marketing telecom services to small businesses: the bundling paradigm november 12, 2000

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.


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.


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


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


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..


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





Option 3• 50 transactions • 30 items deposited • $3,000 cash






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


Bundled services for small businesses-Telecom


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


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.


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


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


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


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.


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.


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.

marketing telecom services to small businesses: the bundling paradigm november 12, 2000

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