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Understanding How To Ensure The Successful Implementation Of Your Top Up Schemes

Stathis Efthymiou, Vodafone Greece27-30 September 2004

Prepaid Mobile 2004, Budapest

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Scratch Cards• “Traditional” method to recharge prepay account

• Production & distribution costs (plus insurance, storage)

• Stock outage at POS → loss of revenues

• Restricted number of denominations (e.g. €9, € 20, € 36)

Difficult to “test” new denominations

Fixed values cannot “compete” for all available pocket money of a teenager!

• Both sides of scratch card can be used to promote effectively new services, loyalty programs,

contests etc.

• Suitable even for POS that sell low volume

• Fraud risk: for POS with multiple cashiers / shifts (e.g. gas stations, super markets)

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E-voucher receipts (off-line top up @ POS)

• Electronic evolution of scratch card

• No production costs

• Distribution cost (Lower? Same? Higher?)

• Minimum requirements for:

Easy deployment: sell & provide “PIN files” to e-voucher distributors

• More denominations

Easy to launch & test intermediate denominations

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E-voucher: Availability wins!

• Availability of high denominations results to higher penetration → higher

revenues

* Figures are indicative - Actual figures are confidential

95.1%87.4%

1.2% 4.5%

10.7%

0.3% 0.7%

€ 9 € 15 € 20 € 36

Scratch Card vs. E-voucher

Scratch card E-voucher

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E-voucher receipts (cntd)

• Limited promotion capabilities

Text based, few lines, black & white

• Traditional physical scratch card distributors resist to e-voucher

• Tax implications

• Opportunities for local micro-marketing activities

E-voucher POS installed at merchants in a specific area / limited period

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Telephone Banking

IVR ? CC agents ?

• CC agents

High cost per top up (OpCo will pay?)

Prone to errors (I.e. type wrong MSISDN)

Waiting time (on a queue) costs if call is made by prepay mobile and usually balance is already

zero!

• IVR

Development cost

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Telephone Banking (2)

• Issues

Not all banks would agree to offer Telephone banking e-top up → service

not available from all banks and therefore cannot be communicated

effectively

Not all bank customers are using Phone Banking

Call to Phone Banking cannot be offered free of charge (it cannot be

treated as an exclusive line for top ups)

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IVR e-top up through Bank account

          

(1) Call to 1258 and select top up amount

(2) Request to capture funds

(3) Debit bank account

(4) Credit prepay account

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IVR e-top up through Bank account (2)

• Registration

Link MSISDN with Subscriber’ bank account

Apply at bank (branch, phone banking, ATM) or at Vodafone shop

• Top up experience

Subscriber calls 1258 free of charge from his prepay mobile

Enters PIN

Selects top up amount € 10, € 15, € 20 or € 40

(although that amount could have been variable)

Call ends

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IVR e-top up through Bank account (3)

• Top up experience (continued)

Vodafone requests from Bank to capture funds (through ΔΙΑΣ)

Bank reserves funds and responds

Vodafone credits prepay account and sends confirming SMS + new balance

• Real time top up (takes from a few seconds to 1 minute)

• 24 hours x 7 days

• Remote (from mobile) & convenient

Greece or abroad (CAMEL)

No more PINs to key!

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IVR e-top up through Bank account (4)

• Low distribution cost

Lower than traditional scratch card, higher than credit card acquiring

transaction fee

• Loose customer communication

• Less room for fraud

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IVR e-top up through Bank account: Issues

• Prepay market is a cash oriented market

• Subscribers are used to scratch card (or e-voucher) method

• Subscribers dislike to disclose their bank account details

• Subscribers’ inertia: need to apply at branch, Vodafone shop → hook ?

