General presentation on needs-based segmentation for mobile service providers.

1. info@tudasbanya.hu
Tudásbánya Kft
www.tudasbanya.hu
Corporate
Needs-based Segmentation
(CNBS)
Tudásbánya Kft.
July, 2006
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2. info@tudasbanya.hu
Tudásbánya Kft
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Corporate Needs Based Segmentation (CNBS) was
considered as a competitive advantage by our
customers.
We delivery CNBS to 4 different countries in EU to
Mobile Service Providers in 2005-2010
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3. info@tudasbanya.hu
Tudásbánya Kft
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The telecommunication industry is generally changing –
Strategic level
Convergent
Telco
Highly Financial
Differentiated
Services
Mobile Insurance From voice service to the
Mobile 3G
field of
IPTV (broadcasting) and
FMCG/Retail Pharmacies mobile payment.
Customer
Value
Book stores
Gas Stations
Uniform
Uniform Highly Differentiated
Customer Needs
The telecommunication industry was generally changing, fulfilling more diverse needs, that
3 generates highly differing profits

4. info@tudasbanya.hu
Tudásbánya Kft
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The telecommunication industry is generally changing –
On the operational level
In 1999 In 2006
~5 handsets ~30 handsets
~10 tariff plans ~25 tariff plans
~10 value added ~200 value added
products products
~ 3 tariff options ~ 20 tariff options
4-5 minutes to 4-5 minutes to
serve serve
Needs based segmentation is to establish customer groups that has the same (similar) 4P
4 characteristics

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How churn prediction and customer value calculation
segmentation scheme can be improved?
Top
Value
Churn probability
Medium Value
Low Medium High
Low Value
Existing segmentations raise additional questions and challenges:
•Why the top value segment become •We know who are the customers with
profitable? high churn probability, but how can we
•How can we increase profit on the low keep them?
value customers? •How to reach customers with Medium
churn probability?
Existing (usual) segmentations can be improved easily with NBS information
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6. info@tudasbanya.hu
Tudásbánya Kft
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What is needs based segmentation
Fezorg Ltd.:
The ultimate goal is: Next action:
• Product - 3 new 3G handsets for 2 years contract
To determine for each customer, the classic
• Place - Propose over call center, confirm it after 4
4P-s of the next possible step of the provider days, try it no more then 2 times
• Promotions
towards that particular customer. - Provide detailed description
• Price - List price, then
-Apply loyalty discount
-Apply volume discount
Fezorg Ltd.:
The practice: Generally:
- High value customer – High purchasing
Assign customers into groups with approximately the power
same characteristics (4P). Then treat each customer - No negotiating power (discounting)
according to the group generally, but apply rules for - Internet user, innovative for new products
- Prefers CC, do not prefer shops
individual customers - Price sensitivity is medium
Needs based segmentation is to establish customer groups that has the same (or similar) 4P
6 characteristics

7. info@tudasbanya.hu
Tudásbánya Kft
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Usage of NBS…strategic samples
 Strategic segmentation for customer management
 Segment planning
 Segment performance management
 Campaigning (inbound and outbound)
 Basic targeting enabler
 Up-sell/Cross-sell
 Product development
 Needs to fulfill
 Customer service
 Different segments can be served differently (reducing service time,
increasing satisfaction)
 Channel routing/optimization
 Commission / Incentive management
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8. info@tudasbanya.hu
Tudásbánya Kft
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Some samples….
 Large mobile operator tailors the loyalty program
according to the need of churners.
 Bank call center tries to short customer calls
according to needs based segments
 Mobile operator promotes new products
according to the „explorers” media consumption
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Questions to answer
 Contract period (12-36 months)
 Ratio to invest into better (more expensive) handsets
(subsidy optimization)
 Tariff structure (mass, customized, specialized)
 Discounting
 Next best offer
 …
 …
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10. info@tudasbanya.hu
Tudásbánya Kft
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Segment Card - „Son and Father”
1. Segment description 1. Handset description
# of companies avg age of handset
share to total corporate avg # feature os handsets
# sim-cards 2. Avg # of monthly fee product used
2. Average company size: 1-5 employee, 2-5 MMS penetration
temporary 3G penetration
Typical location: small, medium cities etc.
Average company income: XXXXX 3. Contractual descriptions
3. Average bill size: XXXXXX avg discount rate
Average CV: XXXX share of customized contracts
CV-within group: X1% share of specialized contracts
CV-within RM: X2% avg # of committed days
CV-International: X3% 4. Service KPI-s
CV-Fix X4% 5. Trend KPI-s
CV-VAS: X5% Increase in MMS penetration Quarter over
4. Traffic description Quarter
avg number of sms
avg number of mms
avg number of minutes per direction
Different Needs-based customer groups can be proposed and served differently, products
and services can be priced differently.
10

