Data-backed customisation can help telcos keep customers loyal

WHEN it comes to keeping telco subscribers loyal, offering them lifestyle perks has become all too common. Not that they are unwelcomed; I enjoy getting a free movie ticket now and then, as much as the next mobile phone subscriber.

But StarHub's new rewards plan, unveiled on Monday, has raised the ante by tailoring perks and services to how much their customers spend on their StarHub services - another step in the "gamification" of consumer services.

With this toss of the gauntlet into a crowded fray, a targeted fight for higher-value customers is emerging as a fresh tactic in the telco price war.

Given how crucial return customers are across the consumer sector, it's a no-brainer for telcos to team up with other retailers and merchants.

For instance, Singtel has a weekend movie ticket tie-up with Cathay cinemas, while M1's partner is Shaw.

Helped by its purchase of food review portal HungryGoWhere for S$12 million in 2012, Singtel can also woo subscribers with dining discounts.

Even newbie Circles.Life was no slouch in playing this game when it dangled deals with online retailers like Shopee, Carousell, Zalora and defunct bicycle rental operator oBike to attract defectors from incumbents, although its partnerships have tapered off since.

But promotions are a low-hanging fruit and eat into margins. Back when Circles.Life gave users extra data if they paid for their plan with a DBS Bank or POSB card, co-founder Abhishek Gupta pegged the cost at up to S$8 million, taking into account marketing expenses and the lost revenue from discounts.

Growing - or maintaining - market share by offering cheap services to customers is well and good, but the prolonged falls in average revenues per user (ARPUs) have made telcos sit up and pay more heed to getting their customers to loosen their purse-strings.

Circles.Life's Mr Gupta told The Business Times earlier this year that the mobile virtual network operator's ARPU is "driven by the fact that we are focused on a segment that likes to spend, and we're able to over-serve them", while MyRepublic chief executive Malcolm Rodrigues said that "we're trying not to play in that S$15, S$20 ARPU space... we've always been 'premium product, premium price'".

StarHub's latest promotions have the usual S$1 offer for snacks and drinks, as well as one-for-one Dunkin' Donuts redemptions, discounts at travel booking website Agoda and local fashion brand Love, Bonito.

But it is also making an effort to differentiate customers of varying spending levels. StarHub has unveiled "membership tiers" for post-paid, pay television and home broadband customers, with perks like free on-call network maintenance to reward those spending over S$200 or S$350 a month for six straight months.

Still, the redoubled efforts to keep higher-value customers' spending have not made the price war go away.

StarHub used to offer preferential services only to those who spent at least S$350 - but the launch of a mid-tier status with a S$200 threshold cuts directly at the knees of its rival's Singtel Prestige programme, which requires S$250 a month for eligibility.

Even when the price war comes to its logical conclusion, when the dust settles and the market consolidates, structural changes in the consumer telecom industry, such as over-the-top services and media content streaming, suggest that the customer value predicament will not ease up.

So, armed with their treasure trove of data, telcos are taking notes from other businesses that have also run headfirst into a disruptive landscape.

Singtel's venture capital arm, Innov8, last year led a Series B funding round of A$22 million (S$22.1 million) for Sydney-based Data Republic, which offers the technology to share data securely and privately.

Early funder Qantas had already tapped Data Republic's services for its Red Planet digital marketing business, and a spokesman for Singapore Airlines, which also took part in the Series B round, said that it, too, could avail itself of Data Republic's services "to obtain a better understanding of customers' needs and preferences".

Carefully calibrated or even individually customised promotions backed by the insights from sound data are a more appealing way for telcos to stay relevant than adopt one-size-fits-all discounts in a race to the bottom that ultimately take a chunk out of the bottom line.

As much as I am tempted by offers of cheap doughnuts, more investments like Data Republic's will be needed to keep customers biting.