White Paper

Using Real-Time Charging for

Promotions and Bundles

© Copyright Openet Telecom, 2009

2010
Using Real-Time Charging for Promotions and Bundles
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Using Introduction
Pre-paid customers are popularly characterized as being more transient, cost conscious, and
Real-Time difficult to manage than their post-paid counterparts. But for many pre-paid customers, it is a
payment method which provides the most control and flexibility, but it does not reflect the sum
Charging for of their communication needs.

Promotions Marketers have traditionally treated pre-paid as a single bloc, while post-paid subscribers
have been subject to advanced segmentation techniques. In highly competitive markets, pre-
and Bundles paid marketing is becoming increasingly sophisticated, to support the quest for sales growth.
The best marketers recognize that within the category of pre-paid there are in fact multiple
segments, driven by different needs including usage, value, and lifestyle. A simple illustration
of this point is that a student will have very different needs (usage, time-of-day, and recharge
and profile) than a parent, even though both may be prepaid customers.

Pre-Paid’s Unique Challenges

Issues such as churn, revenue stimulation, and new product adoption obviously apply to
pre-paid customers. However, the nature of pre-paid users makes for a unique challenge,
with low customer exit barriers, issues with account dormancy, multiple personal SIMs, and
unregistered or missing personal details.
Most pre-paid customers can, in theory, access the same services as post-paid subscribers.
The reality for many is that they do not, for reasons as varied as limited handset capabilities,
high marketing costs, credit risk, and small balance amounts. This requires service providers
to be more creative in what services they offer and how they reach these customers.
For marketers, this represents a very different challenge, and requires different marketing tools
to those used for post-paid. There is a growing understanding that the billing infrastructure in
particular real-time charging, the mechanism by how pre-paid accounts are managed, is best
placed to address many of the unique challenges of marketing to pre-paid subscribers.
While pre-paid ARPU will always lag post-paid revenues, service providers recognize that
does not mean that significant revenues and profits cannot be made. Indeed the lower
customer acquisition costs, with no or limited handset subsidies, means that pre-paid
accounts often generate a profit more quickly.
The pre-paid business objective is changing, and, in many markets has already changed from
one of basic service provision and credit control, to that of improving and innovating how pre-
paid services are marketed.

© Copyright Openet Telecom, 2010

Using Real-Time Charging for Promotions and Bundles
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Pre-Paid Service Plan Innovation

The language of service provider marketing is changing. A new vocabulary is emerging
that includes words such as: promotions, merchandising, and cross-selling; all placing the
customer at the centre of system and process change.
However, taking the steps to realize this change frequently puts marketers at odds with
their existing charging systems, many of which were designed originally for circuit-switched
technology.

Figure 1: Overview of real-time charging’s influence on pre-paid marketing

Real-Time Charging is now as much about enabling marketing as it is about accurate

accounting. A flexible, open, configurable Real-Time Charging system can unleash marketing
innovation and enable pre-paid marketing to maximize efforts for targeted usage and recharge
promotions, flexible bundling, and to build loyalty.

Promotions
With pre-paid users perceived as being more value conscious, promotions play a vital role
in stimulating revenue. However, blanket promotions risk destroying value by needlessly
cutting prices or offering free services without sufficient operator reward. This is because
what constitutes value depends on the segment; to be successful promotions need to be
differentiated with relevant benefits.
But with personal data either missing or incomplete, and lower customer values making
traditional marketing approaches expensive, these promotions need to be carefully crafted to
be profitable. This requires the use of multiple promotional triggers, and the ability to run and
manage multiple promotional offers in parallel.