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IVR e-top up: Conclusions

• E-top up through bank account / credit card becomes more effective as

distribution costs tend to be close to the acquiring costs of credit card

transactions

• 24hr availability

• Low penetration

• Rule: go for the top 20% subscribers who redeem the 80% of airtime

value

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IVR e-top up: FindingsE-top up through bank account registered users in August '03

€ 0.0

€ 5.0

€ 10.0

€ 15.0

€ 20.0

€ 25.0

€ 30.0

€ 35.0

Jan

2003

Feb

200

3

Mar

200

3

Apr

200

3

May

200

3

Jun

2003

Jul 2

003

Aug

200

3

Sep

200

3

Oct

200

3

Nov

200

3

Dec

200

3

Jan

2004

Feb

200

4

Mar

200

4

Average Scratch Card top up Average E- top up ARPU e-top up

Promo periodBonus= + 20%

* Figures are indicative – A

ctual figures are confidential

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IVR e-top up: Findings

• 40% of e-top up users still redeem scratch cards (hybrid)

• 42% air time value redeemed by the above hybrid e-top up users comes from scratch

cards

• Introduction of e-top up drove to higher ARPUs

• Average monthly airtime consumption: hybrid users = 2 x pure e-top up users

• How to fully convert to e-top up and abandon scratch card / e-voucher top up?

Give permanent incentives?

Insufficient bank account balance?

Do subscribers think of it as an alternative (and not primary) top up method?

Are subscribers unconfident?

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Web banking / ATM e-top up

                                

                          (1) Select top up amount & reserve funds

(3) Credit prepay account

(2) Send request to Vodafone

(4) Capture funds

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Web banking / ATM e-top up (3)

• No registration is needed: ad-hoc

• 3rd party top up is possible

• Limited to bank customers / internet users

• Not convenient as a simple call from your mobile!

• Loose customer communication

• Less room for fraud

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Real time e-top up at POS

• M-Pay solution

Real time (on-line) e-top up – no PINs to enter!

No need for a fixed line or a GPRS modem: uses subscriber mobile to communicate

during sale process

Variable amounts: from € 9 to € 36,0 (step: € 1,0)

Fraud is more difficult

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Notes

• Air time distribution cost is critical as it affects cost of funds

Distribution + production cost threats profit margins of offered mobile services

• IVR e-top up improves top up experience: whenever, wherever, whatever

Guarantees uninterrupted use of prepay mobile account and increases airtime

consumption

Option of higher top up amounts → increases usage and drives to higher ARPUs

• E-top up through bank account / credit card establishes a link:

MSISDN ↔ Financial source of funds

Is this 1st step towards m-commerce?

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Is it worth to replace scratch card ?

Method Cost savings vs. Scratch card

(per € redeemed)

E-voucher receipts (off-line top up @ POS)

E-top up (real-time @ POS)

12%

E-top up (through bank account, credit card) 50%

• A significant part of e-voucher receipts & e-top up @ POS cost is

merchant’s margin …

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Where to be in future ?

Penetration:

Method

2005 2008

Scratch card 90% 50% ↓

E-voucher receipts

(off-line top up @ POS)

5% 20% ↑

E-top up (real-time) @ POS 2% 20% ↑

IVR e-top up (debit bank account, credit card)

3% 10% ↑

* Figures are indicative

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Prepay Roaming Top up

• A global Vodafone initiative

• Participating OpCos

– Vodafone UK, Germany, Italy, France, Ireland, Spain, Portugal, Malta,

Sweden, Australia, N. Zeeland

– Partner networks: Mobilkom A1, Vipnet (Croatia), SiMobil (Slovenia)

• E.g. A Vodafone Greece prepay subscriber (Vodafone à la Carte or

Vodafone CU) roaming at UK, can top up his account by buying &

redeeming ‘Pay as you Talk’ e-voucher receipts

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Prepay Roaming Top up (2)

Roaming subscribercalling his subscriber

network viashort-code number

(I.e. 1268)

Visited Home Network(that issued voucher)

Subscriber Home Network e.g. Vodafone Greece

Central System

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Prepay Roaming Top up (3)

• Low convenience fee: € 0,5 per top up

– Fixed fee promotes redemption of high denominations

• Subscriber redeems e-voucher by calling his home network’s top up line (or visitor’s

network) free of charge

• Uninterrupted service

• Monthly reconciliation & settlement

– Subscriber network has to receive voucher value from visitor network – visitor network’s costs

• Alternative top up options: sell e-vouchers of local network abroad?

