Matt: Hello my name is Matt Dion and I am the VP of marketing here at Elastic Path, today’s webinar is the third and final part of our three part series focused on telecommunications providers. In part one; we talked about new customer acquisition, simplifying and improving this notoriously complex online experience. The second part focused on keeping customers, reduce insurance through support and upgrade optimization. Today we have David Chiu who is a digital commerce strategist for Elastic Path who will be presenting this third part which is called Beyond Minutes, how to sell value added services to mobile customers. As basic connectivity becomes a commodity, Telco’s are turning to a vast sort of services for movies, music, mobile app stores in a an effort to differentiate themselves and boost margins, but designing and operating a content ecosystem is entirely different from selling devises and plans. Today’s webinar we will discuss how communications services providers can successful integrate the two into a compelling and coherent customer experience.

Before I turn it over to David, I would like to give a very quick over view of Elastic Path, Elastic Path provides ecommerce software that allows operators, resellers and other communications service providers to increase market share, reduce share and respond quickly to competitors, it is the only ecommerce platform flexible enough to meet the needs of integrating into existing business support systems that are specific to the Telco industry. We have provided our software and experience to telecommunication providers such as Virgin Media, Sony Mobile, TeliaSonera and many others and we would love the opportunity to help you as well. Now I am very happy to turn it over to David.

David: Thanks Matt, we are going to keep things simple to accommodate our thirty minute format, in previous webinars in this series, we looked at the pillars of telecom merchandising, equipment plans and customer retention. In this one, we are going to take a look at integrating database value added services into the mix with a focus on the trend towards subscription services which has a very high relative potential areas telco’s.

Let’s start by taking a look at the market landscape and the rise of value added services and why they are important. In a conventional ecosystem that has sort of been around for many years, the provision of connectivity and services was really getting into content within the realm of content producers, and in terms of that content, the job of Telco’s was simply to deliver it to consumers and businesses. In recent years, vertical integration, new foreign factors, and new applications have really blurred this line and created a new class of what I call "frenemies", because there can be two telco’s, any combination of vendor, content provider, partner, reseller or competitor, and this can be anybody from the Google's, Amazon’s and Apple’s of the world to review over the top and avoid providers such as Vonage and Netflix.

What this means for CSP's, of course is a huge increase in data network load and capacity requirements as well as the corresponding drop in revenue due to commoditization and competition in their traditional connectivity services. It is a trend that is well understood in mature markets, shown in this diagram for Forrester research, but it is also happening in developing economies, a recent report from the economic times of India shows mobile growth tapering in that market with some carriers’ experiencing up to a 45% drop in our pool, so it is pretty clear that over the next few years, all markets are going to have to turn to some of value added services in order to counter act these powerful trends.

To summarize these businesses tack challenges and dive a little bit into how value added services are a solution to these challenges, we are looking at flat growth due to maturity and saturation in the traditional telecom markets, commoditization of connectivity services which leads to an erosion of revenue, margin as well as brand differentiation when you commoditize connectivity services, one courier becomes pretty much identical to another in the minds of consumers which makes it difficult to bring forward a good brand and value proposition. When you add value added services to the mix, they can help you generate additional revenue streams of course, even more importantly they can strengthen your overall offering because these services and products tend to be quite compelling and desirable in the minds of consumers. You can create value for your subscribers through content partnerships, and really leverage the strengths the traditional strengths of Telco’s in terms of billing customer care, customer outreach and analytics and really leverage those and insert the Telco into the content value chain. There is a real potential to mash up the core competencies of communications service providers with some of these compelling high margin content services that we are going to go over the next few slides, really what the most powerful thing that a value added service can do is to help create a reason for consumers and subscribers to choose you over one of your competitors and we’ll keep coming back to this, sort of a summary reason again and again. If we were to plot some of these services out on a graph, here is one from Gartner research, the obvious business driver in these services is to develop new revenue streams, help increase margin and restore profitability. There is a whole cloud of these over here on the right hand side, they include things like streaming music, online gaming, video on demand and these of course do help to increase margin and generate new revenue streams; you can see they are quite small and even more important driver for value added services is their impact on these larger circles, in that they help reduce sharing, help increase market share and protect traditional revenues by strengthening your brand in service and your relevance with consumers, they help you differentiate your overall offering and allow you to add value and participate on the kinds of fraction less content ecosystems that consumers are demanding nowadays.

