EUROPEMEDIA-(C)2002 Van Dusseldorp & Partners - http://www.vandusseldorp.com/

Saturation in the European mobile market is forcing operators to refocus their business strategies on retaining - rather than acquiring - customers, according to research by IDC.

This saturation is emphasised by operators curbing high subscriber acquisition costs (SAC) and churn levels. Pre-paid was the main catalyst behind their strategies, as they believed having a large subscriber base would be profitable. However, the market took a turn when 3G licences were awarded and operators realised that they needed to increase revenue and concentrate on the so-called profitable customers.

"Operators had accumulated large bases of pre-paid customers in excess of 60 per cent who were not spending money. Pre-paid has led to more headaches than operators had initially expected - higher SAC and increased churn," said Paolo Pescatore, Senior Analyst for IDC's European Wireless and Mobile Communications Service.

IDC notes the following challenges facing operators: identifying who the pre-paid customer is, identifying whether pre-paid customers have churned or not, migrating users from pre-paid to postpaid services, enticing new customers without high subsidies seen in the boom era and retaining profitable customers.

"As in the 3G world of offering a cocktail of services rather than one killer application, retaining customers is all about putting in place a cocktail of measures to increase retention," Pescatore continued. "Consumers are price sensitive as they want a good service at a low price, and they want to be able to personalise their services. Increasingly, the focus will also be on the ownership of customers and the value operators offer them. That value will involve a financial cost, but the revenue opportunity should exceed the initial cost."

The main retention tools are: loyalty schemes personalisation of services, strong brand, customer service, service offering, portals, encouraging usage and handsets.

"In reality, no one of these tools is more important than the others as operators should implement all of them, thus offering every opportunity to retain customers. In the long term, it will become important for operators to develop and offer additional services for existing and new customers as well as good customer service. Being able to offer the services consumers want will be decisive in retaining customers." ((Distributed via M2 Communications Ltd - http://www.m2.com))