Telco Pricing Introduction

Sharing Session

2013

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Price in Marketing Mix

It quantifies value and determines profit

It expresses the value of the exchange relationship

Price is.

Place

Promotion

Price

Product

Cost

Cost

Cost

Revenue

Pricing is main element in marketing mix who contribute in revenue for company

Changes in price are more readily implemented than the other 3Ps

Product - major re-investment

Place - find and convince new distributors

Promotion - long time scales/involves outside agencies

MAXIMIZING PROFIT

Pricing objectives:

Marketing Mix:

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What is the Customers Want from Us (Company)?

Price is not always the most important factor in influencing sale

The customer considers what he/she gets for the price paid; the seller must offer value

What causes them to conclude that they paid too much or got a great deal

Some costumers are interested in getting low price, while the other more interested in quality, brand, etc

Consumer are often prepared to pay more if they expect to get added value

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Value & Brand

Hammer Rp. 199,000

Zara Rp. 649,000

Versace Rp. 1,999,000

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Value & Brand

Air Asia Pramugari Cantik Murah Nggak pakai bagasi

Lion Air Pesawat baru Sering telat Sering insiden

Garuda Indonesia Jarang telat Dapat makan Pramugarinya senior senior

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How to Measure??

Males & females

12-65 years old

From all SES (Socio Economic Status)

Current HP users or potential users (plan to buy HP in next 6 months)

Respondents Criteria

Starting Q1 2011, the study covered 22 urban cities and 14 rural areas in 10 Telkomsel regional

The data is then projected into national figures

The total target respondents is now 11,675 respondents

Coverage Areas

Face to face interviews were conducted at respondents home

Fieldwork period : July 2013

Stratified random sampling with individual listing method was applied

Additional booster on main card users was applied to have sufficient sample base for analysis

Data Collection

Actual Interviews : 11,836 respondents

HP Users : 10,292 respondents

Potential Users : 1,544 respondents

Sample Achieved

Survey is conducted regularly to measure consumer perception to our product value. We conduct the survey every quarter.

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Result

Survey is conducted regularly to measure consumer perception to our product value. We conduct the survey every quarter.

PROFILE MOTIVES

Network 33 +13 38 +14

Bonus & Rewards 19 -2 15 -2

Cheap SMS Tariff 17 -3 15 -3

Cheap Voice Tariff 14 -1 17 -

Cheap Data Tariff 5 -1 3 -1

Features & Facilities 4 -5 4 -4

Brand Image 4 +1 3 -1

Cheap Starter Pack 2 - 2 +1

Reliable Data Connection

1 -2 1 -2

Attractive Ads 1 - 1 -2

%

Teens Adults 12-19 y.o. 20+ y.o.

% Responses Share In %

HP Users Profile

By SES

SES A

SES B

SES C

SES D

SES E

12-14 y.o

15-19 y.o

20-24 y.o

25-34 y.o

35-44 y.o

45+ y.o

Male 53%

Female 47%

Urban 56%

Rural 44%

5

16

44

23

12

26

22

13

19

8

12

52

48

53

47

Index %

-1

-6

-7

+5

+9

+5

-6

-3

-2

-2

+7

+3

-3

-3

+3

Gap

Avg : 25.6 yo. Avg : 33.2 yo.

Gap Gap

Other result: Mobile phone

penetration Demographic Profile Barrier to use

handphone Multiple Card Usage Cross Brand

complimentary analysis

Sample Questionnaire

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Price Value Mapping

Premium Value

Rip-Off

Overcharging

High Value

False Economy

Medium Value

Super Value

Economy

Good Value

Pro

du

ct Q

ual

ity Product Price

High Medium Low

Hig

h

Med

ium

Lo

w

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PRICING PROCEDURES

Determine the

Objectives

Profiling the Subscribers

Analyze the Competitors

Determine the Pricing

Simulate Revenue Impact

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THREE KEY PRICING ELEMENT

Price Up Case

Price per Minute (RPM)/

Price per SMS (RPS)

Traffic

Menit/SMS Subscribers

RPM and MoU will always show opposite directions. When RPM is increasing, MoU will decrease Oppositely when RPM is decreasing, MoU will increase But it is not means direct loss or addition in revenue

Price Down Case Usually for acquisition

RPM increase MoU is for sure will going down, except in special case

when subscribers is not sensitive with price. Eg. Lebaran, New Year

Active subs maybe will go down Things to note: price up or monetization is not a guarantee that revenue will increase. Too much price up will led to significatn decrement in active subs that in total will result in decrement of revenue

RPM decrease from existing MoU is for sure will going up Active subs must go up Things to note: price down is not a guarantee that revenue will increase. Must compensate with addition in subscriber base.

