Return of Investment

Chapter 2a:Shot-Gun Strategy

Mobily strategy for acquiring bigger share of the market was termed as “Shot Gun Strategy”. I understood that this was not an original innovation of Mobily. Many other companies in the world also applied this strategy. “Shot Gun” strategy meant the following for us.

Mobily would develop as many products it could conceive and would fire these products in the market.

“Products” for a Telecom Operator needs an understanding. The Telecom Operators makes available new Technical advances, as they are available. Initially Mobile Telecom Operators provided only Telephony Services using a Mobile Device. This made possible being connected while being on the move. Then, the Short Message Service was added. With the availability of GPRS technology, it was possible for accessing the Internet through a Mobile Device. New possibilities were features like “Instant Messaging Services”, “Multi-media Messaging Service”, etc. 3G provided for services like “Video Calls”, etc.

If we try to generalise this view, the following picture emerges.

Technology to Product

So, essentially, a Telecom Operator purchases technology components including hardware and software for setting up the network. Using the installed hardware, it is possible for the Telecom Operator to offer certain services. The services when attached to service attributes like speed of upload and download of data, quality of service, etc. become a sellable commodity for the Telecom Operator that we term as a “product”. One or more products, when combined and associated with a pricing model including acquisition cost, recurring cost, usage cost, discounts, loyalty bonus, instalment schemes, taxes, etc. forms a “package”; the commodity the Telecom Operator sells to its Customers.

So, what a Telecom Operator tends to work on is introducing new Products through acquisition of new Technologies and then creating Packages around these products to sell in the market.

The below image illustrates the relation between the four. This image is just an illustration and is not for providing comprehensive information.

Technology to Product

What is noticeable is that by setting up infrastructure for 3 services and offering 9 products and offering Pre-Paid & Post-Paid payment options, the Telecom Operator has theoretically the provision for creating 1022 packages (= (9C1 + 9C2 + 9C3 + 9C4 + 9C4 + 9C5 + 9C6 + 9C7 + 9C8 + 9C9) * 2 ).

In practice, for Mobile Telephony Services, we could consider Local On-Net Calls and Local Off-Net Calls and Incoming Calls as a one unit as these generally cannot be provided in isolation; though these products could be charged differently. Similarly, Outgoing SMS and Incoming SMS can be considered as one unit as it is generally not possible to offer the 2 separately. So, under these considerations also, there is possibility to create 126 packages (= (6C1 + 6C2 + 6C3 + 6C4 + 6C5 + 6C6) * 2).

Further, different calling patterns for Mobile Telephony Services could be charged in different combinations. For example, if a package is intended for Customers more involved in making Local Calls, the charge of Local Calls could be reduced and cost of STD and ISD calls could be increased. If a Customer is more involved in makings calls across Cities, the cost of STD could be lowered and cost of Local Calls and ISD Calls could be increased. In a simple formulation, if we consider that a Telecom Operator creates 3 pricing options for each of Local Calls, STD Calls and ISD Calls (keeping one price option for SMS Incoming and SMS Outgoing and one price for Data Upload and one price for Data Download), then theoretically it would be possible to formulate 4095 packages for Pre-Paid option and 4095 packages for Post-Paid option.

The below illustration shows the different call scenarios possible using a Mobile Phone from the home location. Theoretically, each of the call scenarios can be charged differently. A similar number or larger number of charging scenarios emerges when the person makes calls from outside his home location.

 Call Scenarios from Home Location

It would not be wrong to consider that Mobile Telephony Services, Text Message Services and Internet Services are Basic Services that a Telecom Operator could offer. Using each Basic Technology, it is possible for creating many other services. For example, using the Text Message Service, it is possible for devising service for providing information about the Weather. If the Telecom Operator connects with the Computer Systems of the Meteorological Department, the Telecom Operator could capture the latest Weather Predictions. These predictions could be made available to the Customers through a SMS sent by the Telecom Operator to the Customers.

 Technology to Service

From the above figure it is evident that by simple innovations, the Telecom Operator can create many products. The scope is just endless as it is possible for making available most of the needs, especially needs for information, through Telecom Services. Each of these products could be sold individually or could be packaged in logical units based on the needs of segments of the Customer Base.

So, as a Telecom Operator keeps adding new Technology and building new services around these technologies, the combinations possible for creating packages becomes an enormous number. As each package creation needs a project, and it is possible for a Telecom Operator to conceive an enormous number of packages; it create many projects for launching these packages. Apart from the technical aspect of making the product available technically, the project involves other aspects like creating associated marketing campaigns, training field staff in selling the same, training customer centre staff to be able to handle queries on the same and to be able to use systems for sales and support processes, etc. The IT Department only deals with the technical aspects of all such projects.

Mobily’s “Shot Gun Strategy” was to conceive as many packages and launch them in the market. My understanding for Mobily adopting this strategy is as follows.

  1. Mobily was operating in Saudi Arabia. The population of Saudi Arabia can be mainly classified into 2 categories – the rich local residents and the relatively poor expatriates. The needs of the expatriates are mainly for connecting to their families in the home country. So, the main innovation possible for this segment was to keep adjusting the Telephony Services Charges. Being different from other operators in this scope is relatively difficult. In addition, there are regulatory requirements that need pricing within defined limits. So, Mobily could create differentiation by trying to sell all the new technologies and services to the rich local residents.
  2. The local residents of Saudi Arabia are people who have most basic needs in life including villas, cars, and most luxuries of life. Predicting the minds of people who have sufficiency in life is generally a difficult affair (This I state from experience and not through any statistical analysis).
  3. So, instead of trying to predict the minds of this segment, it was seen as prudent to just fire different products in the market. If 100 products were fired, chances that 10 of these products would create the needed return from the overall investment were relatively high. As Mobily has returned multiple digit profits consistently for the last 7 years, it can be safely stated that this strategy has worked for Mobily.

However, this cannot be seen as a sustainable strategy.

 Return of Investment

Once the market has been acquired, it would be prudent to launch targeted products with more or less predictable return of investment. Shifting the investment from development of enormous number of projects to better analysis before launch of a project can do this. This will create better quality products which will help sustain the acquisition. The below illustration tries to justify this.

 Spend more on Analysis

 

Advertisements

This site uses Akismet to reduce spam. Learn how your comment data is processed.