© Copyright Openet Telecom, 2010

Using Real-Time Charging for Promotions and Bundles
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Usage Promotions
Usage promotions encourage service uptake, especially for new services. The freedom
to configure promotions using a combination of: service type, usage, and balance results
in highly attractive and creative promotions (see Figure 2). Typical of the types of flexible
promotional use cases now possible are the following:
¨¨ Spend X and the rest are free - this promotion is designed to incentivize subscribers to
spend slightly more than they normally would. The value proposition to the customer
is that all service above a certain threshold will be zero-rated for a given time span,
typically for one day
¨¨ Spend X and the next X are free - this is a variation on the above theme but with a limit
on service usage, e.g., send 12 SMS and the next 10 are free
¨¨ Buy one get one free - a popular idea borrowed from retailers. This promotion enables
a service provider to allow a customer to pay for one service, such as a ringtone and
get another for free. This idea can be extended, to allow any ratio of services to be
combined e.g., three for the price of two, etc
¨¨ First use free - service providers have a growing number of data, content, and
multimedia services. However, many customers are reluctant to try new services. This
approach allows a customer to easily try a service, prior to subscribing
¨¨ Free Sunday / Favourite Day - calls or messaging is free for those who have maintained
a balance of a certain amount or have recharged their account within the month
¨¨ Cross product promotions - to encourage customers to try new services, new services
can be provided at a reduced price or on a complimentary basis for a period of time.
E.g., spend $10 on text messaging this week and receive mobile TV free for the next
week

Re-charge Promotions
Subscriber churn is a particular problem for pre-paid subscribers, as unlike post-paid
customers, where contracts typically lapse on a particular date, pre-paid accounts simply (and
quite often gradually) become dormant. Adopting a life-cycle management driven perspective,
including associating expiry dates with balances, can pay dividends by keeping accounts
active and flagging any changes in state. This could be used for example, to apply multiple
lifecycle states as an account goes towards dormancy. So, when an account enters a certain
stage, it would be subjected to an intensive period of promotions to re-animate usage.
Recharge promotions if structured correctly, are an ideal approach to encouraging customers
to stay active and reduce churn. There are a number of ways that service providers can
encourage subscribers to not only maintain their balance but also use it. Examples of effective
recharge promotions include:
¨¨ Recharge bonus - i.e. every time you recharge you’ll receive a credit
¨¨ Encouraging multiple refills of an account during a defined period - e.g., recharge 4
times this month and have weekend sms free
¨¨ Varying recharge rates - to incentivize refills that use low cost channels
(ATM, IVR, USSD etc.), to reduce the cost of fulfilment
¨¨ Persuading a subscriber to maintain a minimum balance level to enjoy lower rates -
e.g., maintain a balance of more than $30 and enjoy reduced voice calls
¨¨ Committing a customer to an automatic monthly recharge in exchange for a bundle
of services

© Copyright Openet Telecom, 2010

Using Real-Time Charging for Promotions and Bundles
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Legacy charging platforms are almost universally poor at launching rapid promotions. In
some cases, it’s not even a feature. And where it does exist, it is often a new module, built as a
requirement into the onboard rating and balance software. Because of these limitations, service
providers have started to move these capabilities onto new platforms. With the new platforms
providing the flexibility needed to support more complex rating models such as flexible
discounts.

Figure 2: Examples of usage and recharge promotions

Bundling
Customer buying trends are driving the increased importance of bundled and packaged
service offerings. End users are attracted to bundles because of the price, convenience and
peace of mind they offer. From an operator’s perspective, they make for both a high value
offer and a driver of revenue.
Of particular interest to pre-paid subscribers, are occasions when they want to enjoy
equivalent advantages to a post-paid subscriber, but without changing their payment plan.
Allowing customers to bolt-on packages, can provide an additional source of income, and
enable a subscriber to gain access to services at a more favourable rate.
Combining the attractiveness of lower prices, with prepaid cost control, bolt-on packages offer
subscribers new value and operators’ incremental revenue (see Figure 3). Below are some
use cases typical of temporary bundles:
¨¨ Bolt-on service packages - in addition to the standard rates, customers can bulk
purchase a service for a set price. This usually works best for popular and high-usage
services such as message credit bundles e.g., for an extra $10 buy 500 SMS per month
¨¨ Bolt-on roaming packages - provides a customer with a better rate for international
services for an upfront payment, usually with an expiry date. For example, you are
going on a one-week holidays you will receive a defined quota for text and calls, to
control costs
¨¨ Service passes - allows ad hoc purchases of internet access or to a specific service for
a limited period of time, volume (KB), or access amount
¨¨ Credit Packages - purchasing usage represented by a credit to one or more services,
for example, 1 credit = 1 music download
¨¨ Cross-service bundles - for example, a ‘youth’ package that provides access to voice
calls, sms, mobile tv, and data