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PRICE CHANGES/NEW PRICING TRIGGER

Why do we need price changes or new pricing scheme for our subscribers?? There are three things as a triggers why we need price changes or new pricing sheme

Performance Issue Target Gap

We see that there is a gap from our target that cant be reached by usual business. The gap can be everything,

subscriber, revenue, traffic, BEI, etc

Competitor Movement

Competitor launch new product which is we perceived can

be a threat to our product in the market

Special Request

Some ocassion or event need special product, to promote

our brand or to gain specific segment or to help people in

disaster or remote area. Eg: Sail Komodo, APEC, Disaster

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How the Pricing is currently being defined

NEW < 1 Year

RECENT 1 < x < 2

Years

A B

OLD > 2 years

POSITION IN MARKET

1 NETWORK 2

< 50% Utilization

50 70% Utilization

70 100% Utilization

A B C

3 TYPE PP - LONGEVITY SUBS

C

4 SUBS BEHAVIOR

Voice Minded

SMS Minded

A B

Existing Tariff (Customize)

Cloning Market Leader Tariff

Build New Price Scheme

A B C

PRICING TYPE

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Cluster

SIZE AREA APPLIED

Branch A Branch B Branch C

A B C

Data Minded

C

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It creates variation of pricing drivers among product, plan, & regions

Zona Marking: pricing based on cluster. Each cluster may have different pricing for optimization purpose, regional starter pack for acquisition purpose

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch

Sub Branch Cluster

Branch A Branch B Branch C

A B C

Current pricing situation shows different drivers in every subscribers across brand, LoS, and Area

RPM ARPU S/sub RPS M/sub

Area 1

Area 2

RPM ARPU S/sub RPS M/sub

Area 3

RPM ARPU S/sub RPS M/sub

Area 4

RPM ARPU S/sub RPS M/sub

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The market offers a large number of different price plans, complexity is inevitable

Many different price plans in Indonesia across Regions and Length of Stay whose complex tariff structure with multiple bonus/package offers

54 pricing Zones in OCS enable us to set different pricing across cluster

Total 16 Price Plan for simPATI, 10 of them

are having zone based schema

Total 14 Price Plan for kartu As, 11 of them

are having zone based schema

Area 1 : 15 zones

Area 2 : 9 zones Area 3 : 16 zones

Area 4 : 11 zones

Special : 3 zones

Total 54 pricing zones until today inc. 3 special zones

Each price plan can have different tariff schema in each zone

Each additional offer can have different offering schema in each zone

Product pricing consist of combination between price plan and additional offers

4 Zones in 09 17 Zones in 10 26 Zones in 11

47 Zones in 12 54 Zones NOW 60 Zones in EOY

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Granularity is the key for optimization: Pricing based on time, traffic, cluster, and Length of Stay

Many different price plans are offered in the market

o Approximately 30+ distinct price plans for Telkomsel alone, some of which come in multiple geographic variations

o Price Plan also indicates subscribers LoS

Packages and add-on bonuses result in a large number of possible combinations

o Preload Benefit

o XgetY scheme

o Packages, etc.

