i-mode Business Strategy

DoCoMo declares war on i-mode handset prices

DoCoMo has declared war on high handset prices and has commenced battles on a number of fronts.

In Europe DoCoMo blames a less than anticipated uptake of i-mode, except in France, partially on high handset prices. There is obviously more to the problem than handset prices, in particular the low rate of subscriptions especially in Italy and Germany.

However at least the first step is to get the handsets out there and this reflects a combination of the promotion, the sales process, and the handset pricing.  The latter is most directly under DoCoMo's control.

In Japan DoCoMo plans to buy handsets in bulk for the first time to cut costs as incentives to retailers. The decision to buy handsets in bulk orders from manufacturers such as Sharp and Fujitsu rather than periodically, as the company does now, marks the company's most recent effort to reduce handset costs to consumers.

DoCoMo in October signed up more new subscribers than closest rival KDDI for the first time in three months after raising incentives to handset retailers and as customers bought plans that included flat-rate fees and free e-mail between family members.

DoCoMo expects 28 million users, or 61% of its 46.9 million customers, will sign up for discounted services for families, more than the 59 percent they had forecast, according to a recent interview by the CFO. The company raised its forecast for flat-rate subscribers to 2.5 million by the end of March 31, 2005, from 2 million.

Note: Competition in the flat-rate segment further escalated Nov. 12 when Vodafone Japan finally announced the launch of a flat-rate price plan. Vodafone's new "Packet Free" tariff will allow unlimited use for 3,900 yen (US$37); there is also a "Packet Economy" level for 2,000 yen ($19). Both plans allow free messaging (including attachments) between other subscribers and offer global roaming video calling from selected European regions.

Handset commissions up but price has to fall

DoCoMo said its average commission to retailers for each handset sold rose to 33,000 yen ($310) in the first half, compared with 32,000 yen a year ago. KDDI last month said incentives per handset to retailers will rise to 38,000 yen ($360) from 36,000 yen due to competition.

DoCoMo pays about 40,000 yen ($380) per handset to manufacturers such as NEC and Matsushita Electric Japan's largest and third-largest handset makers, for units used with its old MOVA network service. It pays between 50,000 yen and 60,000 yen ($570) per handset used with the newest generation FOMA 3G service.

"We've been asked by DoCoMo to cut prices of handsets and we've been working on it," said Masaya Iwakiri, spokesman for Panasonic Mobile, the mobile-phone unit of Matsushita. "We have no plan to deliver handsets in bulk to DoCoMo."

For DoCoMo, buying handsets in large quantities from Matsushita and NEC carries a risk because it may result in higher inventories. The handsets made by the two companies account for more than half of DoCoMo's 30 best-selling mobile phones, according to a survey by Impress, a Japanese Internet and multimedia publishing company.

Europe handset strategy a blow to Nokia

In Europe, VITELCOM has positioned itself in the i-mode market where it has already become a major supplier to the i-mode operators located in Spain, Germany, the Netherlands, Belgium, France, Italy and Greece.

Carlos Carrero, President and CEO of Vitelcom, has big ambitions for Vitelcom in i-mode and it is believed that he has persauded DoCoMo to adopt his strategy of launching a €50 ($65) i-mode handset.

This will be a stunning coup for i-mode in Europe and for Vitelcom, and a devasting blow to Nokia's ambitions in European i-mode.  This seems possibly insignificant today, but the number of i-mode subscribers is about to explode over the next 18 months with the U.K. coming on board and new campaigns in France and Spain, and new operators in Eastern Europe.

Of course in France SAGEM is attacking the market very successully including the i-mode market with Bouygues.

In return Nokia has launched legal proceedings against Vitelcom and Sagem claiming patent infringements.

Vitelcom has launched several i-Mode step2 products during the first half of 2004 including VM30iv that adds video recorder and video player to the current extensive list of features, and the planned launch of its first i-Mode step3 product later in 2004.

Let's hope that Vitelcom can bring its products to all i-mode markets.

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Independent audits, analysis, project reviews and i-mode strategy business advice, seminars and round tables, conference chair and speaking, magazine articles and press comment - to discuss these and other opportunities, please call or email. | Walter | Email Walter | Call (Australia) +61 403 345 632. | Pascal | Email Pascal | Call (France) +33 670 765 643. | Subscribe to i-Mode Strategy.

Redesigning the i-mode Sales Process for Success - Part 3 Creating Excitement

In Part 1 of this redesigning the sales process for i-mode success I described five key dimensions driving this redesign - four "in the box" and one "out of the box" (Part 2 describes customer segmentation).

