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Prepaid marketing: Above the line, below the line or through the line?

By Michal Samuels

Perhaps not surprising at all, cost-conscious consumers are increasingly shifting towards prepaid – sometimes also called contract-less – plans to replace their contract-bound plans to be able to control spending while cutting costs in this cash-conscious era in which we are living.

While the shift toward prepaid is a global trend, it seems particularly strong in the United States.

Recent financial results of U.S. carriers indicate an unprecedented drop in post-paid when compared to prepaid numbers.

In the fourth quarter of 2009, 65 percent of the 4.2 million net new U.S. mobile subscribers were prepaid customers (IDC Technology Research).

Couple this trend with the commoditization of smartphones and the question clearly arises: How should U.S. wireless carriers react to these trends and should they re-adjust their marketing strategies to retain the notoriously agnostic prepaid customers?

Creative above-the-line marketing
Recently there has been an overflow of creative above-the-line campaigns, as well as a flurry of press releases and marketing strategies announcing how service providers are intending to reward their customers in order to maintain their loyalty.

For example, one Tier 1 carrier recently offered to reward loyal prepaid customers with a reduced bill every six months of continued and loyal standing.

Another carrier has offered current tablet owners the option of a post-paid billing plan, without the need to commit to long-term contracts. Other carriers are trying to woo new customers with attractive offers and devices such as smartphones.

However, despite the numerous attractive offers available to users, carriers are not receiving the desired response rates and, moreover, are seeing a constant rise in their prepaid customer base rather than in their postpaid customer base.

This is largely due to the fact that many users may find that the offers were sent at irrelevant times, and as a result the users were unable to uptake the offer.

Effective below-the-line marketing
A different strategy for winning the prepaid battle would be a personalized marketing approach coupled with attractive, but more importantly, personalized pricing options, placing emphasis on data plans and device offerings.

According to IDC research, pricing strategies are a crucial factor impacting prepaid customers – which might challenge in the near future the current monthly-unlimited method adopted by some U.S. carriers.

Carriers should be able to offer a personalized price plan based on each and every customer’s individual behavior, preference and usage patterns in terms of voice, data and messaging.

Just imagine a platform where marketers are able to quickly design and launch numerous personalized price and product offerings to millions of subscribers, but also have the ability to automatically follow through each subscriber’s life cycle.

We have found that European carriers using personalization methodologies have effectively decoupled above-the-line marketing programs, and instead focused efforts on below-the-line personalized offers to retain customers and, more importantly, increase their average revenue per user (ARPU).

As smartphones are gaining popularity and market share on a daily basis, the number of prepaid customers using data-centric devices is also increasing.

Forward-looking carriers realize that prepaid customers are no longer classified as low income, but are more tech-savvy and, as a result, service providers will be able to expand their portfolio and increase revenues to include this important market segment.

While marketers are scratching their heads, it is worth bearing in mind that loyalty plans can also be implemented in a personalized context in such a way that they are still relevant, and apart from being offered at the right time and context, also contain an economic offering based on individual mobile behavior.

Another important factor for personalized, below-the-line type of marketing to consider is that of timing.

Provide the right offer at the right time and the chances of receiving a high response rates increases dramatically.

For example, Amazon’s personalized recommendation system based on each user’s purchase history has yielded great results and an increase in the company’s sales without running expensive marketing campaigns

Through-the-line marketing
To summarize, above-the-line campaigns are simply not enough and are definitely not personalized, and thus should cleverly be combined with below-the-line marketing campaigns.

Above-the-line mass marketing enforces key messages, while personalized, below-the-line marketing campaigns bring forward the clear benefits to the customer with an emphasis on real time and context.

Michal Samuels is marketing manager at Pontis, Glil Yam, Israel. Reach her at [email protected].