Moreover, many of the plans are highly complex

More price plan creates more granulality hence create rooms for optimization

Zone based pricing give rooms for different pricing across cluster

By Traffic

By Time

By Cluster

By Price Plan

1

2

3

4

Exploit the Legacy

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Existing price plan in OCS zone based

Total 16 price plan for simPATI, 10 of them are having zone based schema Total 14 price plan for Kartu AS, 11 of them are having zone based schema

Kartu AS

Nationwide

Zone Based

Nationwide

Zone Based

6

3

11

Ekstra, Broadband, Internetan, Seharian, Semalaman, Jagoan Nelpon

Regular, Super, Jagoan Serbuuu

Price Plan # of type

PeDe 4

Freedom Call 7

Gratis Berjam-jam 6

Freedom 2 Choose 3

Puas 2 6

Puas 2 Regional 6

Shuffle 6

New Facebook 2

Facebook 3

Loop 4

Price Plan # of type

Rp. 20 2

Rp. 0 4

Ozone 7

Extra Ampuh 4

Madura 3

Promo Regional 5

Madura 2

Gratis Nelp 30jam 24

New Regional 4

Gratis 100X 8

Gratis 100rb 5

10

Price Plan in Telkomsel

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Assessing the Impact

Two big pricing moves

Launch new product to attract new subscribers

Change existing tariff

Potential additional revenue Potential revenue threat

Competitor subscribers move to our network

Our subscribers move to new product which usually have lower tariff

Our subscribers increase their usage

If we change tariff too high, subscriber will move to our competitor

SIMULATION

Data needed: Duration per call ARPU Subs profile: LoS, place Data usage SMS usage Voice usage Traffic per hour

Market share Recharge transaction Recharge share in outlet Competitor product Handset penetration

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Basic Tariff based on Pricing Zone

Two major system in our IT is involved for pricing:

OCS Reflex

Rating & Billing System All subscribers profile are stored in OCS Responsible rating & billing for all event All tariffs, bonus, package will be created in

OCS OCS will charge subscriber based on LAC-CI &

price plan

Provisioning System Responsible for provisioned package that

purchased by subscribers. Eg, Talkmania, Jagoan Serbu, Blackberry, Flash, etc

Reflex will provision subscribers based on some factor like LAC-CI, price plan, time, etc

In Reflex, LAC-CI are grouped into home. Pricing & offering can be differentiate

between home

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Basic Tariff based on Pricing Zone

How a subscriber is being rated in OCS based on the price plan and pricing zone

HLR/MSC SCP OCS

Location = LAC-CI Location = LAC-CI Location => Zone Tariff => Zone & Price Plan

Based on LAC-CI, OCS will determine pricing zone, and which PP type subscriber will be rated

FR RB

Location => Zone ID Tariff = PPs type based on the zone

CGI Cluster Zone ID Category

51010xx Surabaya 21 Jtm

Regular

51010xy Malang 22 Jtm

Reguar

51010xz Jember 13 Jtm High

51010yx Jombang 14 Jtm

Medium

51010yz Madura 24 Madura

Use Case Subscriber A with PP1 calls from Madura SCP sends the LAC-CI of Madura OCS translated LAC-CI as zone 24 Based on the pricing table, subscriber will be

rated as PP1, type E

Reference Table: 2x per week

Common ID Reference Table Billing and Rating

Type of Changing the Tariff: Moving Cluster to different Zone

ID Creating new type of Tariff in

particular zone Changing the tariff itself

Zone ID PP1 PP2 PP[n]

13 A A A

14 B C C

21 C D C

22 D F B

24 E A E

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Package Tariff and Bonus based on Pricing Zone

How a subscriber is being rated in Purchasing Packages

HLR/MSC Reflex OCS

Location = LAC-CI Location = > LAC-CI LAC-CI => Home (group of LAC-CI) Reflex Home Reflex => Pricing & Offering

CGI Home Service Pricing Offering

51010xx Sibolga TM ON Siang 3500 150+50

51010xy Malang TM ON Siang 3000 100+50

51010xz Semarang TM ON Siang 2500 150+50

51010yx Jabotabek TM ON Malam 3000 50+50

51010yz Malpua TM ON Malam Restricted

Type of Changing the Tariff and

Offering

Creating new Home or splitting Changing Tariff Changing Offering

Reference Table Eligibility Rules Mapping Pricing & Offering

Pricing Catalog Offering Catalog

Offering and Pricing can be mapped by:

LAC-CI (home) Tariff Package Value Registration Time Price Plan

Thank You