Thinking about revenue: Upside opportunities to complement IP and Mobile Centrex
Revenue potential is obviously a critical factor when considering launching a new service. But, it’s important to think beyond the basic numbers, as the right service can create many “upside” selling opportunities. Here’s why.
The revenue that can be generated by a given value added service clearly constitutes a key element of the business case for its launch. In our case, we are concerned with services targeted towards enterprise and SME customers, which generally present service providers with higher ARPU and AMPU potential.
For IP and Mobile Centrex services, this can easily be calculated on the basis of forecast customer levels and pricing models. This is because, generally speaking, IP and Mobile Centrex services are sold to end-users with a monthly subscription and an associated call charge model. Thus, forecasting revenue should be straightforward, based on individual market estimates and conditions. The same is true for a wide range of specific services, but in the desire to reduce overall OPEX and CAPEX levels, service providers are increasingly looking for more.
The service may be sold as a package, with a number of inclusive features and call minutes, generally through a range of standard bundle options. Of course, predictable revenue generates significant benefits for both the service provider and the user. The user gains from reduced and controllable CAPEX budget, while the service provider secures a long-term recurring revenue base which generates higher ARPU and AMPU than is available with consumer packages. So, it’s a win-win for the customer and provider.
But that’s not the end of it. There are opportunities for the service provider to add value through the provision of complementary services that can also generate significant incremental revenue, but which may not be viable on their own without the “anchor” service of IP or Mobile Centrex. But, if additional services can be added incrementally to the core service, both CAPEX and OPEX costs associated with traditional service introduction can also be reduced.
The trick is to complement the hosted voice PBX services with other attractive services and capabilities such as conferencing or VPN, or even call centre features. The additional costs of these complementary services may be marginal to an individual user or enterprise, but through the economics of scale constitute a significant upside revenue opportunity to the service provider.
Similarly, the service provider can offer access to a self provisioning and switchboard portal as standard, but they might also provide a richer application that can be installed locally on the customer site (as a software application on a standard PC – no hardware requirement to endanger the CAPEX saving arguments!) for an incremental fee. The upside opportunity can create significant revenue for the service provider that may not be apparent when considering the launch of the anchor service.
Provided the basic service is sufficiently compelling, users will be drawn to optional extras that add real value to the services they use. Of course, it’s important not to try to present every feature as an optional extra, otherwise users rapidly lose sight of the overall value proposition. Hidden costs are rarely attractive to potential customers. In our experience, the simplest and clearest pricing policy remains the most obviously successful path. But, there’s plenty of scope for optional extras to be added to the basic packages.
In order to achieve this, the service provider needs a vendor whose solution can easily be complemented with additional packages. Easy Virtual PaBX can now offer a range of conferencing, VPN, call centre and switchboard options and accessories to enable service providers to build a richer service proposition for the enterprise customer.
This creates value for the customer through access to a set of valuable services from a single provider (reducing the problem of finding trusted partners) and creates additional revenue potential for the service provider, while at the same time helping meet CAPEX and OPEX reduction goals. What’s more, additional services help strengthen the bond with the service provider, reducing the likelihood of churn, strengthening revenue potential for the future.
So, it’s essential that service providers consider not just the specific service they plan to launch, but also give some thought to how they can supplement this with other revenue generating opportunities in the future. The key point here is that the additional services should be complementary to the original – so that users of the anchor service, e.g. IP or Mobile Centrex can quickly see the advantage of adding, for example, a conferencing service to their package.
Service providers need partners who can help them make these choices and offer guidance on new revenue opportunities. Why not talk to Gintel and see how we can help you develop a winning enterprise service portfolio?
Tore Saeter, June 2010.