The telecommunications industry is constantly exposed to disruptive developments that bring with them a wide variety of challenges, but also opportunities.
On the B2C side, the Coronavirus pandemic also led to a decline in sales in this sector, mainly due to declining roaming as a result of people’s lower mobility and the long retail closures – as a result, cell phone upgrades frequently agreed spontaneously in stores are largely no longer available. In contrast, the negative development of the fixed-network market, which had been in sharp decline for a long time, has been slowed and has even increased slightly in value in recent years.
Similarly, data traffic, i.e. the amount of data transmitted, has been increasing exponentially for years. The COVID-19 pandemic has further intensified this trend, especially in B2B, because home offices and video calls have since become the order of the day.
It is apparent that constant change and shifting trends require strategic flexibility on the part of providers. Customer preferences and, as a result, willingness to pay are subject to shifts. All this must be taken into account when setting prices for new products and, of course, also when adjusting the prices of existing products.
Growth strategy and product portfolio
The telecommunications industry is dominated by large national providers with high market shares in certain segments. In addition, there are local providers, often discounters, which have also positioned themselves on the market.
For many companies, the question now is how they can survive in this market alongside the established players, especially since many companies offer very similar products, which makes it difficult for customers to make a decision. They then usually opt for the lowest-priced alternative if the suppliers fail to highlight the competitive advantages and unique selling points of their products.
New pricing models are in demand
New and complex products require new pricing models, with which many companies have little or no experience. Value-based pricing, which systematically determines customers’ willingness to pay and builds on this basis, is a good starting point.
At this point, providers must decide how they want to position themselves in terms of price strategy in relation to the competition: Are we a premium provider? Or do we tend to position ourselves in the medium or low price segment?
Often, smaller providers offer more value in terms of local proximity and fast services while positioning themselves lower than larger companies – this is where profit is lost.
Subscription Pricing and Recurring Revenue Management
With the advent of SaaS, subscription pricing or recurring revenue management is gaining importance. Companies are increasingly moving away from one-time purchases and focusing on selling subscriptions and other recurring payment options.
Important in the course of this: Service pricing. Companies should never interpret services purely as an additional service without a price surcharge, but should always expect the customer to pay something in return for their services.
Bundles and add-ons
The dynamic nature of the industry is also reflected in the importance of bundles and add-ons, which customers can book flexibly – pricing them represents a further challenge.
Third parties or resellers who buy capacities and bandwidth and then resell them at lower prices on platforms such as Amazon often become problematic at this point. Since these providers try to undercut each other, a downward price spiral or even a price war ensues. In the end, only Amazon benefits.
Sales strategy and market penetration
In sales, two main questions arise for telecommunications providers: “Where should I sell?” and “How should I sell?”. Often, the answers to these questions are inadequate because they are built on an outdated sales structure.
“Where should I sell?”
The question of “Where?” is primarily about building the network infrastructure. Which areas do I want to develop? Is the development worthwhile at all? Laying a fiber-optic network, for example, involves high costs at the outset and is not profitable. Companies must therefore identify areas for which the high investments will pay off in the long term.
“How do I sell?”
When it comes to “How?”, two primary trends can be observed:
- E-commerce is gaining enormous importance and is displacing large parts of the offline business.
- Sales are mainly managed through key account management to attract and optimally manage large business customers.
Customer Success / Experience
The industry is under constant pressure to innovate. Due to the increasing complexity of solutions, customer expectations are also growing, while at the same time prices for conventional services are falling. Manufacturers must be able to keep pace with this price development – in both the B2B and B2C sectors. Examples of this are the pressure to continuously improve the network infrastructure and the spread of high-quality fast bandwidths (4G and 5G). Otherwise, customers will quickly migrate to other providers – dedicated churn and retention management will become a key priority in this cut-throat competition. All stages of the customer journey must be considered and the relevant touchpoints optimized.
Solution approaches: Success with strategic pricing and sales measures
The diverse challenges of the industry require tailor-made solutions, which we develop in cooperation with you.
E-commerce and multi-channel strategies
At the strategic level, dedicated e-commerce and multi-channel strategies should be worked out. In the telecommunications sector, we often find hybrid sales models. For example, MediaMarkt is increasingly selling via its own online store and at the same time in its numerous stores all over the world.
At the same time, companies must address the question of which markets they want to prioritize in the future. In the cutthroat competition in the industry, resources must be optimally distributed to ensure sufficient market penetration. Otherwise, they will simply be lost in competition with giants like Samsung, Vodafone, or Huawei. Above all, the process of setting prices plays a major role.
We often observe that historically grown condition systems reduce profitability. This can be counteracted by revising the system and thoughtfully eliminating unjustifiably granted discounts without compensation.
Churn and retention management
Dealing with customers is also challenging: customer churn is the order of the day. Professional churn and retention management as well as innovation and investment management coordinated at the strategic level can provide a remedy. Manufacturers who succeed in differentiating their product from the competition, for example through clever value selling or bundling, secure their profitability in the long term.
Experiences and project examples
Roll & Pastuch has extensive experience in the telecommunications industry. We have worked on projects in both the B2B and B2C sectors with various local medium-sized and market-leading international players in the D-A-CH region, developing solutions to complex problems.
Some sample projects include:
- Pricing audit and development of a new pricing architecture
- Pricing analysis to derive key B2B pricing levers for market share impact, business success, strategy & sales-related price improvement (customer success impact, XaaS value pricing)
- Development of a market entry strategy for the launch of a new product offering
- Restructuring of pricing models with the aim of improved upselling and a sustainable increase in profitability
- New communication approach for guided upselling
- Analysis of levers for pricing, as well as value-based pricing for a new subscription-based product
Learn more about the pricing and sales potential of the telecommunications industry
We will be happy to answer your questions and provide you with further information.