for additional services with available airtime, data, or wallet balance, through to bundled-on services such as device insurance. This enabled the offering to shift away from a breakage model to a more sustainable (and consequently fair) margin- and value-based model. To further support this, we conceptualised a brand and marketing strategy that could leverage the sentiments of the vanguard audience, and foster real collaboration, co-creation, and relationship building opportunities with customers.

Thinking Ahead

Through this process, Overt identified and predicted many of the trends that have consequently been leveraged in today’s MNO and MVNO landscape. This was a helpful indicator of our strategic rigour and ability to interpret how the customer and sector landscape may change over time. In addition, we also identified opportunities for businesses across different industries to adopt mobile as a complementary and enhancing value-added service, while maintaining authenticity to their audience. In a post-COVID environment, many of the concerns outlined by this research have been exacerbated, and brands are now searching for ways to connect their product to an increasingly distant audience. With the fragmentation of social media, and an increasingly native digital customer, the trends outlined have become paramount to business stability and success. As telcos continue to fight along the inevitable “race to zero” journey, it will be interesting to see how our local service providers compete with each other when airtime, data, and potentially, even network quality, are no longer differentiators. It will also be interesting to see how other large brands across industries consider adopting an MVNO strategy as part of their customer offerings.