How to tackle bundles with the prepaid audience?

How to tackle bundles with the prepaid audience?

When you pull up in a gas station to fill your car, you expect to be able to tank as much gasoline as you need. Nobody sells gasoline by the canister because consumers expect flexibility in the quantity of gas they want to purchase. When we talk about emerging markets, digital content bundling should work the same way.

The traditional bundling model involves supplementing a postpaid contract with long-term access to a digital service. For consumers with disposable income ready for such a commitment, this works great.

However, the majority of mobile users in emerging markets have prepaid SIM cards: India at 95%, Russia at 78%, UAE at 84% etc. In case of a low cost purchase (say 1GB of data for $0.5) giving away a digital service that costs several times more than the telco product itself does not make sense. This means bundling partnerships are often launched with the prepaid subscriber base excluded.

Here is where the gasoline analogy comes in. Prepaid customers have flexibility and choice in which service to buy from the telco: 1GB for 1 day, 3GB for 5 days, 10GB for 30 days etc. To expand the benefits of bundling to this audience, telcos need to give subscribers flexibility with digital service access as well.

In practice, this means creating transactional offerings in parallel with the regular postpaid bundle. While postpaid bundles focus on streaming and time-based content access, transactional offers can also be expanded to consumption-based content. This can range from traditional categories such as in-game goods to physical services like ride-sharing credits.

Transactional offers can also be viewed as a teaser for the prepaid subscriber - a glimpse of what they would be getting if they upgraded to postpaid. Today, the decision to upgrade is a leap of faith for the prepaid subscriber:

Converting prepaid subscribers to postpaid with transactional offers

Teaser offers would help “ease in” the subscribers to the digital service so they could experience its value and be more likely to convert:

Converting prepaid subscribers to postpaid with transactional offers

This approach also helps test the pricing localization needs of digital content. Most Western digital services cost more than $5 per month, while the average prepaid user keeps less than that on their account.

Seeing which price points and service duration access periods are popular helps the merchant adapt their pricing strategy. For example, rather than having the main offer be $9.99/month, $2.49/week might just work better.

Localizing the pricing and access duration of digital services is also a major step towards the ultimate goal: creating a sustainable recurring revenue flow from the prepaid audience. Today, this is prevented by high recurring service pricing combined with low average account balances, which leads to a large percentage of payments failing.

Modifying the pricing to match user spending habits helps reduce those failures and should be combined with:

  • Reminders to prepaid users to keep enough balance on their account
  • Retry attempts for failed payments and notifications to the subscriber to top up
  • Providing users with a grace period during which they keep access to the service while notifying them they should top up before the next retry attempt
  • As an alternative to the above (if free access can’t be given away), starting renewal attempts before the next period (e.g. charging for April 2018 access is not done on March 31st, but rather on March 29th)
  • Step-down charging and switching users to a smaller package (from monthly to weekly) if they do not have sufficient balance on their account
  • Billing in smaller increments, e.g. 4x weekly charges for monthly access
  • Expanding microlending (often used by telcos for their own services) to digital content

Today we see that telcos can be hesitant in launching bundles for prepaid audiences because the transactional logic of top-ups does not match well with the digital services that are being bundled. Creating transactional digital offerings and implementing the additional features for recurring charges (all of which are supported on our Trident Bundling Platform) helps overcome this.

As a result, telcos can get more out of their integrations and bundle partnerships with digital services, creating new growth from their entire subscriber base, not just the postpaid minority.