So the first thing we look at is, are the different types of value added services and why it is important to distinguish between those that are post-sale and those that are subscription based. And we will start with post-sales services and these are primarily apps and other one-off purchases like ringtones and wall papers and the key factor about these is that they are really only for existing customers, you can’t buy ringtones or wallpapers unless you are a subscriber first. So effectively, they are useless for non customers and this example from T-mobile Germany you can see that they have been appropriately segregated from the initial acquisition experience.

Same thing here with Sprint, they have got a digital lounge here with ringtones and applications that is separate from the initial purchase and that recognizes that of course you need to be a subscriber first and that all of these items are useless for non customers. Characteristics of sort of these post-sale services is that nowadays with things like the Amazon Marketplace, I Tunes of course and Google Play, these kinds of services are going to have a minimal impact on acquisition. Consumers are going to prefer to buy them from the world gardens and revenues and margins from sort of sale of ringtones and all these sort of on a downward trend and really playing in this area as an ecosystem play, it is difficult to do, they are very, very established vendors and appropriately creating this ecosystem sort of beyond the scope of this webinar but it is important to understand their characteristics.

What happens if you don’t is that, it sort of confuses the customer’s journey a little bit and this example from Verizon, this is under shop which is presumably the customer journey to initial conversion and acquisition and if you are not a customer you can buy phones and devices, you can shop plans, you may be looking at accessories, you may be looking for a deal, and this all makes sense for the initial acquisition but none of these makes sense because you can’t buy ringtones or music or videos or apps on your Verizon phone unless you are a Verizon customer, so it is important to distinguish that in segregate, post-sale value added services from the initial purchased stream because they don’t really make sense to a non-customer.

On the other hand, this webinar is going to focus on subscription services which can also be characterized as a presale service, these can and should be aggressively marketed as part of the initial acquisition because there are powerful differentiators for the overall service, these are on-going recurring services that re highly marketable and again are very, very good at helping you differentiate your plans from those of your competitors, they move Telco’s away from being a bit piped, simply delivering the content and because of the variety of partners out there that are now sort of offering these on going recurring services.

They can be much easier to deploy than a full ecosystem play in creating an app store or wallpaper store or ringtone store or whatever. Subscription value added services is where you want to be, here is an example from Orange France and they did a joint venture with Deezer which is a music service, before this joint venture, Deezer had 25,000 subscribers in France, and within a few months after sort of putting this deal up and selling Deezer as part of orange plans, they were up to 1.2 million subscribers. Numbers from Sweden in the first half of 2012 showed that almost 90% of digital music sales are in that market, are now via streaming services, Gartner reports that somewhere between 35-90% of companies with digital products are going to be generating revenue through subscriptions over the next five years. So subscription value added services is really where you want to be, and as this example from France, it really is a win, win situation for both the CSP and the content provider.

So to summarize some of the key difference between post-sale and subscription services, post-sale that sell up stores ringtones and wallpapers, they are just going to have a low and declining impact on acquisition given consumer preferences for the big three. On the other hand pre sale and subscription value added services are really compelling products that can be a differentiator for your plans, they could help build consumer awareness and trust, they can obviously positively affect both conversion and average revenue per user, and the next thing about them is, compared to creating full app store or a post- sale ecosystem, they are actually relatively easy to deploy assuming you sort of have the right partners.

So let’s take a look at a few ways that Telco’s can integrate the subscription based value added services into their offerings, and we will start with a few that are a little bit problematic and move to some of the best practices in this area.

