There’s a good reason why there are more than 540 bundle partnerships launched between VOD services and telcos. Product bundling helps VOD services grow their user base, and telcos grow their core business.
But for telcos, core services come first. Any bundle offer needs to match the telco’s business model. If a bundle deal is launched, the goal with the bundle is to sell premium tariff plans, increase subscriber stickiness, grow mobile data consumption or acquire new subscribers.
This creates a situation where the full potential of bundling often goes unrealized. The trickiest part of bundling is the commercial offer which needs to be profitable for both sides. And it can be difficult to come to an agreement that satisfies everyone. Here’s why.
In the case of a promotional hard bundle model, digital service providers give away X free months of their service, bearing the cost themselves. In exchange, telcos include the service in their marketing promotions. Such a premium offer and the marketing visibility is valuable. But telcos are only able to include it in their highest revenue-per-user (ARPU) tariff plans.
Otherwise, the balance between what the digital service provider “spends” (free access to the service) and what the telco spends on marketing are not in balance. This results in hard bundles often having limited reach:
As a result, the telco’s full marketing efforts go into promoting a bundle offer that is only available to a small portion of their subscriber base. This creates discontent on both sides: the potential number of new users for the digital service provider is smaller than it could be, while telcos are able to target the offer only to a relatively small audience. At the same time, using the same bundle offer for a wider audience is not realistic: giving away a 6 month free trial for a $2 prepaid SIM card purchase simply wouldn’t make sense.
One solution that would help overcome challenges and arguments regarding the commercial offer would be more flexibility. The user base differs between telcos: some have the majority of their subscribers on postpaid plans, others on prepaid SIM cards. Some offer only cellular services, others also offer also broadband or TV services.
An ideal bundle offer should be set up in a way where the entire telco subscriber base can be targeted on one side, while the discount given by the digital service provider matches the revenue from that segment:
Approaching bundles by having a scalable offer in mind also adds flexibility to the options for what exactly will be given as a benefit to subscribers: beside free trials, sachet packs, price discounts, zero-rating data or exclusive content within the service can be used. This makes it possible to increase the marketable audience by the telco, while also increasing the potential number of new subscribers that the service provider can gain.
Fortumo’s Bundling Platform supports setting up such complex bundle offers with minimal effort for the digital service provider and telco, regardless of how many different scenarios or audiences are involved. Interested in learning more? Get in touch.
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