Firstly, the requirement to fulfil the basic customer needs, and secondly do this with ease – or without problems and hassles. Thirdly, to provide clarity – this is about consistency of expectation - and finally, deliver an experience that is unique in that it stands out from the competition.

The fifth and "out of the box" driver is to generate excitement.

Of course, excitement is a relative feeling, moderated by expectations, and hence its linkage to the third dimension above. Although it is not always high among customers, when created, it can achieve true differentiation.

These dimensions are not actually objectives, the objective is to develop and sustain the customer’s commitment to the operator.

The dimensions are strategies in support of that objective. A key tactic, supporting those strategies, is the fifth dimension of generating excitement.

In-store, this can be described as the show and play tactic as compared to the show and tell tactic.

Think about this. For a telco this should be very simple because they have the whole range of technological capability at their fingertips.

The wireless internet i-mode phone links to the fixed internet. It even links to an existing customer's POP mailboxes – their Bigpond mailboxes for example. The fixed internet links to the store, and the store links to digital kiosk hubs and large wide-screen displays.

The infrastructure – the province of a telco – can all be there to create a fabulous experience.

The only new element is the need for next generation digital kiosks that give a sharp high quality image in a short time and with intuitive and fun user interface. The digital kiosk, in fact, is the hub of the show and play opportunity for i-mode sales.

The large screens can be used to run i-mode emulators, accessing exactly what the client sees on the phone, can display video and still images transmitted from the phone through kiosks, and for example can display java games also through emulation.

Coming in the direction of the i-mode handset, video clips from the screen can be snatched down through the kiosk and loaded onto the handset, as can music and also a selection of free java games loaded on the kiosks and available to customers according to some purchase criteria.

Customers can access to free pics and also to uploading those images onto their web picture storage provider (presumably Telstra) and can also send the images from the phone through the kiosks to their friends on internet. This gives a parallel experience to them using the i-mode handset itself to send images directly through email from the handset, and increases their comfort level with the whole range of digital technology.

The digital kiosks can also be equipped with barcode readers to give instant rewards for in-store promotions, and instant rewards for achieving certain levels of competence and expertise in using the handsets e.g. 'send an email to this address and receive a barcode for two image prints'.

As Samsung says, in a DigitAll world all these components of the internet, digital images, digital music, the i-mode handset and mobile internet, the digital kiosk, web storage, and web email, can create an exciting experience.

This excitement helps develop and sustain the customer's commitment to the operator.

Not only that, it should also drive down support costs and drive up incremental sales in content and other advanced i-mode service functions.

Caveat: Beware the after the excitement let-down when customers call the help desk and get confusing or incompetent answers. The US mobile-telecommunications industry is the number one source of complaints to Better Business Bureaus according to McKinsey. Customers were relatively satisfied with their access to the service channel, but they could be very displeased with the way service agents addressed the issues they raised. The most common such complaint was that a carrier repeatedly failed to fix a problem. Customers are aggravated by the physical separation between the channel where the customer relationship originates (generally a store, and not always one under the carrier’s direct control) and the call center. Fixing this, for i-mode success, will not be easy. Not least because it requires the carrier to coordinate its efforts across at least four departments: customer service, IT, marketing, and retailing. But fixing it ahead of i-mode launch is essential, otherwise all the efforts in the store may be wasted.

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Part 2 - Customer Segmentation
Part 1 - Principles
Complete Version (PDF, 6 pages, free) go to my website www.digitalinvestor.com.au

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To understand better the i-mode business model see my related blogs on imodestrategy.com:

Why the Open Mobile Terminal Platform Alliance is a Win for the i-mode Business Model - here
Why the Analysts Have It Wrong About Telstra's new i-mode Alliance - here
The Delicate Balancing Act of Sustainability for Mobile Game Content Providers - here

What's your view of the sales process for i-mode - what changes are needed and why? Post your Comments.

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For rigorous expert independent audit and advice, no matter where you are in the i-mode ecosystem, call me.Email me; Call (Australia) +61 403 345 632

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"I can personally recommmend the Mobile Intelligence Tour as the most effective, most intensive and most enjoyable way to acquire business insight into the Japanese mobile economy and the people behind it," Walter Adamson.

Redesigning the i-mode Sales Process for Success - Part 2 Customer Segmentation

In Part 1 of this redesigning the sales process for i-mode success I described five key dimensions driving this redesign - four "in the box" and one "out of the box".

Firstly, the requirement to fulfil the basic customer needs, and secondly do this with ease – or without problems and hassles. Thirdly, to provide clarity – this is about consistency of expectation - and finally, deliver an experience that is unique in that it stands out from the competition.