© Copyright Openet Telecom, 2010

Using Real-Time Charging for Promotions and Bundles
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International roaming voice 60 min ................. $10

International roaming texts 100 SMS .............. $5
Mobile Internet 5GB .......................................... $50
International Roaming Blackberry
- email .............................................................. $25
- with internet .................................................. $60

Figure 3: Examples of recurring and non-recurring bundle offers

Service providers should be able to offer these bundles as a once off, non-recurring
bundle. Available from the date of purchase until they have been used up or the associated
expiry period has been passed. After which the customer pays the current standard service
agreement amount.
Alternatively, these offers can be paid for as a recurring charge, allowing a service provider to
gain regular, incremental revenue. With a recurring credit subscription, customers’ accounts
are decremented at regular intervals, with unused credits from the period being either reset
to zero, or rolled over to the next calendar period. Again once the credits are used up, the
customer pays the current standard service agreement amount or where credits are unused,
they are rolled over or expired.

Loyalty Points
The high cost of acquiring a customer, makes it essential that subscriber relationships are
cultivated to meet both retention and profitability targets. Operators investing in relationship
marketing initiatives, do so with the intention of retaining their most important subscribers i.e.
those with the highest ARPU and with the longest relationship. Loyalty Programs increase the
cost to customers of leaving one service provider for another.
Pre-paid users yet again represent a different challenge to loyalty plan management, as their
worth to the organization is principally calculated on refills. Customer lifetime values are
heavily influenced by a subscriber’s retention period, providing an additional bonus based on
the length of relationship, can provide a customer retention incentive.
Additionally, one of the overlooked influences of prepaid subscribers is comparing the ratio of
outgoing versus incoming calls. Pre-paid subscribers often receive many more calls than they
make. Awarding points, as a reward for incoming calls, can increase operator inter-connect
payments, and act as a magnet to attract customers to your network.
A customer loyalty program, that rewards subscribers with ‘free’ network services in exchange
for points, can be a vital component of a successful customer retention strategy. But these
points are only effective if used by the customer. A properly structured loyalty program will
provide usage-based incentives, to reward the most valuable customers best.
Reinforcing the value of a loyalty plan, means ensuring users are informed of their loyalty
points’ status. Automating points-earned confirmations, redemptions, and the communication
of other loyalty-related information, using alerts by way of a text messages and an online
portal, can provide both convenience and a sense of ownership for loyalty plan members.

© Copyright Openet Telecom, 2010

Using Real-Time Charging for Promotions and Bundles
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Notifications
Notifications provide a simple, yet very effective communication channel for subscribers.
Being able to trigger timely notification messages, based on subscriber balances or rate plan
changes, can have a powerful marketing effect. Configuring an alert based on a changed
threshold state, contributes to a ‘low touch’ marketing, which can prompt subscribers into
action. Notifications can be configured to be sent to:
¨¨ Advise a service balance is at zero to prompt a refill
¨¨ Advertise the availability of a service promotion
¨¨ Notify that a promotional balance is about to expire
¨¨ Confirm a change of rate plan
¨¨ Verify a successful bundle subscription
¨¨ Inform that a bundle balance has expired and normal costs apply

A practical example of these capabilities is when a service balance has been exhausted.
Rather than wait for a subscriber to refill, a timely prompt can have a positive revenue effect,
encouraging customers to refill earlier than usual, taking days off the charging cycle.

