Reinventing the MVNO: From Mobile discounter to DSP

By: Andy Peers

MVNOs are reinventing themselves, changing from mobile discounters to digital service providers (DSPs). They are having to adapt to survive in the digital era, where consumers know what content they want, and the ways in which they want to consume that content. It has changed dramatically. The participation economy has seen passive users transform into engaged participants, and in response, businesses are trying to adopt agile business models and approaches that can instantly respond to what customers value and at the speeds customers demand.

For today’s MVNOs, the market is primarily defined by brutal price competition. Margins are becoming tighter and the cost of acquiring new customers is higher. Most MVNOs are somewhat similar to one another, forced to compete on price with little to differentiate them. To avoid this becoming a dead-end, many MVNOs need to rethink their strategies, and to differentiate themselves through customer orientation rather than price. In short, they need an agile approach in order to survive.

Understanding the MVNO Customer

To stand out from the crowd, MVNOs have to really understand what their customers value. If they embrace what it is about their products that subscribers value, and for what they may pay a premium, then it's possible the “cheaper is best” approach may no longer apply, and new monetization opportunities may emerge.

MVNOs need to move away from their traditional ways of doing business, as they are currently riding a downward spiral, where high churn rates translate into higher spend on customer acquisition, all along failing to grow to compensate for that spend. Margins are consequently squeezed.

Another issue is that, for the most part, MVNOs are not innovating: they continue to follow the outdated business models they inherited or copied from mobile operators, such as using equipment subsidies to lock customers into long-term contracts.

Adopting an Agile Approach

Because MVNOs are ostensibly online businesses, they should look to innovative with the business models and solutions characterizing the digital world. 

Online businesses typically use agile innovation, starting with a minimally viable product that they test with customers to gauge whether or not they value it. If they do, they then create a pricing model through "value-based pricing," which sets pricing according to customer value. This is an improvement over traditional cost-plus pricing models in which the cost of infrastructure and product development are factored in more than customer value. 


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