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Mobile-price strategy turns around revenue growth in emerging market

McKinsey was brought in to help a leading Asian mobile operator who had witnessed a devastating 80 percent drop in their average price per minute in just a single year as the result of a hypercompetitive marketing environment. We were asked to develop a strategy that would stabilize pricing and put the carrier on a path to revenue growth.

Mobile price strategy turns around revenue growth in emerging market
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As a result of in-depth consumer research, an analysis of the pricing environment and competitive strategy, and our understanding of the fundamental mechanisms of price wars, we recommended that the carrier:

  • Optimize revenue by moving from uniform pricing to targeted pricing based on customer segment, region, and competitive pressure. Uniform pricing meant that the carrier was giving away revenue when it didn’t have to; targeted pricing, driven by economic modeling that instantly showed the impact of changes in pricing, changed the physics of their business.
  • Develop innovative promotions and incentives that didn’t involve lowering prices but provided value-added services such as to enhance the carrier’s perception as a brand that offered real value-for-money.
  • Become a best-practices leader in technology and big data, which included the development of new performance dashboards that gave management real-time insight into everything from the impact of pricing moves and tariff changes, to productivity on a store-by-store level. This great performance transparency helped management to focus on the distribution hotspots. Rewards and incentives could be tied to performance like never before.

The combination of these recommendations reversed the downward spiral; revenue growth was restored within 12 months, the company’s position as the country’s leading brand was fortified, and the brand became so much more attractive to retailers and distributors that their number increased by more than 20 percent.

Bolstered by this turnaround, the company had the cushion and confidence to invest in future services centered on data, wireless broadband, and content. Importantly, the skills and practices we instituted didn’t leave when we did; the company has continued to use strategic pricing to maximize their performance.