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WORLD TELEMEDIA 18 SHOW PREVIEW Are freemium models dead – and are micropayments going to take their place?

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The recent Facebook data scandals has not only eroded consumer trust in social media platforms, but it has also shaken consumer confidence in all digital services companies such as Netflix, Spotify and Skype – and this presents MNOs with a massive opportunity.

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More than 50% of consumers are now less likely to share personal data with digital services companies, with 66% of consumers stating that they would prefer to pay for services if it meant more control.

This is putting ‘freemium’ business models at risk, and opening new opportunities for alternative digital players including mobile operators.

A new study from Openet, surveyed 1500 consumers across the UK, US, Brazil and The Philippines on their perceptions of digital services companies and mobile operators following the recent data scandal. The survey highlighted several further consequences for digital service companies around consumer confidence in sharing personal data and how that impacts how they engage with services.

What the study discovered was that 76% of consumers surveyed plan to increase digital account privacy settings, with potentially millions globally deleting an account because of the scandal.

Meanwhile consumers are calling for improved privacy processes – 87% of consumers surveyed do not think selling data to third parties is an acceptable business practice, 86% want more transparency around data use practices.

And all this presents operators with a massive opportunity – 56% of consumers surveyed now see their operator as more trustworthy than a digital services company.

Niall Norton, CEO, Openet, explains: “Until now, digital service companies like Netflix or Uber have been held up as the poster children for delivering personalised digital experiences and services. But it seems some have been a little too liberal in their use of consumer data, ruining the party for everyone. Since the Facebook data scandal, consumer attitudes towards digital service companies and personal data have eroded, with some consumers even deleting accounts in protest. In fact, many have expressed an interest in paying for services if it means that their data won’t be abused, signifying an end to the ‘freemium’ era. Consumers are clearly screaming out for something different, something trustworthy.”

Mobile operator opportunity

Despite diminished trust among digital natives, mobile operators have not been subject to the same fate. Over half of the consumers surveyed now trust their operators more than digital service companies, citing the historical protection of their data as the key reason for this. In fact, an overwhelming number of consumers (92%) said that they’d be open to using mobile operator-delivered digital services as long as they are transparent about data processes.

Norton continues: “Mobile operators have traditionally had a much more conservative approach in their use of subscriber data, despite having an abundance of it. For a long time, this conservative approach to data use has been used as an unfavourable measure for operators’ digital efforts, especially in comparison to other digital-first companies. But times are changing and it’s clear that consumers expect more if they are to hand over personal data in exchange for services. Mobile operators have earned the right to answer this call. But to be successful, they must learn from the mistakes made by social media and digital service companies alike. Transparency around data collection and opt-in processes are now top priorities for consumers. Operators must bear this in mind when seizing new digital opportunities.”

Carrier billing for subscriptions

While mobile operators are positioned to be trusted by consumers with data, their own payment tools are also there to help drive the duel processes of engagement and payment with digital content – through subscriptions.

“The engagement opportunities that a subscription model can provide organisations can be beneficial to the ongoing relationships they have with their customers,” says Shannon Dority, senior marketing executive at Abacus Media. “And as competition continues to grow within the digital space, being able to provide for the needs of your audience is becoming more critical to ongoing success.”

Dority continues: “Moving away from one-off-purchases, a subscription model can provide businesses with income stability. Having a continuous cash flow offers a predictable and more accurate revenue stream which reduces overall administrative overhead. Businesses can better anticipate the supply and demand of their products and services, improving overall production efforts saving time and money. The model also provides a foundation for higher customer retention rates, allowing marketing and sales to shift their efforts from quick acquisitions of new customers to maintaining long-term relationships from the current client base. This increased level of customer engagement provides continuous value throughout the customer lifecycle, which can result in increased revenue opportunities such as upgrades, and customers who can become brand ambassadors.”

And carrier billing can deliver this easily and effectively – be it an ongoing monthly subscription or simply as a tool to sign up subscription trials that can then be converted to other payment models.

“Subscriptions can offer consumers a sense of regularity and convenience,” says Dority. “Setting up a recurring payment for access to a product or service means that they don’t have to continually remember to make the purchase, therefore their service isn’t interrupted or suddenly cut off because they forgot to pay. Another reason this offering is popular with consumers is that the upfront flat fee makes it easier for customers to budget by being able to predict and control what they spend. And subscription models give businesses the opportunity to provide a level of transparency that customers are looking for in the digital age – being upfront of what level of access to their product or service they will receive for their payment, demonstrating value for money. This helps to build ongoing trust with your brand which leads to ongoing engagement and business.”

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