Social Machinery

The world has achieved 4 Billion mobile phone users according to latest report from WCIS. With more than 60% mobile penetration, service providers are looking on how to onboard the next billion subscribers that will come mainly from emerging markets like China and India. According to UND studies, this segment lives on less than $2USD a day.

Therefore, operators wanting to seize this opportunity must find ways to reach less affluent markets in cost-effective and profitable ways. Doing business with the world’s 2 billion poorest people – 1/3rds of the world’s population – will require radical innovations in technology and business models.

But for companies with the resources and persistence to compete at for these customer segments, the prospective rewards include growth, profits and incalculable contributions to mankind.

The key is to innovate in distribution channels

Unlike mature markets, where distribution channels such global retails outlets, online portals and telemarketing is enough to serve the vast majority of the population, rural areas where most of the poorest segment live is still a major challenge for most mobile operators. Accessing to remote rural communities implies finding innovative retail and distribution channels that can be sustainable in terms of costs. Besides, the problem with low spending users is that their monthly budget is extremely low for mobile services.

The proportion of income spent on mobile phone range between 10%-20% of their income, which translates in monthly spending of 5USD to 7USD. Therefore distribution needs to be efficient enough to keep costs down and give more flexible payments options. Nevertheless, looking regions like South East Asia where the overall mobile penetration is around 40%, the untapped opportunity remains with by these low ARPU segments.

Creating a channel strategy on Emerging markets

 I believe there are 4 golden rules for any companies that want to penetrate successfully high growth markets.

1. Innovate in your distribution strategy

For reaching emerging segments, service providers need a Multi channel strategy that goes beyond retail outlets and online channels. Strong local distribution networks and  and community entrepreneurs are the most important aspects not only for distributing SIM cards but also for providing top-up services, handset maintenance and education support network to mobile customers.

For instance, top-up user behavior in emerging segments happens several times a day as they manage a daily micro-finance, so a wide coverage of local distribution is crucial. 

Local entrepreneurs can be a catalyst for penetrating remote communities in rural areas. They can offer airtime reselling but also provide e-Kiosk services. A good example of this is the Village lady from Grameenphone in Bangladesh. This operator empower local entrepreneurs to run their own shared-service  “kiosks” offering to the community calls, internet access, email, fax among others.

Local entrepreneurs can also take a higher engagement by becoming the local network operators and managing part of the network when it comes to maintenance and security. 

Digicel – Taking Multichannel distribution to the next level

A good example of a broader multichannel scope is Digicel. This operator,  now present in 31 markets worldwide mainly in the Caribbean and Central America and with a customer base of around 10 Million subscribers, specialized on addressing remote rural areas.

For that purpose they have a wide range of channels to reach customers including own Digicel stores , dealer outlets, Digicel store insides retail outlets and Nomadic Digicel stores to “penetrate” small towns. With this compelling strategy they can promise to their customers that a Digicell store will be no less than 5 minutes away. As these segments are based on day-to-day finance you need to be at the right time always.

 2. Give flexible payment terms

 Unlike other segments, cash-challenged rural communities live their life in a common uncertainty. They manage their budget on a daily basis becoming extremely price savvy when it comes to their mobile spending. Giving more flexible payments models can help them to optimize their tight budgets in a better manner.

Some example of flexible payments options are:  Low-spending segments are shared credit accounts among users, low denomination refills (Sachets), e-refills that can be bought in pharmacies, convenience stores or petrol stations and overseas credit purchase for people who live abroad but wants to buy top-ups for family or friends.

 3. Provide a remarkable customer experience 

Not because you are addressing the bottom of the pyramid,  the demand for a excellent customer care service is lower. In fact, successful operators in emerging markets use customer care as a way to differentiate and create loyalty. In most of the cases, cash-restricted segments have been exposed to low level customer care support and bad quality service.

Providing 24 hours per day customer support, online bill payments, loyalty bonus offerings could help operators to differentiate your offering.

4.  Provide empowering services

 As a clear difference with mature markets, most of the untapped rural segments don’t have the money to spend on mobile entertainment. Existing Value added services are not the focus for this kind of group as they see the mobile phone as a tool for improving their life, bringing more money or making their life more convenient. Therefore, successful operators need to bring empowering services that can help them to address fundament needs like security, safety or generating income.

A good example empowering service is the case of Cell Bazaar in Grammenphone Bangladesh. Cell bazaar is an m-commerce or advertising directory service targeting at the bottom of pyramid population and bridges sellers with buyers. Users can use this service by sending SMS or connecting through WAP browser. It is well suited due to the poor transport infrastructure and inefficient internet access speeds through PCs in Bangladesh. One use case could be connecting a fisherman in the village to a market entrepreneur in the city.

Another example is G-Cash in the Philippines. This service try to help un-banked segments by offering mobile remittance for a market with  low density of bank branches, low volume of credit users, high mobile penetration and high number of filipinos working abroad.