Prepaid Profitability

Prepaid phone cards have been in gas stations, grocery stores, and in bulk discount stores for years, but only now are prepaid services starting to take on new meaning for consumers and new significance for the companies that offer these services. Typically, telecom service providers offered prepaid cards as a means to manage credit risk, or to reach out to anonymous customers on vacation. Now that IP and advanced network rollouts are a reality, the prepaid subscriber stereotype is rapidly changing. With many content services available (ring tones, video messaging, downloaded music, etc.), a new pay-as-you-go preference has emerged. This phenomenon has opened up the prepaid market, from credit risk to mainstream consumers. However, supporting prepaid customers is a huge hurdle for many legacy systems today. This prepaid consumer activity will ultimately trigger the need for billing and customer care platforms on which customers are supported based on the products and services they use, and not based on how they pay. To truly leverage the new prepaid consumers, service providers will need to take strong heed of three factors. 1. A Transaction-Based Focus on Customers Is Paramount A new focus on the customer--and not the method of payment--opens up new choices for consumers and new benefits for the service provider. For example, a consumer's ability to select prepaid and postpaid balances based on the kind of transaction gives operators valuable insight into which services have stickiness and which are just draining the marketing budget. When a provider elects to support its customers with a convergent system (any service combined with any payment method) that can handle every type of transaction, the provider can convert valuable data gained from the way every consumer selects services into campaigns targeted at the provider's entire customer base. This is the next logical step in the evolution of a predominantly prepaid market. As the operator builds a tighter financial relationship with its customers, they will churn less and approach the profitability of postpaid customers. 2. Pairing Up Prepaid and Postpaid to Differentiate Operators realize that as they roll out advanced services quality of service alone will not differentiate them from the competition. The key factors will be price and content. A single platform supporting all consumers and services will be a vital differentiator in an intensely competitive market. Providing a single view of a customer allows that customer the convenience of seamlessly moving between payment preferences. In short, the customer expects the same level of service and packages regardless of payment method. 3. A Single Platform Is a Powerful Marketing Weapon A true prepaid/postpaid convergent system makes the distinction between prepaid and postpaid irrelevant. In a prepaid/postpaid convergent environment the operator has the ability to leverage the best pieces of postpaid rating and billing with the low latency of a prepaid system. In addition, the operator can create hybrid accounts and multibalance accounts to lock in subscribers and reduce churn. The operator can also affiliate balances across an account or multiple accounts, enabling complex packages aimed at the lucrative business market. Most important, operators will evaluate the importance of a customer based on the size of the financial relationship, rather than the means of payment the customer selects. The lessons learned from tracking how large-balance prepaid subscribers use the service can be applied to all large customers, prepaid and postpaid. It's about evolution: Deploying a convergent system to support all customers is the ideal approach, but it doesn't need to begin there. Operators can evolve their capabilities over time, first deploying newer prepaid systems capable of supporting the rich content and services. Over time, they can deploy a strategy that supports all customers and services with a single platform. Only then will operators redefine their approach to supporting their customers with a perspective that isn't limited by their method of payment, but open to all possibilities. Darla Thompson, CRM magazine's September guest Pointer, is a vice president at CSG Systems. www.csgsystems.com