The world’s best telcos marketing and pricing strategy is here and is happening now! T-mobile pricing strategy has totally shaken up the telcos market globally with a new value-based pricing strategy: Unlike any telco operator before, T-Mobile’s sole focus is on giving subscribers what they want in their price plans.

 

Unlike Telstra marketing and pricing strategy which made special pricing for the combo packages that includes broadband, TV, Movies and home phone. T-Mobile sets its call rates and packages to cater to the needs of almost every consumer – and at really affordable prices.

 

An added bonus feature for the Telstra subscribers is the mobile data. However, they’ve limited their free data offer to 150GB a month. Once it exceeds the 150GB data cap, the connection will be slowed to 1.5Mbps. Which means customers won’t be able to watch HD video or high-speed applications.  Also, some web pages, video/social media content and some large files might take longer to load after this data cap. For a faster data service (for free), customers on the basic package have to wait for the next billing cycle.

 

With a clever combination of smarter marketing and pricing strategy, T-Mobile has been able to increase its EBITDA margin since implementing its Un-Carrier moves. 

 

In May 2016, for example, T-Mobile offer one share of the company to their most loyal customers. When they did this, their stocks jumped from $39.90 in May 2016 to $66.15 in May 2017. On top of this, the profit margin telecommunication industry also saw an increase of 60%, which is a big return on investment.

 

T-Mobiles adjusted EBITDA margin went from 26% in 2013 to 37% in 2017. While postpaid phone average revenue per user has fallen a bit since then, that number has been steady since 2015.

 

 

 

 

The “Un-Carrier moves” as part of T-mobile Marketing and Pricing strategy

 

Before T-Mobile introduce their value-based pricing strategy – telco pricing was complex and difficult for most of their customers to follow (B2B customers and consumers).

 

The data cap really annoyed subscribers: Excess data was automatically added to the billing of their mobile plans. 

 

Then, in 2015, T-Mobile dramatically simplified its pricing revenue model by providing  Un-Carrier moves.”  Instead of paying for data, subscribers pay for the lines.

 

The ‘pay for lines’ model has been enormously successful and we will explain why in this article. But as change and disruption continue to hit the telcos market, the question is can T-mobile value strategy continue to meet the demands of subscribers? 

 

In other words, are mobile users too fussy to please and too tight to pay more?

 

Mobile users want more of everything – especially unlimited data. However, unlimited data is not something that telco operators are willing to give them for free right now. Many people argue that the time spent using mobile roaming data is enough to keep the telecommunications revenue stable.  

 

However, telco operators are worried about giving away too much data. They are experiencing considerable margin pressure at the moment. They don’t want to give away too much before knowing how this is going to impact them in the long term.  That offering unlimited data requires increased bandwidth to service all their customers. This is why they have to cap the data at 1 gbps so all the users can use the limited bandwidth during the day. But at night time when there is less demand for data and calls, there is unlimited data.

 

The data system works like this; bandwidth is what keeps data moving. From finding information in search engines to video streaming on youtube. Essentially you are downloading data to the device buffer files. Once finished, those buffer files are deleted. The more usage, the more bandwidth is required.

 

That’s why the business strategy for telecommunications companies is to constantly upgrade their network to meet the demands of the users and offer the best deals. This is to keep them from abandoning their mobile plans to other telecommunications companies. 

 

 But when all of the users are online at the same time, the companies add a data cap because they can’t provide 1gbps for them all and at the same time.

 

T-mobile Marketing and Pricing strategy 

 

T-mobile went beyond these pricing methods and their pricing strategy paid off. It heard the gripes of the users and unveiled their Un-carrier rebranding. The Un-carrier provides a single unlimited data plan like unbundling gadgets from the service plans, data cap removal from music and video streaming that would include taxes and fees in its price strategy.

 

The result is 1.1 million more customers after the announcement of the Un-carrier plan, the largest user growth and was named 2014’s Most Innovative Companies.

 

T-mobile is aware it is nowhere near the number of customers Verizon and AT&T has. But it has turned that into an advantage by offering unlimited wireless data and unbundle device payments to its customers.

 

A phone line instead of data

 

T-mobile made promotions like adding a line for free for family, offering couples 55 years and older higher customer lifetime value and lower average customer acquisition cost. T-mobile aims to maintain a stable average revenue per user while pursuing aggressive pricing to attract new users.

 

Demographically speaking, 55 years and older have more credit than the younger demographic group, don’t use much data and rather stay with one provider. It makes sense T-mobile targets older people as they are more profitable and increase telecommunications revenues.

 

While its rival companies are finding to keep their margins profitable by offering higher-priced plans, t-mobile is slashing its price and more value to their plans to entice more customers.

