July 5, 2022 - Frank Healy
The implications of inflation on decisions related to 5G charging
Inflationary pressure has pushed many service providers globally to respond by increasing their prices. For some, this may have further implications in the months and years ahead.
Strategies related to pricing and even the ability to communicate have always varied considerably. Recent justifications for price increases by operators have ranged from network investment to salary pressure to security improvements and bundle enhancements. However, some things do not change such as anecdotal evidence of users being contacted with information on price increases at or around the same time as service outages. Consumer-led campaigns in the UK have been encouraging users to contact service providers and negotiate discounts. Many aspects of this seem outdated and susceptible to loyalty reduction over and above the customer care cost incurred by service providers.
Amid the general trend towards price increases, some alternative providers have made a point of not increasing prices as exemplified by Giffgaff, KCOM or Tesco in the UK – all of which have sensed churn opportunities. Whereas others have sensed an opportunity for efficiencies by reducing demand for old bundles – such as AT&T’s approach to focus price increases on grandfathered services. While others still have taken a more segmented approach. For instance, Proximus has lowered prices for entry-level bundles but increased prices more generally.
There could be an increased velocity of customer turnover for some service providers as users become increasingly price sensitive. What are some of the implications of price increases for service providers?
- More than ever, service providers need to know their customers – understanding their data and avoid cringe-worthy errors such as increasing prices for those groups already on the verge of moving on
- “More for more” is a key strategy – the ability to try more addons or alternative options within a given price bundle. As price increases it is a clear strategy that some are already leaning towards, especially convergent providers like KPN and Swisscom
- Digital self-service is a clear cost saving mechanism for option selection and personalization. It is a key factor in the strategies of miMovistar and Slovak Telekom
- There is potential for linking pricing with ESG (Environment, Social and Governance) priorities – among other options – to cater for higher salaries for personnel as well as network improvements for segments in need, locking or reducing prices for entry-level plans
- Segment fragmentation means that more adaptive service providers have the best chance to align with already evolving customer expectations
These, along with other options, influence the ways in which service providers prioritize their own flexibility requirements to continue responding to a rapidly changing landscape. Service providers will need to align with the changing expectations of consumers and competitors to ensure competitive advantage. This is in addition to the evolution of opportunities from 5G-driven gaming and entertainment as well as the enormous requirements of enterprise customers. Businesses and customers alike are evolving too in response to overarching economic and geopolitical influences.
Service providers can have confidence after networks were tested for their resilience during the pandemic, although the flexibility and ability to compete for pressurized consumer pockets will be put to the test in the months ahead.
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