MVNO Strategy: Market Differentiation and Segmentation

mvno-strategy-market-differentiation-and-segmentation

MVNOs capture market shares by capitalizing on market differentiation and segmentation 

Mobile Virtual Network Operators (MVNO) have achieved a competitive edge by capitalizing on market differentiation and segmentation rather than merely competing on connectivity and price.

As mobile connections increase and the mobile penetration reach the saturation point, traditional mobile network operators (MNOs), find it increasingly challenging to compete and grow organically.

Competition shifts from being predominantly network based – where the MNOs compete on differences in network quality and coverage – to services based, where competition depend on the ability and flexibility to match service, price and features with specific consumer needs and wants.

A similar challenge happens when new generations of mobile network technologies are introduced into a market (3G, 4G, 5G). The MNOs are then (once again), competing against each other on network roll-out, while also trying to get their own existing subscribers to update to a new and more expensive package that delivers the same – only with more speed.

"As smartphone makers have shown, communications services are all about the experience - and experience goes far beyond simply having network connectivity perform as expected."
Ericsson
Experience Matters

One-size-fits-all

Mobile network operators suffer from the limitations of their traditional method of marketing – a “one-size-fits-all” strategy, where they approach all consumers, as having similar lifestyle, needs and demands, resulting in under-served and un-reached segments who does not feel they belong.

“The customer can have a car painted any color that he wants as long as it is black.”
Henry Ford
About the Ford model T in 1908

Market dissatisfaction comes from either poorly tailored products and services or intangibles, such as a mismatch between consumers individual lifestyles, and what their operator’s brands stand for.


Some Examples
:

  • Prepaid mobile customers feel like second class citizens compared to the service offered to postpaid.
  • The CFO of an enterprise might not see the value of six months free Netflix on the companies SIM cards.
  • The SME might not see the value on unlimited data on the SIMs they use for their customer calling center.
  • The startup will not see the value on xxx minutes of voice calling as part of their package offer.
  • A teenager might not think it is “lit” to be using the same mobile network as dad and grandad.
  • Grandma might not think it is “jolly” that customer service is now an AI chatbot.
  • A dedicated sports team fan may find it difficult to accept the mobile operator is sponsoring the rival team.
  • A visually impaired person will not see the value in the added Virtual Reality (VR) service to their package.
  • A Vegan will struggle to see the value of coupons for McBurger as part of the MNOs rewards program.

Different consumers simply do not all have identical needs- or identical use habits, which utilize the same operator value components all the time.

MOBILE OPERATORS are designed for distribution of mass market telecom connectivity services, however in the digital economy this logic shifts from the current supply focus, into a demand driven reality.

CONSUMERS in today’s digital economy require personalized, and innovative telecom services, but the mobile operators continue to deliver one-size fits all connectivity service and offers.

ENTERPRISES are increasingly demanding complete lifecycle services to support their digital business models and transformation, only to be met with standard offers of connectivity from the mobile operators.

MVNOs Competitive Edge

Mobile Virtual Network Operators (MVNO) have utilized the above issues, achieved a competitive edge and captured market shares – by capitalizing on market differentiation and segmentation rather than merely competing on connectivity and price.

Instead of the view of customers as one large, indistinct segment – MVNOs embrace a targeted approach, creating a unique brand positioning and value proposition to attract a defined niche segment, such as specific groups or demographics and tailor their service, offer and products to the needs, value and lifestyle of this customer segment.

“The goal for an MVNO is to make profit by fulfilling the expectations of the chosen segment, so that the customers experience the level of service that satisfies their needs.”

Deploying in this way ensures that customers’ needs are more accurately identified, and serviced. In return, customers respond positively, with growth resulting from the niche segment approach.

MVNOs can target a range of verticals and market segments by offering:

  • Connectivity options that can be differentiated according to preference and context (i.e., differentiated data tariffs and connectivity for various sites, apps, location etc.).
  • Platforms allowing the verticals/industry to control their own connectivity and business (Platform as a service, Software as a service, Connectivity as a service, Data Analytics, etc.)
  • Differentiated non-network services such as customer care, bespoke services, brand and product characteristics, which create a sense of belonging according to lifestyle.

Fig 1: Mobile Network Operators (MNO) Marketing Strategy vs. MVNOs

MNO – ONE SIZE FITS ALL

Mobile network operators suffer from the limitations of the traditional “one size fits all” marketing strategy – taking consumers as large averaged groups or as a few segments, resulting in underserved and un-reached segments.

MNOs marketing approach - one size fits all

Mobile operators realize that they can’t be all things – to all people and see the value of MVNO partners. Different consumers simply does not have the same needs.