If we look at this example, it is the entertainment section in Rogers which is one of the major CSPs in Canada and part of the issue with this is, we have had a bit of missing metaphors between post-sale and subscription value added services and using a directory listing of all the services here and unfortunately there is no real clear call to action for either existing customers of new customers, if you click on to that, you see this directory listing of services and some of them are sort of one off purchases of apps and some of them are subscription, so you get three dollars a month for a particular value add here. The problem with this is the subscription service here is sort of under utilized; it is something that could be used to compel and differentiate and to create a real unique selling proposition for the service plans. But it is sort of buried here with the app stores and it is kind of wasted as opposed to sales service, so you have got to be careful about mixing subscriptions services which can be very powerful and burying with them sort of post-sales services. And the fact that you click on it, you have got a bunch of options here, if you are a non existing customer, it shoves you over to the standard acquisition process where you pick a plan and you pick a phone and there is actually no way to add this service to your bundle right up front.If you are an existing customer, it shoves you over to the customer care application, and again it is a bit late, although you can buy these services, the time when you really want to convert is actually at initial acquisition where you can use them to help market your plan. And finally if you are just browsing as a guest, you can’t go any further and it sort of just shuts you back out to the page underneath and there is no way to get more information about this service. So again it is really a wasted opportunity to let the subscription service work hard for you when it is buried into the app store.

Another way to promote a subscription value added service is to treat it as a standalone product outside of a service bundle, in this example from Telenor, you can navigate through o plans which then allows you to select add on services which then allows you to select the Wimp music service and finally there is a call to action which as someone not intuitive you have to text them to get more information or it links you out to an external site to register, you can immediately see some of the issues with this particular buyer journey, more of a co-marketing exercise than really a value added service for the Telco. And while it does create a reason for the customer to choose this Telco over another, it is really a name only, it gives up tight integration between the service provider and the Telco, so the beneficial effects and the rub off is pretty minimal and the problem with this is it, instead of relegates Telenor into a bit of the support role as the bit pipe or the billing platform rather than brand that truly brings this music service to you. So you can definitely market subscription services as a standalone product but it is not necessarily the best way to go about that.

Another way to do it is as a plan add-on, now we are getting a little bit warmer, this is probably the most common strategy right now to integrate subscription services into bundles at the moment. And this example from Orange France, you can see here there are standard bundles for post paid service and right underneath there is the option here to add the Deezer music service for €5 a month. It is a relatively clear call to action, but unfortunately clicking on the link exist this purchase flow and actually sends you over to the Deezer site. So there is opportunities to integrate even further here, so this is not a bad strategy but it is not necessarily the best one either and integration has to be thought out carefully. The next way to bring services into the plan is as a plan feature. And this is even better than doing it as an add-on because the cost of the service is buried into the overall offering bundle. KPN is a Telco in the Netherlands and you can see here as part of their packages their standard and premium packages, they include subscriptions to Spotify premium and the cost of those is buried directly in the deal. What this does is create a unique selling proposition for the plan itself, there is not additional thought required on the part of the consumer. They don’t have to decide to add it, simply part of the plan and it also allows KPN to really be part of the content value chain, this is not KPN marketing Spotify as an additional add-on, this is Spotify as service that is integrated directly into your KPN plan and it really sort of puts KPN in great position t market themselves as a company that brings you Spotify along with all the cool stuff that spotify brings to the consumer. If you take it to the next level, subscription value added services can really be the star of the show, and when they eclipse the basic plan off where it can be, actually be very, very powerful.

Here is a very compelling example from Orange in the UK, it’s their panther prepaid services and it is very aggressive so it is no surprise that it’s tied with the prepaid offering, but there is no reason that this sort of strategy will work well also for post paid plans. As you can see here there is a fantastic value proposition signing up for the plan, get’s you free subscriptions and there is a very, very clear compelling offering, the subscription comes with your choice of value added services such as Deezer which we have talked about already as well as things like MTV, mobile sports and it is a very, very clear way of marketing value added subscriptions as part of the overall plan. These are the key value propositions, the subscriptions are free, they are obviously not free the cost is bundled within the cost of the plan. But to consumers, it is a great value proposition and embedding these content partnerships, it creates the appearance and functionality of, in overall, ecosystem when you sign up with orange, these are the services you get with your plan and it works for new customers, part of selecting your phone and plan includes selection of these value added services and it also works for existing customers for reducing sharing and improving retention by being able to sort of move on to this plan and add these services to your existing plan. Doing things this way really aligns with the overall strategic goal, [Force ESPs] of leveraging your internal strength and product bundling and billing and analytics and adding these compelling services into an overall package, it is a very, very powerful way of promoting value added services as part of the Telco offering.

