The Internet of Things (IoT) is the next stage of digitalisation. It holds unique potential for the telecoms industry, but it will require monetisation and sales excellence to unleash its topline potential, writes Dr. Kajetan Zwirglmaier, a partner at Simon-Kucher & Partners. Here, he details six aspects that are key to IoT topline success:
Use mass customisation, not mass-market tariffs
Traditionally, mass-market offers have been the standard in the telecoms business. While digitalisation is driving the creation of more customized offers, most operators stick to the traditional SML logic. But especially for IoT customisation is needed in order to successfully grab market share. An example would be high-value, highly critical (critical IoT) applications, such as self-driving cars, versus low-value, low requirements (massive IoT), such as vehicle parking monitoring.
It goes without saying that these use-cases and, consequently, the companies providing these services, have highly diverging demands regarding both the telecoms service that is provided and the willingness to pay for it. At the same time customer and sales demand simple, clearly structured offers.
Designing a successful IoT offer therefore must be flexible enough to tailor services to customers’ diverse needs, while at the same time, being standardised, simple to sell and well structured – meaning in other words, mass customisation.
Focus on horizontal penetration and selected verticals
Many CSPs are envisioning to extend their footprint across the IoT value chain by providing E2E solutions. E2E solutions aim to cover the entire ICT aspect (connectivity, network modules, cloud platform and data management services).
As tempting as these new vertical ventures may sound, CSPs are entering uncharted territory with a host of new competitors. Among these competitors are ICT solution providers, which are, in many instances, still CSP clients or sales partners. An even greater challenge is that the business approach is turned completely upside down.
Transforming today’s highly scalable horizontal market approach into a hardly scalable project business. Extending their reach across the IoT value chain is a challenging, albeit promising, approach. In a world with limited resources, the capacity to identify focus verticals and simultaneously drive horizontal penetration with mass customised connectivity is critical for the overall success.
Exploit opportunity for technology-based price differentiation
IoT applications require different network capabilities, using LTE-M, Narrowband IoT (NB-IoT), which are currently being rolled out by operators, or standard 4G, 3G, or 2G. Looking ahead, 5G will be the ideal network for empowering IoT and drive the digital society, by integrating all this technologies into different network slices. Each network has its own set of distinct features that makes it the most appropriate technology for specific use-cases. This pattern will continue to prevail in the future. Next to today’s technologies, specifically designed network slices will provide the optimal connectivity for different use-cases. Pricing needs to reflect the value these technologies and network slices provide the customer accordingly.
Build a multi-dimensional pricing – including more than just data
Data prices in B2C below 0.2cents/MB are no longer the exception, in IoT some MVNOs already offer 2cents/MB and the decline in price per megabyte will continue. This alone is an eye opener, revealing why IoT price dimensions that focus solely on data are not sufficient. It becomes particularly apparent when considering the fact, 40-60% of IoT devices need less than 1MB/month. Some require even less than 5KB/month.
The telecoms industry is currently facing a challenge in roaming wholesale pricing for NB-IoT, as their billing systems are not even capable of measuring the monthly usage of many use-cases, which can fall below 0.001ct. Moreover, customer needs are not solely driven by data packages; they are also driven by technical features, such as in-house coverage, device management and service, among others. For this reason, the offer must be supported a multi-dimensional pricing in order to ensure sustainable revenues and make IoT a topline success.
Address new international sales and pricing opportunities and challenges
For the first time in history the telecoms industry, IoT is forcing CSPs to offer permanent international access, beyond the traditional, occasional, roaming. In our globalised world, most IoT products/services are deployed and sold international. As many companies are international operations, they also have the capabilities to source internationally. Selling on a global scale brings with it additional opportunities and challenges:
- International market access
- International competition
- International coordination for international CSP players (price harmonization with affiliates)
European regulations may have forced the telecoms sector to offer free roaming when abroad, but IoT-manufacturers force CSPs to offer truly international services. Ultimately, a global approach will extend beyond the topics of pricing and sales, as new strategies will need to be developed to address the international challenges and opportunities – such as partnering and roaming.
Keep it simple – for customers and sales
Having read up to this point, it might seem that maximizing IoT opportunities requires a rather complex approach. Truth be told yes it does, but the most complex thing is keeping all this simple, as in today’s still emerging market, success in IoT necessitates simplicity in offers and pricing for both the customer and the sales team.
The go-to-market strategy needs to be as straightforward as possible while still enabling mass-customization, multi-dimensional pricing, price differentiation, and international alignment. Fortunately, digitalisation is not just driving IoT demand; it also offers the new tools to make a complex offer and pricing logic simple and intuitive for both the sales team and the customer.
Addressing these topics proactively will give CSPs a competitive edge in conducting IoT business. In a market environment where mobile penetration is close to maximum capacity and ARPUs are, at best, stable, IoT is providing CSPs a unique opportunity for a turnaround. Monetisation and sales excellence are the key to unlock its potential.
