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Consumers are ready for mobile converged services but may be unwilling to pay a premium for them: KPMG study7 June 2006
The time has come for service providers to switch revenue focus from consumers to include third party advertisers and sponsors, according to KPMG's Consumers and Convergence report, launched today in Canada.
The survey of 3576 cellular phone owners worldwide revealed that consumers see absolutely no limits in terms of what services can be offered via their mobile handsets. It also found that 96 percent of North American respondents are in possession of a cellular phone, and 24 percent spend an hour or more each day on their mobile handheld devices.
The report clearly states that simply attempting to use converged services to generate more revenue from consumers using the traditional subscription model will not work. Service providers would find themselves offering upgraded content without necessarily being able to secure the premium subscription rates for which they would hope. Instead, service providers need to continue focusing on reducing churn while capitalizing on the appetite for converged services using revenue earned from new partners. These partners include marketing organizations that provide subscribers with personalized, location-based offers and content providers that deliver short-duration content directly to subscribers' mobile handheld devices.
Nathalie Bernier, KPMG Canada's National Industry Leader, Information, Communications and Entertainment, explained: "Mobile service providers will need to stop thinking of converged services purely as a revenue booster. Instead, they should consider them as another churn reduction tool, allowing them to present a stable, loyal subscriber base which will be attractive to advertisers and digital commerce partners. In its most basic terms, it's a case of moving from a "wallet share" model - aimed at extracting more cash from each customer - to a "wallet sharing" model. The latter model will allow service providers to use these enhanced, converged services as a means to deepen their customer relationships and allow other parties to reach their customers."
Survey highlights
A key driver behind this shift is the typical customer's reluctance to pay a premium for converged services. The survey found that in North America:
- 37 percent of consumers maintained they would not pay a premium for
converged services
- 20 percent indicated they would be willing to spend only 10 percent
more than they do now
Considering that this is a generation of consumers raised in the Internet era, where content is perceived as being free, and the competitive telecom environment, service providers need to follow the Internet example themselves. What this report reveals is that the "wallet sharing" model is no different from what major Internet search engines have been doing for years: providing a service offering so compelling that it attracts hundreds of thousands of eyeballs which in turn are attractive to marketing organizations and content providers.
What does this mean for the Canadian customer?
The survey presents a picture of a North American customer who is very comfortable with existing converged services such as web surfing, instant messaging and interactive gaming. Customers also listed the cellular phone as the means by which they preferred to consume all types of media (except music) while traveling. This indicates a pre-conditioned comfort level with the mobile handheld device as an all-purpose multimedia terminal, a positive sign for convergence service providers. This means there is tremendous opportunity for North American consumers to benefit from gaming, electronic coupons, location-based services and the short-duration video content they want, such as news, movie trailers and short video clips.
According to the report, 90 percent of North American consumers stated a preference for a single service provider and 89 percent desired a single, consolidated bill for all the services they use. "Wallet sharing" will allow the parties involved to generate revenue while providing the unified bill consumers want without additional cost.
Ms. Bernier concluded: "These are interesting times for mobile service providers. Our survey respondents exhibited an overwhelming preference for a single service provider. However, as converged services become an increasing reality, there may only be room for a few players "owning" the relationship with the customer. It is likely to become increasingly important to manage this change of business model correctly in order to earn the right to own those relationships."
Service providers will need to complement the traditional subscription model with a revenue model based on presenting a loyal subscriber base to marketing organizations and content providers. Marketing organizations will need to invest further in effective, personalized and location-based mobile advertising opportunities (which already have a click-through rate that is four times higher than Internet-based advertising). Finally, content providers should focus on delivering short-duration content to mobile handheld devices.
KPMG LLP commissioned Taylor Nelson Sofres to undertake a global consumer convergence survey. A total of 3,576 interviews were conducted in Asia- Pacific, Europe and North America with consumers who own and use cellular phones, in order to develop a detailed perspective on the experience base, attitudes, behaviours and preference associated with various electronic information and entertainment services, particularly as might be delivered via mobile handheld devices.
KPMG LLP is the Canadian member firm of KPMG International, the coordinating entity for a global network of professional services firms, providing audit, tax, and advisory services, with an industry focus. The aim of KPMG International member firms is to turn knowledge into value for the benefit of their clients, people, and the capital markets. With nearly 94,000 people worldwide, member firms provide audit, tax, and advisory services from 717 cities in 148 countries.
For further information: Julie Bannerjea, Senior Manager, Corporate Communications, KPMG, Tel.: (416) 777-3243, Cell: (416) 527-1804; Roch Landriault, Media relations, NATIONAL Public Relations, Tel.: (514) 843-2345, Cell: (514) 249-4537
Source: newswire
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