Yankee Group: Clear positioning is the key to 4G success
Hundreds of mobile network operators (MNOs) around the world are currently in planning mode for 4G/LTE. Success with this new technology is not only dependent upon how operators deploy the networks. They must also succeed in how they launch and communicate their offer in the marketplace.
To guide operators as they define their approaches we have identified five specific ways to position LTE in today's data-centric world. While this is not an exhaustive list, it does introduce clarity into today's debate about LTE technology and the benefits it delivers to end-users and operators alike.
No. 1 for Tablet Users
Pitch LTE as the preferred connectivity solution for tablet owners who want more than patchy Wi-Fi service. Keep in mind that tablet owners differ--both in demographics and behavior--from non-owners. Understanding these differences allows operators to cater their LTE packages to tablet-owners, a demographic that clearly sees the value in robust and reliable connectivity.
Who are the tablet-owners? Our research shows they are:
- Younger. In fact, tablet owners today are more than 10 years younger on average than non-owners.
- More affluent. The average tablet owner earns $70,000 per year and has an annual household income of $87,000. The average non-owner earns $56,000 per year and has an annual household income of $66,000.
- Smartphone enthusiasts. Respondents who own a tablet are 31 percent more likely to own a smartphone than people who don't yet own a tablet.
Tablets plus LTE is a match made in heaven. Against this backdrop, operators that position LTE as the ideal connectivity solution for tablets are on the right track. Additionally, operators have the opportunity to establish their company (and their brand) as the No. 1 choice for this discriminating demographic. And let's not forget the chance to attract customers who are migrating their PC behavior to tablets and therefore need to get online using their tablets. Connect the dots, and a market leadership position awaits smart operators that grab hold of this opportunity and make it a central part of their marketing and communications.
No. 1 for Cord-Cutters
Establish LTE as the answer for customers looking to discontinue their land-line connections and move to a mobile-only lifestyle. As we know, 3G-based mobile broadband may have been positioned as a viable alternative to land-line services; however, its performance is hardly on a par with fixed broadband. LTE changes all the rules, allowing operators to provide customers the promises of an untethered lifestyle and position themselves as the go-to company for cord-cutters in the process. The timing is perfect as consumers are already beginning to substitute mobile for fixed broadband, even in 3G scenarios. A 2011 survey commissioned by U.K. communications industry regulator Ofcom, for example, revealed that 44 percent of U.K. households with a mobile broadband service had discontinued their land-line broadband connection. The highest instance of mobile-only broadband was among households at the lower end of the socio-economic scale. This sends a clear message to operators that LTE pricing must be suitable to the needs of these price-conscious customers. Prepaid plans and price-transparency are important, and--if operators get the pricing and packages right--then they can count on attracting customers eager to cut their cords and control their costs.
No. 1 for Families
Focus on presenting the family unit--or similar groups--with a subscription offer they can share. The concept of offering multi-user or multi-device price plans has gained significant traction and attention during the first half of 2012. This trend is pronounced in markets such as the U.S., where the state of LTE services is relatively advanced. This is not yet the case in Europe, where operators plan their LTE launches for later in 2012 or 2013. Clearly, it makes good business sense for European operators to follow the U.S. example and make multi-device plans a core part of their offers. The result is a proposition that covers the bases to deliver households improved price-certainty, thus enabling operators to differentiate their LTE offers from existing 3G services. Granted mobile services have traditionally been purchased and consumed by individuals, but this is changing. The convenience and cost advantages of sharing data allowances across multiple devices will no doubt encourage more Europeans to explore family plans. Operators should get ahead of this potential demand, and promote their family-friendly LTE services from day one.
No. 1 for Prepaid
Adapt your offer to the shift in prepaid--fast. While the lion's share (62 percent) of all mobile lines in Europe are prepaid, these services are under pressure. In fact, the erosion of the prepaid base is particularly noticeable in markets like the U.K., where prepaid services accounted for only 50 percent of all mobile lines at the end of 2011, down from 65 percent in 2007. Naturally, mobile operators prefer to deliver postpaid services, catering to a customer segment that guarantees steady ARPU and lower churn rates since customers are locked into a contract. But mobile operators can't take the easy way out.
When it comes to LTE, our advice to operators is simple: Ignore prepaid at your peril. Prepaid has an important role to play in LTE, especially as consumers move from having just one mobile phone to adding connected devices such as laptops, tablets and games consoles. For cost-conscious customers who need more than Wi-Fi connectivity for this array of devices, prepaid LTE fits the bill nicely. To take full advantage of this opportunity operators should partner with device manufacturers to offer products with embedded LTE and the option to connect via prepaid. A good example is Lenovo, which recently introduced a 3G version of its ThinkPad laptops. Such offers are precursors to what we can expect with LTE. Smart operators will recognize the opportunity here to establish themselves as the No. 1 choice for prepaid LTE.
Lessons Learned From 3G
Whether operators pursue one (or more) of the approaches we have presented--or come up with their own strategy--the end-game is all about successfully positioning LTE for the future without repeating the mistakes that marked the past.
- The technology won't sell itself. An LTE badge won't mean a lot to consumers. They didn't care much about 3G until they could understand how it improved their connected experiences. Operators should therefore sell the benefits of LTE (or 4G), rather than the acronym.
- Expect the unexpected. While most expected the promise of video telephony to move 3G devices off the shelves, it was really the lure of better mobile access to Facebook, YouTube and other Web 2.0 content that drove the move to 3G. LTE is sure to produce a similar surprise motivator.
- Prepaid is essential. 3G adoption was severely hindered in the early stages due to limited availability of prepaid (see chart below). When it comes to LTE, prepaid should not be an afterthought.
- Handsets matter. Once operators improved the quality and choice in their 3G handset portfolios, they saw a dramatic increase in 3G adoption rates. It's the same for LTE. From day one, operators must ensure a good supply of desirable LTE phones for the mass market.
Clarity Is the Key to Success
The approaches we outline here are really only a sample of the options available to operators seeking to position LTE in a way that benefits both customers and their company's bottom line.
No matter how operators choose to market their offers, success depends on their ability to position LTE (and the benefits it delivers) clearly and consistently in the minds of their customer base. This is a tall order since research shows many consumers simply don't know what LTE (4G) is, let alone the services it supports (see chart below).
Read between the lines. The chief challenge operators face is boosting awareness (not usage). The pressure is on operators to take the lead in educating consumers about the real-life benefits of LTE by showing how LTE is superior to existing 3G services without losing the key message in a sea of confusing acronyms and technology-speak. Operators cannot afford to fail in this basic task.