Addressing the Challenge of Pre-Paid Marketing

The billing infrastructure, or more specifically Real-Time Charging, is one of the best placed
systems to take on the challenges of marketing to pre-paid subscribers.
Legacy systems were designed for infrequent changes, few services, and simple pricing.
These have been pushed by subscriber growth and new data services to the limits of their
capabilities and capacity. This has resulted in service provider delays in new services
introductions, rate plan changes, and promotional roll-outs.
What is required is a massive step forward in efficiency, to scale and manage the execution
of complex business logic required to support the deployment of flexible promotion, bundle,
voucher, and other balance or rating oriented changes needed by marketing. Modern real-
time charging systems (see Figure 4) treat each incoming service request independently,
managing the associated rating and counters steps separately, to allow multiple prices and
promotions to apply to the same service.
This architecture delivers a high degree of flexibility. With bundles, promotions, and recharge
management capabilities as native features, it allows:
¨¨ Promotional information to be abstracted away from rating functionality, making it easier
to execute campaigns and re-use business logic
¨¨ The rapid turnaround of promotions. Employing usage and allowance counters,
provides readily available subscriber specific balances
¨¨ Rollover, recurrence, thresholds, expiry dates, balance status, and account status
capabilities to be re-used

© Copyright Openet Telecom, 2010

Using Real-Time Charging for Promotions and Bundles
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As bundles become the go-to-market mechanism of choice for many service providers, the
definition of balances is being transformed. Balances are becoming fragmented and
re-configured to support a multi-service sell. As subscribers buy different types of services,
the definition of balance is changing to:
¨¨ One that extends beyond the concept of a single cash balance
¨¨ Includes support for many different balance types, such as service-specific balances,
promotional counters, vouchers, shared balances, and of course money
¨¨ Applying business rules based on subscriber status, rather than exclusively by
subscriber type
¨¨ Enabling an operator to perform subscriber contextual tracking

CTE

Figure 4: Real-Time Charging Architecture

Pre-paid charging is a real-time process requiring latency to be kept to a minimum, posing

some unique and serious engineering challenges. As more complexity is loaded onto a
charging request, there is a danger that system latency will increase to unacceptable levels,
i.e. the time it takes for the customer to have his request fulfilled becomes noticeable.
There needs to be confidence that systems can scale to handle the increase in real-time
transactions, driven by the more complex processing required for bundles and promotions.
Finally, it is increasingly important that system costs scale with linearity, as they handle more
subscribers, more data driven services, more rating and balance management complexity. To
do this, software must perform to its maximum to successfully process 10,000s transactions
per second. It requires software fine-tuned with both the operating system and modern,
multi-threaded, multi-processor hardware technologies; to extract the most cost-effective
performance of the parallel processing capabilities available.

© Copyright Openet Telecom, 2010

Using Real-Time Charging for Promotions and Bundles
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Conclusion - The Power of Real-Time in the Network

The approach to pre-paid customers and marketing is changing. The catalyst for this change
- rapid rate plan changes, multiple and varying bundle definitions, promotional versatility,
better lifecycle management - need to be recognized for the important marketing tools they
About OPENET are. Speed and flexibility in their management, will be essential if these tools are to be the
Attract subscribers, provide foundations upon which a competitive organization will be built.
them a great experience,
maximize revenue from them, In highly competitive markets, pre-paid marketing has become more sophisticated, to support
and minimize the cost to serve the quest for sales growth. It is increasingly understood that customers, who have selected
them. Sounds simple until pre-paid, are in fact multiple segments, requiring marketing, bundling, and pricing dexterity.
you try to do it with millions
of subscribers supported by Real-Time Charging, the mechanism by how prepaid accounts are managed, is now as much
inflexible legacy infrastructure about marketing and promotion enablement as it is about accounting. Openet provides a
amidst an ever-changing set convergent all-in-one real-time charging, rating, and balance management solution, providing
of business requirements. To native promotional features, centralised operations, and maintenance to support the rapid
succeed in this environment, launch of new services and marketing initiatives.
you must first know your
subscribers and how they use
your services, be capable of
deploying innovative business
models that maximize revenue,
and be able to control the
allocation of your network
resources intelligently and
efficiently. This is making the
most of every subscriber.
And Openet can help with
our Subscriber Optimization
Software.

At the core of our solutions

is the Openet Framework, a
convergent, modular, real-
time event processing and
transaction management
platform. This Framework
enables operators to transform
their BSS/OSS environments
to capitalize on new services,
business models and network
investments. A global
company, Openet is used by
the world’s largest and most
innovative service providers
including AT&T, BT, Orange,
Telstra, Time Warner Cable,
and Verizon Wireless. Learn
more at www.openet.com.

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© Copyright Openet Telecom, 2010