Distribution evolution
by David Aitken

The mobile telecommunications industry is undoubtedly one of today’s fastest evolving telecommunications industries. The pace and vigour of change is being driven by the mobile phone manufacturers and Network Operators who are attempting to make the mobile phone an essential piece of consumer/business communications equipment.

The development of new data led information technology services (WAP, GPRS, 3G), the reduction in handset/infrastructure cost and product/platform life cycle and the major focus upon the styling and kudos of particular handsets, has led to an exceptional level of consumer demand for the latest cutting edge technologies and services.

The distribution industry has evolved alongside the mobile market development with CellStar and other major distributors of mobile equipment, having significantly extended their services and role within the market. When CellStar commenced operations in 1981, the role of the distributor was to be a key manufacturer’s partner providing a retail handset distribution platform. Times have changed. Network Operators, manufacturers and retailers demand facilitators of mobile services, not purely ‘box shifters’. As a result CellStar and other major distributors offer a wide array of value added services geared specifically to obtain and retain subscribers on behalf of numerous diverse partners.

Essentially all of the facilitation and services that major distributor’s partners demand, wherever they are in the chain, revolve around four basic market drivers: retaining core business focus; acquiring new quality subscribers; retaining existing quality subscribers; increasing ARPU (average revenue per user).

Retaining Focus

Major distributors provide services designed to deal with areas that are non-core for the partner. This allows them to focus upon their core operations and objectives. For example, generally Network Operators do not want to handle mobile equipment, however, it is seen as a necessary tool to achieve their subscriber acquisition, retention and profitability objectives. CellStar provides end to end product expertise, distribution, return and repair platform on the Operator’s/Partner’s behalf.

Customer Acquisition

Customer service levels are increasingly paramount to acquiring and retaining new subscribers within an ever-maturing world-wide market. Therefore, when a distributor facilitates a service on behalf of a partner it is essential that the partner has complete transparency of the operations performed. CellStar has developed an internet-based window to CellStar called NetXtreme. This allows the partner to observe and run reports on all sales, operations and customer service processes carried out on their behalf on line in real time. In order to drive new product/service awareness, general knowledge and special incentives, hence new customer acquisition, major distributors work with Network Operators developing targeted direct response marketing programmes. These can be Business to Business or Business to Consumer programmes as follows:

Business to Business (B2B)

One direct B2B method is the use of comprehensive catalogue programmes. CellStar would select a target market, for example corporate customers, with a niche customer branded products catalogue geared to differentiate the Network Operator’s/partner’s offering.

Business to Consumer (B2C)

Combining product knowledge and target market awareness, CellStar develops unique Network Operator equipment packages geared to high spending consumers. For example, a Panasonic handset was exclusively re-packaged for one of Europe’s leading Network Operators with a re-designed box including Gucci perfume. This was targeted at husbands who would purchase a phone for their wives at Christmas but wanted to demonstrate that a little creative, caring thought had been given to the selection process. This network promotion sold 25,000 units and was Europe’s most expensive pre-pay product with an equivalent price of $250.

Through sales and marketing programmes, Network Operators and manufacturers create ‘Demand Push’ via their own advertising and brand development. CellStar helps to enhance this position by creating a ‘Demand Pull’, particularly targeted at bringing the end consumer onto the Network. This is done via national press advertising; Insert/Affinity Partner Programmes, using companies who already have a proven and profiled customer base, for example, catalogue companies, credit card companies, major supermarket chains, music clubs etc. Once the customer profile is defined, they are targeted with a tailored offering to suit their requirements and desires. CellStar carries out all of the creative, artwork and production of the programme. The programme is monitored throughout as the complete fulfilment process is performed.

Major distributors can offer Network Operators Consumer Acquisition and Activation Programmes. This is a complete preparation of the phone i.e. insertion of the SIM card, preloaded customer care numbers, charging and insertion of the battery; complete preparation of the phone box i.e. extra accessories, welcome packs and programming. The whole concept of the Acquisition/Activation Programmes from CellStar’s perspective is that if all of the barriers can be removed for the end consumer to commence using their mobile phones, then it will engender loyalty and increase sales with the Network Operator.

Customer Retention

CellStar’s ‘Advanced Ordering System’ (AOS) provides an on line partner branded ordering system for the subscriber. It gives a comprehensive list of products and covers all areas of shipping, billing and order tracking. The subscriber is provided with extensive product availability at discounted prices dependent upon revenue spend with the partner. The higher the spend the lower the additional equipment price. The arm chair availability of the latest cut-price equipment provides significant customer satisfaction and loyalty to an increasingly Internet focused audience.

A portal concept helps to retain customers. CellStar has created a vertical portal as part of the e commerce strategy. This can be completely customised to the network operator and will increase the use of WAP/GPRS services for increased handset revenue. The key to the portal is its intelligent ability to perform comparisons and guide the user towards information based choices, all whilst actively using the handset.

There is a definitive positive correlation between increased accessory spend and ARPU. Major distributors can create customised genuine branded accessory catalogues for Network Operators. This is targeted via mail to corporate and SME customer bases with order facility via telephone, fax, Internet, email or post. Examining the Network Operator’s existing subscriber base by specific IMEI number prefix can target specific accessories to chosen product groups. Packaging additional accessories with the handset package not only creates new incremental business channels and engenders loyalty, but also gives rise to increases in ARPU. CellStar and other major distributors redesign traditional product offerings to incorporate additional value and targeting functionality, whilst ensuring that subscriber retention spend is kept to a minimum.

Insurance Replacement Schemes are offered to Network Operators. This is a complete replacement programme eliminating exposure to churn at the critical time in end users life with the Network i.e. when the handset is lost, stolen or broken. It is at this time when this inclination to churn from operator to operator is at its highest. CellStar’s promise of a fast, effective customer focused solution can be invaluable.

Loyalty rewards programmes aid in the successful retention of subscribers. Dealers and ultimately end users are issued with points based on connections gained or airtime minutes used. A catalogue is then produced and distributed with examples of prizes that can be exchanged for points. CellStar manages schemes seamlessly end to end from the partner to production and logistics execution. Value added programme “Box Insets” can engender additional loyalty and turn a potential negative situation into a positive one for the end user e.g. extended warranty offer, recommend a friend offer or a Pre-Pay voucher may be inserted into the box to engender loyalty.

As can be seen, the major market players have demanded a significant evolution of the distributor within the mobile market. Only the true global thinking, forward planning, service orientated facilitators will survive in an ever rationalising, maturing marketplace. In today’s mobile market, the ever-increasing speed of change does not provide a few opportunities for many, but many opportunities for few. CellStar is one of the few.