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„Rainbow Mobile (RM)”
Tudásbánya Kft
Corporate NBS
Concept

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Establish RM Needs-Based segmentation framework
The RM Framework for CNBS will be established on workshops and on Tudásbánya best
12 practices. Tudásbánya proposes 5 aspects (see above) for NBS.

13. info@tudasbanya.hu
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Data acquisition
1. Availability check of measures, variables
(according to the NBS framework)
2. Designing NBS data store (data mart) for RM data warehouse
measures and variables (dimensional design)
3. Develop SQL/PLSQL scripts to read data from
RM data warehouse and write it to NBS data
store (Existing ETT tools can be utilized)
4. Fine tuning of data model and scripts
Tudásbánya will develop SQL and PL/SQL scripts to access RM data warehouse for the
13 input variables to the needs-based segmentation

14. info@tudasbanya.hu
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Analysis and statistical description
1. Measures will be transformed into unified
dimensions
2. Dimensions will be statistically described and
documented (standard)
3. Segmentation target variables will defined and
set
4. Correlation and Factor analysis will be Aspect 1
conducted and documented
5. Aspects will be verified for segmentation power
6. Framework will be reviewed with RM
7. Cluster analysis will be performed (K-Mean,
Two-Steps, etc.) to get the first set of micro-
segments
Aspect 2
Number of statistical methods will be used for clustering
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First cut of micro-segments
1. Statistical methods are usually generating large number of micro-segments
2. Micro-segments will be described statistically over standard telco KPIs (ARPU, MOU,
# of sms sent, etc.) This will give the primary indication of the profile of each
segments
3. Similar micro-segments can be merged
4. Segmentation target variables are used for guidance
Statistical
NBS Data Store
profiling and
KPI
calculations
No Segmentation is
satisfactory
Yes
Non input variables will be used for initial profiling of the micro segments
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16. info@tudasbanya.hu
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Concept…..
Periodically RM Operative
repeated Data warehouse Staff
Source data
segmentation is from RM
data warehouse
Result of
segmentation
loaded to
the RM data
Quarterly calculated Opeartor can check the
warehouse
segments. NBS value for each
customer and can act
Verifying segments twice in a on it effectively
year with survey.
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17. info@tudasbanya.hu
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How can we establish needs-based segments – project
concept
Definition Data collection Market Recommendati Post
survey and ons and production
• Data model for input support and
variables profiling business
utilization maintenance
2. Benchmarks and • Data acquisition
2. Survey design and
best practices development
• SQ/PLSQL script 2. Benchmarks
3. RM Needs-based development 3. Survey execution • Quick wins and best
segmentation practices
framework 4. Survey evaluation • Medium (within
Analysis and 3. RM Needs-
1 year) term
statistical 5. Segment profiling based
actions
description segmentation
framework
2. Statistical Analysis of • Long term
dimensions (over a year)
actions
3. Defining target variables
4. Statistical segmentation
Tudásbánya is proposing a 17 weeks project to establish needs-based segmentation with
17 account planning at RM Slovakia

18. info@tudasbanya.hu
Tudásbánya Kft
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Tudásbánya Kft
How does this work?