The fifth and "out of the box" driver is to generate excitement.

These dimensions are not actually objectives. The objective is to develop and sustain the customer's commitment to the operator.

The dimensions are strategies in support of that objective. A key tactic, supporting those strategies, is customer segmentation.

Customer segmentation is well known to marketers, but poorly applied in telco mobile services sales. For example, let's say an existing customer approaches a store salesperson, the salesperson will quickly offer an upgrade, and if the customer accepts they will hasten to the sales terminal and type in the order. The new phone arrives in a box from a faceless courier. Are advanced services such as email and internet access being sold this way? Yes - with absolute certainty. Will i-mode succeed with this type of approach? No - with absolute certainty.

A customer segmentation tactic, in the stores and through the resellers, is absolutely vital for success with i-mode as a service offer.

One of the enduring reasons for the high rates of customer turnover in this industry is the lack of scientific prospect targeting. The redesigned sales system for i-mode needs to be able to apply a sharp effective front-end of a scientific process in the stores. The customers coming into stores are more than suspects, they are already prospects. We are past relationship acquisition, and into relationship management.

The first process to be applied is effective segmentation.

Firstly, segmentation is needed to direct the client into the appropriate purchasing experience, secondly it is needed to start of the path of commitment from the client to the purchase, thirdly it is needed in order to offer the right in-store training and education, fourthly is needed to be able to follow-up effectively to build on the client's commitment, and lastly it is needed in order to optimally allocate and measure sales resources.

Directing the client to the right purchasing experience

Segmentation is not necessarily difficult. Ideally, with the $100ms that have been spent on CRM systems a quick entry of an existing client’s mobile number should provide instant segmentation and in-store direction. But that’s probably not going to happen.

Therefore we need to know, for example, if the customer is an existing customer, how long they have been a customer, when they last changed carriers if not a customer, why they changed, what they do with their phone today, what they want to do with their new phone, if they are internet literate, if they are business and “PDA” literate, if they are a game player and ring-tone downloader, and what they know about i-mode, and what type of phones and which carriers do their friends use.

In simple terms the sales person needs to understand the potential depth of a customer's commitment to their current and past carriers. For current customers we need to know who are entrenched, or completely loyal, as well as those who have moderate loyalty, shallow loyalty, or convertibility (are vulnerable to competitors).

Then the sales person’s job is to target the customer experience accordingly.

This means that we don't then give a canned beginners demonstration to an experienced mobile data user, it means that we don't assume that because they know the internet that they will easily figure out on their own how to set up the handset, that if they are a game player that we give them a boring brochure to read while they make up their mind, that if they have hundreds of contacts in their current phone as a PDA that we tell them that they will have no trouble loading up the contact manager at home and transferring to the new handset.

This does not mean that we don't sell a client an internet i-mode phone if they don’t know that they want one. Most people in Australia will not know what they can do with it and why they would want it. If you asked people if they wanted a walkman before if became popular they would have also said no – because only the experience can bring the understanding.

Note the ethics here, because in Japan DoCoMo is very careful about image. When you buy a DoCoMo phone, you are specifically asked if you want to subscribe to i-mode or not, and in some cases the salesperson goes with you through a 2-page document with all kinds of disadvantages of subscribing, and you have to sign that you are aware of all these things which can go wrong with DoCoMo's service. So the sales process is the opposite of a salesperson trying to talk a client into buying an i-mode phone.

By initially segmenting clients it means that salespeople know where the clients are starting from in their capability and to get them excited about where they can head with the i-mode service.

In order to act upon segmentation stores must be able to provide different experiences for explaining, training, and gaining commitment. Gaining commitment is a function of the way the sales process is conducted, and obviously if the sales process is targeted incorrectly – by poor segmentation and identification, then commitment is impossible to achieve.

The reason that commitment should be a key outcome of the sales process for i-mode is that the more committed a customer is to a supplier the more they will forgive the inevitable issues and challenges that will arise in the early implementation (see DoCoMo deluged by 3G customer complaints).

When the i-mode customer leaves the store the sales person must have built both the degree of tangible and intangible involvement with the carrier and brand. This is a key to success. It is also a key to being able to later successfully sell incremental service enhancements, and thus cost-effectively adding to ARPU.

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Part 3 - Creating Excitement
Part 1 - Principles
Complete Version (PDF, 6 pages, free) go to my website www.digitalinvestor.com.au

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To understand better the i-mode business model see my related blogs on imodestrategy.com:

Why the Open Mobile Terminal Platform Alliance is a Win for the i-mode Business Model - here
Why the Analysts Have It Wrong About Telstra's new i-mode Alliance - here
The Delicate Balancing Act of Sustainability for Mobile Game Content Providers - here

What's your view of the sales process for i-mode - what changes are needed and why? Post your Comments.

