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Forget pre-pay and post-pay: Pay-anytime is the future

16 April 2018

pre-pay MVNOs mvno strategy pay-anytime post-pay

The global pre-paid market is huge, but fickle. It represents 77% [1] of the total market (although this figure is skewed by countries in the Caribbean and Latin America, in which it is closer to 95%), but pre-paid customers are notoriously disloyal. Whilst the margins on post-paid are lower, the ARPU is higher and post-paid customers are significantly less likely to churn, so operators may try various tactics to transition their pre-paid customers onto more secure, post-paid contracts.

Credit History

However, some customers are unable to access post-paid plans because of their poor credit history. Pay-anytime plans are a good solution here as they enable these customers to build up a credit history without the risk of additional debt. Start by studying these customers over a period of time and learn how much they top up and how often. Then, when they run out of credit, offer them a low-value credit extension - just a couple of Pounds or Euros - and monitor their response. As the values are low, the customer can’t rack up huge bills and, when they re-pay the loan, they are behaving like post-paid customers, but on higher, pre-paid rates.

But it isn’t just customers with poor-credit who choose pre-paid plans. For the most part, pre-paid customers choose this option as they want to control their spend and don’t want any unexpected bills. However, if you develop an app that enables these customers to see their usage in real time and set limits, they will gain the confidence to move away from pre-paid. When they are nearing their limit, introduce the idea of pay-anytime by offering them a small bundle of data or minutes to tide them over for a few days. Alternatively, you could offer an auto-recharge mechanism that automatically tops up their credit by an agreed amount when their balance gets low.

Social Media Icons

Once customers are using your app, you can get to know them better, especially if you offer a small incentive, such as a bundle of data, for sharing their preferences or personal data with you. This will enable you to segment your customers better and build more appealing propositions. For example, you may discover a segment that burns through data when using social media. You could offer these customers an application-based bundle that allows them to swap their credit for unlimited access to their favourite social media app. This is a good way to improve ARPU as customers are likely to buy these bundles in addition to their usual pre-pay top-ups. This personalised experience will also increase loyalty.

The next step is to increase the number of services you offer. If your customers already enjoy unlimited access to their favourite apps, extend this to include streaming services such as Netflix or Spotify. The amount of video streamed on mobile devices increases each year, and Zenith Media estimates that by 2019, 72% of videos will be streamed via mobile [2]. But don’t limit your offer to a monthly pass; you could also offer a daily pass to cover sporting or music events.

Pay-anytime plans are beneficial for both consumers and VNOs. They give consumers more flexibility and an improved experience through tailor-made bundles, and they offer VNOs increased ARPU and customer loyalty. Some VNOs have already embraced pay-anytime and are doing it well, but there is still plenty of opportunity, so now is the time to invest.

Learn more in our eBook: The ‘Un-carrier’ approach: Using pay-anytime plans to win market share and increase customer lifetime value >>

[1] 'Credit where credit's due – Reducing churn and boosting ARPU', Chris Kelly, Total Telecom, https://www.totaltele.com/499589/Credit-where-credits-due-Reducing-churn-and-boosting-ARPU

[2] 'Mobile devices to lift online video viewing by 20% in 2017', Chris Kelly, Total Telecom, https://www.zenithmedia.com/mobile-devices-lift-online-video-viewing-20-2017/