So where does all these content come from, let’s take a look at a few sort of partnership routes to adding this sort of content to your CSP offering. For the largest Telco’s the TRA ones that have double tripling quad play, these guys have an inherent advantage, because or either outright ownership of content or joint ventures that are already in place, examples of these are Bell in Canada which has acquired CTV globe medium one of the largest content creators and distributors in the country, joint venture between Verizon and Red Box as well as many others around the world where a larger Telco’s, larger CSPs are actually acquiring or going into quick significant joint ventures with content companies. By going this sort of double triple and quad play route it means that existing licensing deals broadcast rights and exclusives are available for the mobile company to leverage and quite often when you see this the Telco’s are building their won services out or bundling things like HBO Go because the content is so compelling.

But for smaller Telco’s and some brands, the rise of over the top companies and disruptive content distributors like Spotify and Deezer, what it means is that there are actually a lot of options for CSPs that don’t have multi play options, or that aren’t closely tied with the broadcaster or a company that already has licensing in place. Here is a few examples of this, both white label and co-marketed, going back to the Panther example, one of the Swapables is a Book Club. And in this sort of white label distribution partnership the actual content partners [Hidden] which comes with some benefits, if the services are really compelling it could help the Telco increase their brand differentiation, increase their credibility, and of course there are fewer headaches with marketing and product alignment, the disadvantages of going white label is that if there are competitors in this market space, book clubs or music or video, the Telco undoubtedly lacks credibility in that space compared to some of it competitors, so it can be quite difficult to overcome the barriers of entry and if the service is not compelling or unpopular, basically you sort of take the fall, 100% of the fall and it’s sort of not a very compelling offering.

Another way to go about it is co-branded subscription and especially when they are exclusive to a country or a geography, this can actually be one of the most compelling brand differentiators it can be difficult to get the deal signed to do the co-marketing and bundling but when done well, these deals bring instant credibility to the Telco, you instantly become sort of cooler in the eyes of consumers because you are bringing these services to your consumers and as we have shown before it can be a win-win situation for both the Telco and the content provider as with the case with Orange in France and around Europe actually with Deezer, Spotify is quite promiscuous in signing deals with Telco’s, you see it here with, bundled with virgin media in the UKs offerings, as well as KPN which we have already shown; so co-branded subscriptions can be a very powerful way of sort of increasing the differentiation and compelling nature of your service offerings.

So to summarize the integration of value added services especially subscription ones into the overall CSP product mix, subscription services like streaming music and video are really becoming the format of choice for consumers and in many case the analysts are showing they are going to take up to a 90% market share in certain geographies and in certain segments. The subscription services play perfectly into carriers’ traditional strength in the current billing and analytics and customer care, really allow carriers’ or sort of leverage these strengths and add value to the provision of these new content services to their subscribers. In many ways integrating subscription services is a lot easier than trying to implement an entire post sale ecosystem app stores, ringtones, those sorts of things tend to be dominated by the big three, Apple, Google, Amazon and for most telecommunications companies it is going to be quite difficult to compete with that. So a way around that is to really leverage the up and coming subscriptions services which will be a lot easier to implement than an entire post sale ecosystem. One of the key things to remember is to be very selective and aggressive in integrating these subscription services directly into the product bundles and do a presale, one of those common mistakes is, we have shown already, is to sort of mix the metaphors and confuse those kinds of value added services that can be sold pre-sale with those that really only make sense for existing customers and doing it this way really sort of weakens the potential benefits of subscriptions service in terms of differentiating and creating really great overall product bundle. And finally subscription value added services can positively impact acquisition and average revenue per user which of course is critical but it is important to remember that it is not the only benefit and in fact may not be the primary benefit of integrating subscription content services into your overall product mix. One of the most important things that these value added services can do is create a much stronger consumer perception of your brand and allow you to really competitively differentiate from other providers in your area, by being the company that brings these compelling services directly to customers, to be the point of billing for something like Spotify or Geezer or video service, can really allow you again to differentiate and to insert yourself deeply into that sort of ecosystem or value chain and not become simply a bit pipe throw for the top service providers.

So now that we have taken a look at integrating value added services into the Telco sale. That concludes our series on ecommerce in the telecommunication sector, thanks for listening and I will turn it over back to Matt for some closing words.

Matt: Thanks David, thanks everyone for listening today, please be sure to check on elasticpath.com to listen to parts one and two of this series, have a great day