Marketing Telecom Services to Small Businesses:The Bundling Paradigm
November 12, 2000
Eugene Bala
Eugene Bala The Bundle Paradigm
The Bundle Paradigm
• In today's telecommunications business, marketing capability and business functionality are more important than the hardware platform.
• Combining voice and data traffic over a single digital subscriber line enables telecommunications service providers to deliver integrated bundled services.
• One way to lock in customers is by offering a single, convergent bill that includes bundled products and services.
• Service providers are determined to offer bundled services creating a need for convergent billing systems that can handle complex requirements.
Eugene Bala The Bundle Paradigm
What defines a bundle ?
A product bundle is characterized by the grouping of two or more productsand services into an integrated offering that provides "added value.”
A simple example : McDonald's Value Meal offering, which bundles a sandwich,fries, and drink at a lower price than if the items were purchased separately.
A good bundle should provide a mutually beneficial relationship betweenthe buyer and the seller.
Eugene Bala The Bundle Paradigm
What makes a good bundle for the customer?
For the customer, a good bundle will be seen as providing additional valueon a number of fronts:
• added convenience
• better value
• enhanced performance as a result of integration
Eugene Bala The Bundle Paradigm
What makes a good bundle for the company?
For the company, a good bundle is one that increases sales at a lower delivery expense and simultaneously builds profits by attracting and retaining customers.To do this, the bundle should provide the opportunity to accomplish the following:
• Create customer bonding
• Build a deeper relationship with additional products
• Enhance the brand image
• Build targeted market share and share of wallet
• Realize cost savings
• Achieve premium pricing
•
The Bundling spectrumUnbundled Bundled
Degree of Integration
Offerings
Relationships
Customer’s ExpectationsLower Higher
Two or more services sold separately
Services offeredseparately or part of anoptional package
Services offered only as package with added value implied or stated
Travel servicespurchased without an agent
Microsoft Office addon software components
America Onlineno-option package
Separate businessrelationship for eachservice
Relationship integrated to degree determinedand chosen by purchaser
Single integrated relationship
The Bundle Paradigm
Eugene Bala The Bundle Paradigm
Bundled services for small businesses - Banking
• Today, most financial services providers offer consumers combined statements;
• The small business owner needs ready and frequent access to information on the status of funds, the capability to move funds between accounts, and more day-to-day tools for cash management and investments than the average consumer
• Fleet introduced the Corporate One bundle in 1994 to build deeper businessbanking relationships. At its core are the most frequently requested business banking products
• As with the bank's consumer offering, the most powerful and useful manifestation of this integrated business bundle is the combined monthly statement combined with the added value of a free ATM/debit card and premium interest rates on qualified deposits..
Eugene Bala The Bundle Paradigm
Bundled services for small businesses-Banking
Option 1• 10 transactions • 5 items deposited • $1,000 cash
deposited • electronic banking
access Teller Service
Monthly Plan Fee: $10.00
Non -Teller Service Monthly Plan Fee: $5.00
Option 2• 20 transactions • 10 items deposited • $2000 cash
deposited • electronic banking
access Teller Service
Monthly Plan Fee: $15.00
Non -Teller Service Monthly Plan Fee: $10.00
Option 3• 50 transactions • 30 items deposited • $3,000 cash
deposited • electronic banking
access Teller Service
Monthly Plan Fee: $35.00
Non -Teller Service Monthly Plan Fee: $25.00
Eugene Bala The Bundle Paradigm
The complete telecom bundle for small businessCombining voice and data traffic over a single digital subscriber lineenables telecommunications service providers to deliver not just bundledservices to the small business market segment,but also integrated bundled services
Eugene Bala The Bundle Paradigm
Bundled services for small businesses-Telecom
Eugene Bala The Bundle Paradigm
The three-ring customer-fulfillment process
BundleDelivery
BundleDesign
BusinessStrategy
The bundle of services
Internet ande-Commerce
Services
Wireless
Cell phones Pagers
Long Distance and Toll Free
Data Services Local Voice
Eugene Bala The Bundle Paradigm
What may cause the bundle strtegy to fail?
• As with any marketing strategy, the bundle delivered should not overpromise or underdeliver.
• Failure is likely when a bundle's inherent value-cost savings and enhanced performance cannot be clearly demonstrated and delivered to the customer.
• Weak value or benefits (perceived or actual) beyond those offered by thesingle products acquired separately or compared to competitors' offerings.
• Weak relationship with the existing customer (if the basics have not beendelivered well, the customer is not likely to deepen the relationship).
• Complex or confusing bundle (the benefits should be obvious and realizingthose benefits easy).
• Less selection or fewer options than those available through a la cartepurchases.
Eugene Bala The Bundle Paradigm
ATT’s bundle pricingObjectives
• track incremental features and services added to the bundle - work pricing solution
• end-user objectives• market chain objectives• competitive objective
• internal objectives - corporate objectives
Eugene Bala The Bundle Paradigm
ATT’s bundle pricing The market challenge
• What is the current pricing for individual and bundled services ?• What should go in the bundle of services, and how?
The internal challenge• Target costing in price setting (might determine VC, is it significant ?,
etc)• What end-users and chain members will receive what price for what
technology?• Determine the EVC (economic value to the customer) of current and
potential new solutions
Eugene Bala The Bundle Paradigm
ATT’s bundle pricing
IncrementalValue
Purchase Price
Start-up costs
Post Purchasecosts
EVC
Individualservice
Bundle of Services
ATT’sCompetitiveAdvantage
ATT’s Cost
Customer inducement
ATT’sprofit
Selling price
SBS economics ATT economicsPricing to share benefits
Eugene Bala The Bundle Paradigm
ATT’s convergent billing
Objectives• lock in customers is by offering a single, convergent bill that includes bundled
products and services
• to become total telecommunications providers.
• facilitate a variety of services now and in the future.
• help ATT react to changing market conditions and ultimately overcome the revenue-sapping effects of customer churn.
Eugene Bala The Bundle Paradigm
ATT’s convergent billing
The billing system must address 3 network issues:
• develop business systems based on relational databases that support electronic interfaces that capture customers' requests;
• capture customer-generated events at the switch and at the server, rating the events, calculating the bills, and feeding the data back to the customer via the preferred medium;
• meshing customer care with service deployment so a company can developa single image of its activities.
Eugene Bala The Bundle Paradigm
ATT’s convergent billingDeep behind the bill itself
• Given the investment in legacy computer systems at ATT’s component companies, the chosen billing platform must be able to work effectively on different platforms.
• In today's telecommunications business, marketing capability and business functionality are more important than the hardware platform.
• Adding new business software to the existing enterprises, or even to a new enterprise, can be arduous and time consuming.