How to deal with saturating markets
It was clear that this is coming. It is always coming - markets are saturating. This time, it is the mobile phone market that let mobile phone operators struggle to meet growth targets.
The interesting piece is then that companies mostly become more innovative in developing their customers - or they go out of the market, if they don't.
So now, in the mobile phone markets, companies start targeting the lower end of the market, with all its risk related to a lowered average revenue per users (ARPU). Stock analysts look for that, and if ARPU declines, the company's shareprice frequently gets hammered.
However, technological developments impacting raw material prices allow companies to lower prices of handset that even the poorest consumers might soon find themselves able to purchase one. We recently reported about one of such handsets in Korea.
CNN describes one persons as an example for such case: "On the outskirts of Beijing, Chen Zhenghua makes a living growing and selling vegetables. The 36-year-old takes home $83 a month -- modest wages for most -- but good enough for Chen to consider buying a mobile phone."
Now this relates to handsets - and is an incremental improvement that can easily be matched by any competitors. It becomes more interesting when business models are modified to suit the needs of poor customers.
Here, they describe using the text message as a virtual prepaid calling card. "The consumer sends a text message to a number saying they agree to pay, and in return receives a specific amount of airtime. This system is paperless and cheaper to operate than other prepaid services.
Normally mobile users need to buy credit card-style vouchers bearing an identification number that they key into their handsets to add airtime. Under the electronic system, operators do not have to print vouchers or be involved with distributing them. Therefore, they can afford to sell airtime in smaller amounts." Now this is innovative thinking, and apparently Smart Communications added 1.7 million subscribers and cut costs by more than US$5 million with such innovation - who says that low-end subscribers delude the subscription base of a company?
The interesting piece is then that companies mostly become more innovative in developing their customers - or they go out of the market, if they don't.
So now, in the mobile phone markets, companies start targeting the lower end of the market, with all its risk related to a lowered average revenue per users (ARPU). Stock analysts look for that, and if ARPU declines, the company's shareprice frequently gets hammered.
However, technological developments impacting raw material prices allow companies to lower prices of handset that even the poorest consumers might soon find themselves able to purchase one. We recently reported about one of such handsets in Korea.
CNN describes one persons as an example for such case: "On the outskirts of Beijing, Chen Zhenghua makes a living growing and selling vegetables. The 36-year-old takes home $83 a month -- modest wages for most -- but good enough for Chen to consider buying a mobile phone."
Now this relates to handsets - and is an incremental improvement that can easily be matched by any competitors. It becomes more interesting when business models are modified to suit the needs of poor customers.
Here, they describe using the text message as a virtual prepaid calling card. "The consumer sends a text message to a number saying they agree to pay, and in return receives a specific amount of airtime. This system is paperless and cheaper to operate than other prepaid services.
Normally mobile users need to buy credit card-style vouchers bearing an identification number that they key into their handsets to add airtime. Under the electronic system, operators do not have to print vouchers or be involved with distributing them. Therefore, they can afford to sell airtime in smaller amounts." Now this is innovative thinking, and apparently Smart Communications added 1.7 million subscribers and cut costs by more than US$5 million with such innovation - who says that low-end subscribers delude the subscription base of a company?
posted by Andreas @ 1:54 pm
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