19. info@tudasbanya.hu
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Segment Card - „Son and Father”
1. Segment description 1. Handset description
# of companies avg age of handset
share to total corporate avg # feature os handsets
# sim-cards 2. Avg # of monthly fee product used
2. Average company size: 1-5 employee, 2-5 MMS penetration
temporary 3G penetration
Typical location: small, medium cities etc.
Average company income: XXXXX 3. Contractual descriptions
3. Average bill size: XXXXXX avg discount rate
Average CV: XXXX share of customized contracts
CV-within group: X1% share of specialized contracts
CV-within RM: X2% avg # of committed days
CV-International: X3% 4. Service KPI-s
CV-Fix X4% 5. Trend KPI-s
CV-VAS: X5% Increase in MMS penetration Quarter over
4. Traffic description Quarter
avg number of sms
avg number of mms
avg number of minutes per direction
Different Needs-based customer groups can be proposed and served differently, products
and services can be priced differently.
19

20. info@tudasbanya.hu
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Segment „X” - Trend
S e g m e n t d e v e lo p m e n t
A ve ra g e C V ( F t) A R P U ( F t) C hurn R a te ( %)
17683 10,6
9592 9,8
7796 7980 16908
7,22
15725
2004Q1 2005Q1 2005 Q4 2004Q1 2005Q1 2005Q4 2004Q1 2005Q1 2005Q4
D a ta A R P U / A R P U ( %) A v g . N u m b e r o f S IM / M o n t h ly f e e / A R P U ( % )
C us to me r
1,1 5,1 27,2 26,9
0,82 0,89 4,2
3,6 18,6
2004Q1 2005Q1 2005Q4 2004Q1 2005Q1 2005Q4 2004Q1 2005Q1 2005Q4
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Value creation - „Son and Father”
Segment size Average company size Customer Value increase YoY
11% 3.1 11%
100%
90% Within network Other network 2 656
80%
70%
2 884
230
60%
21 min 618
741
50%
51 min. 801
40% 2 554 Voice
165 min.
30%
20% 3 759
Top_1 Top_2 Top_3 Top_4
10%
473
0% 571
1
Group Corp Part TMO Other Mob. Fix Intern. Messaging Other VAS Monthly Fee Interc onnect
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22. info@tudasbanya.hu
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Focus by segments
Segment /
Focus „A” „B” „C” „D” „E” „F” „G”
Acquisition
Up sell
(SIM)
Cross sell
(services)
Retention
Increase
revenue
Cost
reduction
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Segment Planning – Segment „X”
Segment Current period Plan Period Brief actions
Focus
Increase data usage Data Usage: Data Usage:
1787 kbyte 1900 kbyte
Retention X% Churn Y% Churn 1. Propose 32 months contract
instead of 24 for customer with
completed contracts
2. Offer 32 months contract after 12
months in current contract
Action Detailed Direct Effect on Other effect
description Segment
Propose 32 months Monthly campaigns Avg. contract days will
contract instead of 24 increase to 300 days
…
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24. info@tudasbanya.hu
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Execution on single account level
Account
Representati Corporate Avg. Bill # of active
Name Tax Id Avg. CV
ve NBS Size SIM
Suburban Peter
XXXXX Blue chips 131000 26200 31
Bank Oravecz
It e m V a lu e
Region Central
Size Category Large enterprise
First
4 SIM cards has significant outgoing international traffic to USA.
Descriptor
For 20 monthly fee international package should be recommended, that covers calling 20% discounted
First Offer
international for 1 selected country.
Second
Monthly fee includes 20 SMS, that are used only 40% of the SIM cards
Descriptor
Monthly fee can be reduced by 30 - 0 SMS included for 24 months, for the SIM cards using SMS an sms-
Second Offer
package should be recommended.
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Appendix

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Result – Sample segment profile
Generic conditions Channel
MOU < 10000
Dedicate partner
Number of contacted phone numbers < 1000
Offer
Profile based on internal data
(ARPU: 30257, CV:27812, Churn-red:18%)
International package*
Highest MOU 2912 in +1015 out Favorite country*
International MOU: 157 min Corporate Relax**
Innovation score 8.48 (twice of the average)
„BestVoice” tariff plan (42%)
Profile based on survey data
•Good economic situation Service
•Strong hope for growth
4000 10
Pricing
2086
2000 5
2,94
0 0
Méret db Méret %
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27. info@tudasbanya.hu
Tudásbánya Kft
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Thank you for your attention
Questions, Comments
csaba.kiss@tudasbanya.hu
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