• Next step: real time e-top up at POS?

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Prepay Roaming Top up (4)

• Promote Prepay Roaming Top Up

– TV Commercials, press, Tickets, Maps, Tourist guides: nice to

create awareness, but expensive!

– Welcome SMS and Low Credit SMS customized per outbound

network

Both are low cost and effective promotion tools.

e.g. “Your balance is running low – Now you can top up in Italy by

using Vodafone Ricarica scratch cards”

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Pro-actively alert your customers when they are running out of credit

• Ensure that subscriber is notified when balance → 0

– Local: Nice for consumer, but not recommended!

– Abroad: Yes, useful as international rates are high and subscriber unaware

and inexperienced!

• Prepay subscriber’s behavior is sometimes peculiar ...

– Buying pattern: Buy one scratch card once / twice a week?

– Alerting subscriber will drive to cautious usage:

e.g. make only urgent calls / minimize duration till tomorrow / weekend

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• Low credit notification is useless, unless top up is possible!

– Low credit alert abroad, requires roaming top up scheme and

free call to top up line

– A local low credit SMS could be offered as an added value service

to subscribers who are registered:

a. for loyalty programs

b. their bank account / credit card for e-top up

e.g. send low credit SMS: Your balance is running low. Do you want

an e-top up? Send your 4-digit PIN to 1258 to top up € 10

Pro-actively alert your customers when they are running out of credit (2)

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Ensure your customers keep their accounts topped up

• Effective top up promotion scheme: easy to understand & implement

• Fixed value bonus top up promotion (e.g. €1 per top up during promotion period)

cannibalizes high denomination values (e.g. €20, €36)

• Promotions should have specific objectives, such as:

– Build loyalty (e.g. give extra loyalty points for ATM top up)

– Promote usage

– Promote high denomination values

– Promote low cost e-top up channels (e.g. offer 10% airtime bonus per e-top up

through bank account)

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Top up € XX and gain XX % airtime bonus on your next e-top up (within 1 month)

– E.g. e-top up € 15 and gain 15% airtime bonus on the next e-top up

– Offer sounds more attractive as long as you e-top up higher values!

– Promotion offer % is higher than the actual promotion bonus

– Promotes usage of higher denominations: the more the top up value, the more bonus (%)

you get

– Airtime bonus is always related with the next e-top up

– 1 month expiry period of the bonus option stimulates frequent top up

Ensure your customers keep their accounts topped up (2)

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Top Up€ 10

€ 15

€ 20

€ 40

Earn:

10%

15%

20%

40% Next time you e-top up!

Initiale-top up:

Bonus offer Next e-top up:

10€ 15€ 20€ 40€ 10€ 10% 1.0€ 5% 1.5€ 6% 2.0€ 7% 4.0€ 8%15€ 15% 1.5€ 6% 2.3€ 8% 3.0€ 9% 6.0€ 11%20€ 20% 2.0€ 7% 3.0€ 9% 4.0€ 10% 8.0€ 13%40€ 40% 4.0€ 8% 6.0€ 11% 8.0€ 13% 16.0€ 20%

Ensure your customers keep their accounts topped up (3)

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Rules for promotion

• Variable – not fixed for all denominations

• Give extra bonus for high value top ups

• Bonus should not necessarily be €s; it could also be services e.g. SMS, MMS

etc. although this might narrow its target audience

• Bonus incentives offered to promote top up through specific channels should

not undermine convenience offered

• Bonus should last as long as it needs for subscriber to fully embrace the new

top up habits

• Try to make synergies with loyalty schemes

• Promote low cost e-top up channels

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Stathis Efthymiou, Vodafone Greece

stathis.efthymiou@vodafone.com

27-30 September 2004

Prepaid Mobile 2004, Budapest

Thank you!

Understanding How To Ensure The Successful Implementation Of Your Top Up Schemes