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Telecoms Profitability IG

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The next meeting of this IG is in 1/2 an hour! Looking forward to this new session!


Hi Everyone, for the next Telecom Profitability interest group meeting on February 8th, which topic would you like to tackle?

  • Cust profitability for pricing+individual Cust Profitability

  • Bundled rev issues related to IFRS 15

  • Simplifying cost models

  • Other (include specifics in comments)


Tayyaba Rehman

Thanks Toby. Similar to Tayyaba's vote below, I also selected "Cost profitability for Pricing".

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Another question from the first IG meeting that we didn't have time to get into: how do you assign costs-to-serve? One participant noted, "The models I build assign costs-to-serve to the customer that incurred the costs not the segment.”

This is an interesting Question. And the Cost-to-Serve is a generic name, but if I take a few examples:

Shops (Enquires), Call Center (Layer 1, Voice, Social Media and Chat), Problem Tickets (Layer 2 and 3)

Typically we can get these Events by Customer. With the exception of the Call Centre Voice, we do not get the actual duration.

So like Gary said we use a form of ABC, first split by the Type of Activity and then by the time taken per Event, for example:

Shop Selling:

- PrePaid SIM (5 Minutes)

- Selling a PostPaid Plan (20 Minutes)

Customer Care, Enquires

- Billing issues (15 Minutes)

- Promotion (5 Minutes)

Etc.

Then, we aggregate these by Product, Tariff, Channel and Customer Segment.


It is also worth pointing out that this is actually much simpler to do at the individual Customer level, as we can “lookup” the Customer details and only allocate them to these Tariff, etc.


Doing this with aggregated data is much harder as the source of this data is CRM, and the details entered by the Agents are often not very good quality or accurate.


The additional problem is that often the Events are by Tariff, so allocating to the individual Products in the Tariff such as Voice, Data, and Content, is harder, and we then normally use a combination of Volume (Usage) and Revenues.

So overall quite complex to do accurately, but most software solutions will allow this to be automated quite easily.

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Questions/comments from first IG meeting:

-Shouldn't a marketing campaign be judged by the incremental gain in business from that campaign?

-Allocate the costs over the incremental gain in revenue?

-Some marketing costs go to product. Perhaps it is a terminology of what marketing is. Advertising moreso to customers unless we think it is for the overall image of the company.

-Marketing costs include the cost of the marketing VPs.

Marketing and Advertising are often among the hardest costs to allocate accurately but can be broken down into several major areas.

· Direct Marketing. Ether for specific Products or to Business Customers is very straightforward. To those Products or Customers Groups.

· Product Management. The same applies to the products being managed.

· General Marketing and advertising. This is the biggest one and the major issue. Even if a Campaign is, for example, to 5G, it is more about Brand awareness, and advertising 5G demonstrates the company's Technology ability, which also affects Fixed Services.

It is also difficult to split what is related to Acquisition and what is Retention.


Normally for this we get the best estimates from the relevant Marketing team, then allocate based on Revenue.



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