MVNO – NICHE SEGMENTATION

MVNO’s cater to segments that are underserved or un-reached by the mobile operators. They create a unique brand positioning and value proposition to attract target niche clusters such as specific groups or demographics.

mvno-strategy-market-differentiation-and-segmentation

MVNOs serve those niche segments that the MNOs can’t reach by offering products and services customized specifically to the end-user lifestyles, needs and demand

Fig 2: Difference between Mobile Network Operator’s and MVNO’s Marketing Strategy

MNOMVNO
APPROACHAPPROACH
Mass MarketingAnalytics Marketing
TARGET SEGMENTTARGET SEGMENT
Any customer
is a good customer
Each customer cluster has
a different addressable value
APPEALAPPEAL
Standard
“One-size-fits-all”
Cater to needs that are specific to
each customer, or each segment
VALUE PROPOSITIONVALUE PROPOSITION
Broad value proposition
“Build it and they will come”
Value proposition tailored
to each target customer’s needs
COMMUNICATION STYLECOMMUNICATION STYLE
Broadcasting
to the market
Listening to customers
and respond to their ideas

Telecoms Revenue / Cross-sell Core Business

The initial objective for the first MVNOs, was to generate revenue from telecoms services, with MVNOs launching to capture a share of the Voice, Data, SMS market.

Many of the early MVNOs focused on providing services similar to the traditional mobile operators, albeit at lower prices and thereby introducing price competition into the markets dominated by old monopolies, resulting in lower prices for mobile telephony in several markets today.

However the focus today is more towards offering bundle service, and targeting specific niche segments.

The second, and increasingly more common objective, is using MVNO as channel to cross sell from the company’s existing core business, often seen as the choice for brands, having an existing user base and/or distribution channels.

We have more available here on the subject: MVNO Objectives: Generate telecoms revenues or cross-sell core business

MVNOs Leveraging on Existing Assets

Some of the more successful MVNOs (such as retailers, banks and media brands) have made use of their existing assets including their existing customer base, brand affinity and distribution channels.

They use these assets to create a unique brand positioning and value proposition in order to attract their target segment – using mobile networks as transportation to sell their existing services.

One of the key competitive advantages of MVNOs is that they have a thorough knowledge of their customer segment, allowing them to cater to that segment in a far more personal, relevant way than MNOs can.

Table 1: Leverage on Existing Assets. 

 
CORE ASSETSDESCRIPTIONMVNO EXAMPLES
APPS / CONTENT / SERVICES
  • Having a renowned brand or high level of recognition/value among the targeted customers.

Sky Mobile, Spectrum Mobile, Cubic Telecom
(Cable, Media, IoT/M2M).

BRAND VALUE
  • Having a renowned brand or high level of recognition/value among the targeted customers.

MTV, Red Bull, São Paulo FC
(Lifestyle, Sports)

CUSTOMER MANAGEMENT
  • Being able to offer excellence in the customer experience/journey.

Lenovo, Panasonic, Simyo, ALKA
(Customer Journey)

DISTRIBUTION
  • Being in possession of an existing distribution network. (Offline or Online)

PosteMobile
(Postal, FinTech, Logistics)

EXISTING CUSTOMER BASE
  • Having an existing customer base on which to perform cross-selling and loyalty programs

Aldi, Tesco, Éxito, Equitel
(Retailers, Banks)

OPERATIONAL EFFICIENCY
  • Being cost-effective with a lean operating structure

Tele2, IIJ
(Discount)

SEGMENTATION
  • Having a renowned brand or high level of recognition/value among the targeted customers.

Lebara, Lycamobile, Popit, UK Tell, Uber
(Ethnic, Community)

MVNOs play a key role in penetrating key underserved segments, such as youth, elderly, expatriates, verticals, SME’s, traveler, communities, etc. Segments that the MNOs struggle to adequately serve because such segments are typically too small for the MNO to justify tailored products and services.

The lean and agile business model of the MVNO, however, allows highly focused targeting resulting in benefits to the whole ecosystem: The MNO, the MVNO and the end-users.

What Makes a Successful MVNO

Since the late 90’s, MVNOs have proved as a successful business model with thousands of MVNOs in operation, in more than 80 countries – and growing. MVNOs have used their competitive edge to capture market share, capitalizing on market differentiation with innovative offers and services to specific segment needs

It ultimately, comes back to the fundamentals of what makes for a successful MVNO: a proposition that resonates with the customer, a cost effective channel to market, brand awareness, service and simplicity.

Author: Allan Rasmussen
Managing director at Yozzo. Allan’s expertise includes the development and execution of growth strategies, market insights, trends and opportunities, new business models and strategies
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