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Managing and Reducing the Cost of Customer Acquisition

This report examines the cost of customer acquisition in the mobile industry, otherwise known as Subscriber Acquisition Cost (SAC). It discusses the different initiatives that mobile operators can implement to manage and reduce SAC. In particular the paper sets out to answer the following key questions:

• What is SAC and why does it matter?
• What are the external factors that drive SAC?
• Why should SAC be managed and not just reduced?
• What are the 15 ways in which mobile operators can manage/reduce SAC?
• How can channel commissions be tailored to incentivise key behaviours?
• How can distribution and the channel mix be used to manage SAC?
• What can be done to manage handset subsidies?
• What are the sales and marketing initiatives to manage SAC?
• Which customer levers should be considered in conjunction with SAC?

We believe it is important to focus on SAC management rather than exclusively on SAC reduction, as we will discuss below. The appropriate SAC management strategy for a particular operator will depend on many factors, but particularly:

• The segmentation landscape, as a tailored approach will be required for higher versus lower spending customers, and
• Market penetration, as a saturated market will require a different approach to a growth market.

With many markets approaching penetration levels of 80%+, the recommendations in this paper relating to heavily penetrated markets will very soon become relevant to all markets.

Price: EUR 2,500.00 / GBP 2,400.00

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1
Introduction
1
1.1
Objectives
1
1.2
SAC Defined
1
2
Why Does SAC matter?
2
2.1
SAC - Too much to ignore
3
2.2
SAC Trend - Up or Down?
6
2.3
The side-effects of high SAC
7
3
Key SAC drivers
8
3.1
Market Environment
8
3.2
Competition
8
3.3
Technology
9
4
SAC Management Approaches
10
4.1
Overview
10
4.1.1
Incentivise required behaviours
11
4.1.2
Consistent and clear commission structure with indirect channels
12
4.1.3
Encourage longer contracts
13
4.1.4
Emphasis on direct sales
14
4.1.5
Encourage Internet channels
14
4.1.6
Selling through popular third-party marketplace websites
15
4.1.7
Partner with high brand profile company
16
4.1.8
Promote secondary handset market
16
4.1.9
Encourage purchase of SIM packs
16
4.1.10
Gain scale to achieve volume discounts
17
4.1.11
Sell differentiated devices
18
4.1.12
Create brand loyalty
18
4.1.13
Develop multiple subscriptions migration plan
19
4.1.14
Hybrid prepay/postpay market
19
4.1.15
Attract niche customers
20
5
SAC And Associated Levers
20
5.1
The Relationship of SAC to other key performance indicators
20
5.2
SAC is not the only lever to acquire customers
21
6
Conclusions
22