www.lirneasia.net cost cutting strategies at the bottom of the pyramid the sms story, missed calls,...
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Cost Cutting Strategies at the Bottom of the Pyramid
The SMS Story, Missed Calls, and others
Lorraine Carlos [email protected]
LIRNEasia Media Workshop: Singapore 28 February 2007fieldwork by funded by IDRC
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Agenda
Research methodology & key findings: Harsha de Silva
The SMS story, missed calls, and others Lorraine Carlos Salazar
The next billion customers Ayesha Zainudeen
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General ‘cost cutting’ strategies due to high cost perceptions… SMS
Second-hand mobile handsets
Missed calls
Prepaid subscription
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It’s true: Philippines is the SMS capital of the world
Lack of meaningful information? Of local-language capabilities on handsets? Lack of meaningful information? Of local-language capabilities on handsets?
Use of SMS
50%
35%
60%
100%
30%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pakistan India Sri Lanka Philippines Thailand
% o
f m
ob
ile
ow
ne
rs w
ho
us
e S
MS
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Who types the SMS?
Pakistan IndiaSri
LankaPhilippines Thailand
I type my own SMS
77% 88% 92% 99% 98%
Someone else types the SMS for me
23% 12% 8% 1% 2%
Lower literacy levels in Pakistan & IndiaLower literacy levels in Pakistan & India
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Reason for not using SMS
0%
20%
40%
60%
80%
100%
ma
le
fem
ale
ma
le
fem
ale
ma
le
fem
ale
ma
le
fem
ale
Pakistan India SriLanka
Thailand
% o
f m
ob
ile o
wn
ers
at
BO
P
Other
None of my contactsuse it
I do not know how touse it
Key barrier to SMS use among non-users
Pakistan India
Sri Lanka
Philippines Thailand
I do not know how to use SMS
79% 66% 39% n/a 83%
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Frequency of SMS use
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pakistan India Sri Lanka Philippines Thailand
% o
f m
ob
ile o
wn
ers
at
the
BO
P
Less than once a month
Once a month
Once in tw o to three w eeks
Once a Week
Once in tw o to three days
Daily
75% at BOP use SMS on a daily basis
Filipino SMS use aided by language advantage, and driven by high cost of use?
75% at BOP use SMS on a daily basis
Filipino SMS use aided by language advantage, and driven by high cost of use?
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Urban vs. rural SMS use
Use of SMS
Urban Rural
Pakistan 55% 39%
India 48% 40%
Sri Lanka 51% 63%
Philippines 100% 100%
Thailand 49% 26%
Anomaly in rural Sri Lanka…Perhaps to do with prices, or the outdated def’n of urban and ruralAnomaly in rural Sri Lanka…Perhaps to do with prices, or the outdated def’n of urban and rural
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Why so much SMS in Philippines?
cost-cutting through SMS, missed calls, and more…
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General ‘cost cutting’ strategies due to high cost perceptions…
SMS
Second-hand mobile handsets
Missed calls
Prepaid subscription
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High expected per minute costs
Expectation of the cost of a one minute local call (US cents)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pakistan India Sri Lanka Philippines Thailand
% o
f B
OP
Betw een 21c - 35c
Betw een 16c - 20c
Betw een 11c - 15c
Betw een 6c - 10c
Betw een 2c - 5c
Less than 1 cent
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…especially on mobile
Expectation of the cost of a one minute local call (US cents)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Mobile owner Fixed owner* Non-owner
Philippines
% a
t B
OP
Between 21c - 35c
Between 16c - 20c
Between 11c - 15c
Between 6c - 10c
Between 2c - 5c
Less than 1 cent
*low base
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India Sri Lanka Philippines
PackageBharti AirTel
Dialog KIT Smart TnT
USD USD USD
Calls/minute
Outgoing on net 0.02 0.06 0.11
Outgoing off net/fixed
0.04 0.06 0.13
SMS/message 0.03 0.02 0.02
Ratio to SMS
Outgoing on net 0.7 3.5 5.5
Outgoing off net/fixed
1.3 3.5 6.5
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High expected initial cost of getting connected
Expected cost of a new phone by non-owners
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pakistan India Sri Lanka Philippines
% o
f n
on
-ow
ner
s at
BO
P >USD 176
USD 146-175
USD 116-145
USD 86-115
USD 56-85
USD 26-55
<USD 25
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Handsets: brand new vs. second-hand
36%28% 28%
40% 34%
64%72% 72%
60% 66%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pakistan India Sri Lanka Philippines Thailand
% o
f m
ob
ile o
wn
ers
at B
OP
USD 0
USD 20
USD 40
USD 60
USD 80
USD 100
USD 120
USD 140
USD 160
Ave
. pri
ce p
aid
fo
r h
and
set
using second-hand using brand new
ave.price paid for second hand ave. price paid for brand new
‘Cost cutting’ via use of second hand mobile handsets at half the price!
More Filipinos use second hand phonesMore Filipinos use second hand phones
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‘Cost cutting’ via missed calls
Use of 'strategies' to minimise call costs
0%
10%
20%
30%
40%
50%
60%
70%
Make calls at off-peak hours
Use of missed calls
Use phone as an incoming deviceonly
Mobile to mobile calls only
Fixed to fixed calls only
Pakistan India Sri Lanka Philippines Thailand
High miss calls in the Philippines, less in India where call prices are low
High miss calls in the Philippines, less in India where call prices are low
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Use of 'missed calls' to minimise communication costs
0%
10%
20%
30%
40%
50%
60%
70%
Pakistan India Sri Lanka Philippines Thailand
% o
f B
OP Male
Female
Missed calls more popular among male mobile owners in South AsiaMissed calls more popular among male mobile owners in South Asia
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‘Cost cutting’ via prepaid connections
Pakistan India Sri Lanka Philippines Thailand
% of mobile owners at BOP
Prepaid mobile connections
99% 95% 92% 99% 96%
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Reason for choosing prepaid (rather than post-paid)
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pakistan India Sri Lanka Philippines Thailand
% o
f p
rep
aid
mo
bile
ow
ner
s at
BO
P
Other
Lower per-minutecharges
No billing procedures
No monthly rentalcharge
To controlexpenditures
Prepaid helps to control expenditurePrepaid helps to control expenditure
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How often prepaid mobile account is topped-up
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Pakistan India Sri Lanka Philippines Thailand
% o
f p
rep
aid
mo
bile o
wn
ers
at
BO
P
Twice a week or more
Once a week
Once in two weeks
Once a month
Once in 2 months
Once in 3 months
Less often than once in 3months
Expenditure control evidenced by infrequent top-ups in PK, IN, LK & TH
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In sum…
High price expectations lead to adaptive cost-cutting measures – which in turn creates a way of life in the Philippines and in the other countries... SMS is now a way of life in the Philippines
BUT, this is not a bad thing: as it is driving affordable access at the bottom of the pyramid
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Ownership and GDP per capita (USD, PPP)
23%
9%
22%
60%
11%
23%
7%
14%
64%
81%
59%
38%
23%
76%
18%
0%
10%
20%30%
40%
50%
60%70%
80%
90%
Pakistan India Sri Lanka Philippines Thailand
% a
t bo
tto
m o
f pyr
amid
0
1,000
2,0003,000
4,000
5,000
6,0007,000
8,000
9,000
GD
P p
er c
apita
, US
D (P
PP
)
Own a mobile Own a fixed phone
Own nothing (but use something) Per Capita GDP PPP (US $)
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Thank you for your attention