Will dynamic discount tariffs succeed in Africa?

Reading today that Safaricom has launched a tariff that is expected to renew price wars in Kenya (something more than often and common in the industry), I would like to share our experience in value propositions definition around dynamic discount tariffing.

As explained before in our previous post related to what operators are doing with their excess of capacity, Safaricom has launched a tariff to allow its subscribers to have special discounts based on time of calling and location. This offer is launched to fight in am existing pricing war in the country, being expected to send competitors back to the drawing board.

As referred by Michael Joseph, Safaricom’s Chief Executive Officer, “This great invention will give our prepay customers real value for money through exciting discounts in these tough economic times when everyone is looking for authentic bargains”. Is this a real telecom bargain? It might be for the customer… but, what about the operator?

This technology lets operators discount call rates based on traffic in a particular cell, introducing a new way to price telecom services based on capacity excess per cell, number of customers per cell and pricing levels per plan per customers. Operator benefits include reduced churn and network congestion, and increased total revenues from existing network infrastructure investments.

While within network calls in Kenya (and in most of the African countries) has continued to drop from time to time, cross network calls are still considered expensive. As a result, the battle for subscribers has always been fronted by promotions and value addition service by network operators and my friends, dynamic discount tariffing is one of these top-notch services that, correctly used, can mean a significant differentiation factor for any operator.

Safaricom is not the first operator to launch this service. First time I saw it was while working in MTN, where I saw the amazing effect of the service in South Africa and Uganda. The service itself is really simple but it’s difficult to explain and communicate to the customer in an accurate manner. On top, deep economics should be done behind the service to avoid cannibalization, traffic drop in peak hours or optimism in customer acquisition.

After deploying the service in different countries, I have decided to put some slides with some of the reflections to consider before and after launching the service. Hope it helps to those that are planning to launch, or those like Safaricom, that have recently launched it to the market. My best wishes for them.

Best regards. Eid Mubarak. عيد مبارك

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