 

Contractless Mobile Plans

 

With gadgets constantly upgrading every few months you are stuck with the outdated one. Making you powerless to change the terms of the contract. But with T-mobile, you pay upfront a portion of the price of the gadget plus the monthly rates. At any time you want to end the contract, you can pay the price of the device minus also the monthly payments you paid already. Thus the full payment is lessened. A flexible plan of T-mobile.

 

This contractless strategy is slowly gaining ground as T-mobile revenues are improving. It allows for flexibility to leave before the normal two years is what the customers are looking for. So strictly speaking they have the T-mobile phone prices without a contract to finish the plan. The only agreement is the payment of the subsidized device. This improves customer relationship with T-mobile.

 

Subscribers found the plans are easy to understand which includes taxes and fees. Added to that is no activation fees. But in terms of performance, if you live in a suburban or rural the coverage is not that good. All in all, T-mobile plans are in harmony with the needs of the subscribers.

 

Overpricing or underpricing?

 

Pricing is what keeps the telco companies attracting their customers. It creates the value of the product and the benefits the customers can get from it.

If overpriced, the products will not perform well in the market whereas if underpriced, the product is unprofitable to the company. It will force the telco to discontinue the product line which results in souring the customer relationship with the company.

 

Key factors to consider  in Your Marketing and Pricing strategy:

 

  • In cost-plus pricing, calculate the product cost and add a profit margin. A fairly easy method but without the customers’ valuation. Of course, a company needs to increase its revenue but should be only as a final option.

 

  • Competitive pricing is bringing a lower price against the competitor or offering an added benefit for the same price as the competitor. Announce why your service has more value due to its brand image, more bandwidth and network coverage. The possibility of a price war could erupt between the telco companies to gain market share. This will lose customer value and decreased profits by all of them.

 

  • Value-Based pricing. The customer decides what should be the fair price. The points to consider are the customers’ needs and how they value the options you are offering. The price is based on the surveys on usage, subscription, satisfaction and time value impact.

 

 

Once value pricing has been established. Take the value proposition to build a meaningful price ladder.   The end result is the final price that assures both profit along with customer satisfaction.

 

To assess the impact of the different pricing schemes, we use the Customer Lifetime Value (LTV) to see at the short and long term effects of the customer’s satisfaction with the service.   

 

 

 

There are three key levels that influence the customer to continue:

 

  • Acquisition time – once the customer receives the phone set, usage and lower price, the buyer will try it if the service is satisfactory.

 

  • Raise time – more options to the buyer on top of the present package more suited to his profile.

 

  • Retention time – nearing expiration of the subscription period. The company offers a renewal of the same service.  Aside from a new phone, special discounts or more usage time. The company, in turn, gets data on his phone habits and where he goes browsing.

 

The way the telco companies keep their profit margin is by subsidising smartphones with data plans. Admittedly, no one wants to pay the full price of the smartphone which could be in the hundreds if not thousands of dollars. They offer the device at a very reduced price or free provided that the subscribers keep using their plans for a duration of time under contract.

 

So the user pay the companies a subscription rate to use their service. The telco companies slap you with a hefty early termination fee (ETF) if you wish to terminate your contract early. This is to cover the cost of the subsidy on your device.

 

 

 

Implications

 

  • T-mobile marketing and pricing strategy are based on what the subscribers wanted in their plans. Removing the data cap and purchasing the line instead of the data plan.

 

  • Its unlimited plans called the Un-carrier plans is gaining market share in the telecommunications industry. They are a telco company that is in tune with their subscribers and offer them affordable plans.

 

  • T-mobile introduces the contractless mobile plans which provide flexible payments. Unlike other plans, you can opt to buy the phone with the previous payments to offset the balance.

 

  • Other telco companies are catching up to T-mobile marketing strategy. Now the bigger telcos are noticing T-mobile unlimited plans. Hence, their future pricing and marketing strategy will include unlimited data instead of capping the data flow.

 

 

Conclusion

 

  • T-mobile is changing the way telco companies are servicing their subscribers.  Many of the telcos companies have neglected their subscribers and have not given them what they want: more data. The telcos need to address the concerns of their subscribers if they want to keep them using their plans.

 

  • Subscribers like unlimited data, special discounts (for older subscribers) and flexible payments. They want the plans to be transparent and they want to change their phones when it’s discontinued.

 

  • T-mobile marketing and pricing strategy are increasing its market share when other rival companies are trying to competitively lower their price to match T-mobile prices.

 

  • T-mobile is one of the most innovative companies with its Un-carrier service plans. For the first time ever, a telecommunication company that listens to its customers.

 

 

If you would like more information on Telecommunication pricing, then download our free pricing guide or e-book now.

 

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