For approximately the past five years, a prominent broadband operator has used PerfTech’s in-browser messaging platform to help achieve these objectives:
- establish a tiered, billing model based on usage allowances and speeds
- encourage users to subscribe to an Internet plan that best fits their data needs
- foster a high level of customer satisfaction through “right-sized” performance
All of these objectives could be accomplished through one strategy: voluntary tier migration.
Background
Many subscribers initially underestimate their data needs and choose an undersized Internet plan. That instinct is then compounded by the ever-climbing growth in video streaming and other heavy data-consuming applications. According to the operator, average data consumption among their subscribers grew nearly 5-fold, from 40GB to 189GB monthly, from Sept 2013 through June 2017. It’s not surprising that this trend frequently produces a mismatch in service plan.
Process
To ease subscribers into tier migration, the operator began a process that included these steps:
- Establish usage levels for all speed tiers for new and renewing customers
- Set allowance levels and overage fees to target the top 1-2% of consumption customers
- Roll out a data meter for subscribers to track their own consumption
- Forgive the first overage instance, and cap the next 2 overage events to $30; overage is uncapped thereafter
PerfTech’s Role
Critical to every step in the process was clear and immediate communication. Personalized, in-browser messages informed subscribers at every event. Messages were used to:
- Introduce the usage meter and how to access it
- Educate subscribers on data usage and the demands of different types of applications
- Alert subscribers when various data thresholds are reached, such as at 75%, 85%, 95%, and 100%
- Notify users when overages fees apply, whether forgiven or charged
- Advise subscribers and link to options when it’s time to upgrade to a higher tier
Results
The following graph charts the operator’s growth in ARPU for the past 5 years, from 2012—when the usage-based billing model was introduced mid-year—through 2016. Because of the initial grace period, overage fees were not collected before 2013. Note that the operator’s “base ARPU,” which is a fixed amount, is not reflected on this graph. Only those segments whose fees grew ARPU are included as follows:
Grey: a combination of installation, equipment rental, and home wi-fi fees
Orange: tier migration revenues
Blue: data overage fees
Note that while “other” fees grew marginally for the past 5 years, the two fastest-growing contributors to ARPU growth are 1) tier migration and 2) overage fee revenues. Even though overage fees have grown at a faster pace, tier migration as a segment is more than 6-times larger and produces more absolute revenue:
2012-2016 Grew By % of Total ARPU
Other fees ~1.7-fold from 10.25% to 14.1%
Tier migration ~10-fold from 1.47% to 11.76%
Overage fees ~19-fold from 0% to 1.89%
From the operator’s perspective, although overage fees do represent a growing segment of revenue, collecting overage fees is not the operator’s real goal. The strategy is not to overload subscribers with penalty fees, which can lead to dissatisfaction, but instead to get them to a tier where the monthly usage allowance and respective speeds will cover their average needs and keep performance high. Proactive communication has and continues to play a critical role in maintaining these objectives, which in the end have produced increased revenues, a growing ARPU, and improved subscriber satisfaction.