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For rigorous expert independent audit and advice, no matter where you are in the i-mode ecosystem, call me.Email me; Call (Australia) +61 403 345 632

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"I can personally recommmend the Mobile Intelligence Tour as the most effective, most intensive and most enjoyable way to acquire business insight into the Japanese mobile economy and the people behind it," Walter Adamson.

Redesigning the i-mode Sales Process for Success - Part 1 Principles

Relationships with handset manufacturers are one of the important elements of the i-mode ecosystem. It is important firstly for competitive advantage in specifying market-leading features, and secondly because usability of these features is a critical aspect of the service.

When handsets are used just for voice and simple messaging sales can be driven and customers satisfied with good design aesthetics, good pricing and by deploying a ‘product’ sales mentality. That’s not the case with i-mode.

With i-mode the design aspects remain just as important, but the performance and usability and sales experience all take on bigger dimensions. This is because not only do customers need to experience that it's easy to send e-mail or access the Internet, but they also have to be able to readily download software (games) and use still and video cameras, connect to PCs or photo kiosks, and to manipulate contact lists with complex links, options and parameters for each entry. The i-mode device is a rich service centre with a close affiliation with their owner!

In fact – and here is the conceptual breakthrough – i-mode is a true service brand.

In Japan, i-mode's success is in part thanks to the fact that it is marketed with an emphasis on services and the overall user experience - with no reference to the actual technology.

However, although they may deny it, brand managers have received the majority of their training focusing on product brands. Telstra, particularly in their reseller strategy, relies mostly on advertising, packaging and promotion and the accompanying imagery to shift handsets. This is a classic product brand management approach.

In contrast, powerful service brands, such as Amazon and Google can grow without conventional advertising, by leading their brand building with service and customer experience.

For i-mode success, what now becomes more important is the creation of a great customer experience where advertising simply amplifies the effect. This experience starts with the sale itself.

And the sales process has to be re-invented from the beginning to the end, starting with the absolute commitment to i-mode as service rather than handsets as just another category of packaged 'product sale' from the store.

Five key dimensions drive this design. Four are "in the box" and one out of the box.

Firstly, the requirement to fulfil the basic customer needs, and secondly do this with ease – or without problems and hassles. Thirdly, to provide clarity – this is about consistency of expectation - and finally, deliver an experience that is unique in that it stands out from the competition.

The fifth and "out of the box" driver is to generate excitement. Of course, excitement is a relative feeling, moderated by expectations, and hence its linkage to the third dimension above. Although it is not always high among customers, when created, it can achieve true differentiation.

With the i-mode service this excitement factor is all all-important. When done properly a price premium can be sustained and up-selling opportunities generated, and this is where the increase in ARPU and return on investment start to accrue.

We know that problems with handsets, in various dimensions, such as usability, availability, and functionality, have caused serious setbacks for carriers offering advanced services. This occurred in some European i-mode implementations, in Telstra’s Mobile Loop implementation where they reportedly wrote-off $100m in hard costs alone, and even in DoCoMo itself when they rolled out their first FOMA 3G handsets (see this report).

If these lessons are not learnt in Australia, before Telstra rolls out i-mode, then business success is by no means assured.

According to a report by Analysys, operators should learn from the success of Vodafone and i-mode operator NTT DoCoMo in Japan. "We believe that many operators outside Japan will be able to replicate this success as long as they pay careful attention to pricing, marketing and availability of handsets," said the report's co-author, Alastair Brydon.

The sales process for i-mode, through the whole chain from own-stores through resellers, has to be re-designed, starting yesterday!.

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Part 3 - Creating Excitement
Part 2 - Customer Segmentation
Complete Version (PDF, 6 pages, free) go to my website www.digitalinvestor.com.au

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To understand better the i-mode business model see my related blogs on imodestrategy.com:

Why the Open Mobile Terminal Platform Alliance is a Win for the i-mode Business Model - here
Why the Analysts Have It Wrong About Telstra's new i-mode Alliance - here
The Delicate Balancing Act of Sustainability for Mobile Game Content Providers - here

What's your view of the sales process for i-mode - what changes are needed and why? Post your Comments.

---

For rigorous expert independent audit and advice, no matter where you are in the i-mode ecosystem, call me.Email me; Call (Australia) +61 403 345 632

---

"I can personally recommmend the Mobile Intelligence Tour as the most effective, most intensive and most enjoyable way to acquire business insight into the Japanese mobile economy and the people behind it," Walter Adamson.