There is always a right price.

We are currently working for a mobile operator in France who is questioning if there’s a right price to offer in the market they are targeting. The extreme competition in place, plus a declining pricing tendency in the market, requires executing an optimal pricing project to solve this question.

But make no doubt about it and skip the guesswork: there’s always a right price depending on the pricing strategy followed by the operator. Optimal pricing can be used to maximize profit through determining empirically the current clients de-positioning (that is, clients paying more that they should according to the existing plans and their traffic pattern), and defining corrective pricing measures to retain clients and stimulate ARPU levels.

There are two key questions for all mobile telecom operators:
• Which is the premium tariff cost that my users are paying, compared with my competitors?
• Can the optimum price per minute —where profits are maximized — be estimated?

Both questions can be solved through a simple, but powerful, tool we use in most of our pricing projects: PRICING HEAT MAPs. So what is this? Heat maps are a graphical representation of the best pricing price available depending on the MOUs consumed and the traffic pattern of consumption. (traffic pattern can be measured in % of net call, off net calls, peak time, off-peak time or a combination of these four variables). An example of it can be seen in the following slide:

Behind this outputs, a deep analytical model is used to 1) model all available pricing plans of the market to study 2) determine the market traffic hypothesis 3) represent the outputs.  The main benefit for the operator is that the market can be rapidly simulated and represented so pricing decisions can be taken very quickly. On top of this, the tool will help them to simulate all the potential pricing options once there’s a minimum historic traffic record.

Complex problems, simple tools, good decisions.
Best regards

About this entry