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The reality of pre-pay: it has to be profitable - Business Logic

"We think we're getting predictability into the pre-pay market" - the Cinderella of mobile could become a loyalty leader for mobile operators, thinks Business Logic founder David Walker.

The key to loyalty generation for customers, he thinks, is going to small groups. "That's something you can't do with normal advertising. But we can identify groups, and hit them with precisely targeted campaigns - and they are invisible to your competitors."

Most operators, he told visitors to his booth at 3GSM, see pre-pay as a necessary evil. "They imagine that they'll use pre-pay as a way of recruiting potential contract users," he said. "In reality, they have to turn it into a profit centre, because there's no way on earth most pre-pay users are going to sign up."

His solution is SMS contact with the pre-pay customers to generate loyalty. And he claims he can spot who are the ones who are loyal, and which are the churn candidates.

His tool is a really small, cheap computer, which does everything you could hope to do by phoning up the customer to see how they are doing, but via SMS. It monitors usage patterns, and offers rewards.

"Most operators don't have back-office analytic packages for pre-paid," Walker observed. "It's too expensive - if you make just one call to ask 'How are you doing?' you've blown your five pounds ARPU - or more."

Pattern matching means they can identify the type of user; a lot of texting between 3.30 and 5 pm points to a teenage user; more incoming than outgoing points to a security phone. "We can target patterns for groups; if a group likes text messaging, we can respond with rewards like, say, ten free texts when they hit 100 texts."

Most operators, he says, respond to user dissatisfaction with uneconomic incentives - and too late. "Offering someone a free handset when they're already leaving, is too late. Getting them signed up for a reward scheme gives them a reason to stay before they get dissatisfied."

Trial operations with Telstra in Australia show that response rates to these SMS incentive schemes are astonishingly high. "One scheme- admittedly a high reward scheme - got an 80% response. Others, aimed at dormant customers, got  30% response.

"The beauty of it is, we can run a campaign for a group of only a thousand users. No TV campaign needed, and a good response; we call it 'submarine' campaigns, because it all goes on below the surface of the network, and your rival operators can't see what you're doing. That means they can't respond."

The company is now moving into European markets, and reports "encouraging" interest.

  Tags: 3GSM, SMS, Business Logic