The pre- and post-paid billing path to profitability

The US-based CSG and its wholly-owned subsidiaries serve more than 265 service providers in over 40 countries across the globe. The company provides billing and customer care solutions for cable television, direct broadcast satellite, advanced IP services, next generation mobile and fixed wireline markets. In this article, Sherie Ng advocates the case for service providers to shift focus from the type of billing system (pre-paid/post-paid) to the type of transaction the customer is completing

Traditionally, consumers who paid for phone services under pre-paid calling plans were often credit-challenged consumers who didn’t offer reliable, long-term revenue for the telecommunications service provider. Today, pre-paid subscribers could be using both, voice or data services and could be using the service simply for the convenience and the flexibility to pay only for what they use, thus reducing the fear of using too many services and being faced with a huge bill at the end of the month. With this change in customer dynamism comes an opportunity to reassess the value of the pre-paid subscriber base.

Following are some third-party statistics that illustrate the need for convergent pre-paid and post-paid billing systems:

• As the number of pre-paid subscribers increases worldwide, analyst predict that service providers will need their billing system to provide a unified view of their customer base.
• Pre-paid is a segment that carriers can no longer place on the back burner. (IDC report, August 2001—Wireless pre-paid: Ready for Blastoff)
• Operators need to find strategies to increase the value of pre-paid subscribers. (Pyramid, June 2001—Extracting Value from Pre-paid Mobile Subscribers)

Pre-paid versus post-paid is a means of payment, not a class of service. There is a wealth of knowledge in a carrier’s customer base about the way consumers use pre-paid services. Since they pay as they go—and could be anyone from a carrier’s best post-paid subscriber to a one-time service user—they offer a unique look into how and why consumers use a carrier’s services. However, if that usage data is trapped in a silo of information solely about pre-paid customers, in a way that can’t be applied to the post-paid install base, a carrier will not be able to maximise the revenue per user. To get past this stumbling block, carriers should shift the focus from the type of billing system (pre-paid/post-paid)d) to the type of transaction the customer is completing.

A transaction-based focus

When consumers use pre-paid services, it includes the pre-authorisation of transactions, that is the same as the post-event processing that occurs in post-paid transactions. Since billing is a transaction process, by thinking of pre-and post-paid activity in a transaction-based model, carriers can boost revenues and decrease customer churn.

When considering the customer’s transaction—not the kind of network it’s measured on or the type of bill the consumer receives—consumers gain the flexibility to move balances between accounts and decide which account they want to use to pay for different services. The ability to move funds between pre- and post-paid accounts based on the kind of transaction, be it a phone call or Internet download, gives carriers valuable insight into which services are revenue generating and which are just draining the marketing budget.

Benefits of the transaction-based model

When a carrier elects to support its customers with a convergent pre- and post-paid billing system, it allows them to convert the knowledge gained from the way pre-paid consumers use services into marketing campaigns targeted at the entire customer-base. For example, carriers could offer account credit extensions for all services under one balance including voice, SMS and MMS. In addition, multiple balances become possible for post-paid voice, pre-paid GPRS and SMS or any combination thereof for one subscriber. Carriers also gain the flexibility to package offerings across balances, offer vanity numbers, friends and family plans and business applications, including multiple balances per employee.

Churn reduction mechanisms and customer loyalty plans can be applied to all consumer types and more segmentation tools can be used across the entire customer-base, enabling effective campaigning. In addition, since new offers and plans can be rolled out quickly, it gives the carrier the opportunity to target business pre-paid users.

Convergent pre- and post-paid billing systems also lowers the call centre costs because the customer service representative has one-touch access to customer information, regardless of payment method. This enables the representative to spend less time on billing-related calls and focus more on value-add tasks such as outbound calling.

Limitations of the pre-paid systems

Carriers using legacy pre-paid billing applications must be aware of the limitations and risks of those systems. For example, there is a high cost of ownership associated with data residing in two silos based on the way a customer chooses to pay. This means if a carrier wants to launch the same services for pre-pay and post-pay consumers, it needs to be configured twice and the two systems must be run, maintained and upgraded. In addition, it can take anywhere from 6-12 months to launch a new pre-paid service through a legacy system. This delay opens the door wide for the competition to get to market faster and steal market share. Another inhibitor to a carrier’s ability to compete is the dependence on proprietary interface standards, rather than open systems. If a carrier has to wait for upgrades or other support as standards change, it will delay their ability to launch new services.

The key to faster time to market and the ability to quickly launch new services is to have a user-friendly configurable system that allows carriers to build and launch most new services the same day. If the new service plan is part of a convergent pre- and post-paid system, it can be launched to all customers simultaneously.

By thinking of the transaction that the customer is making, carriers can increase revenues, reduce costs and customer churn and with an open-standards based system, can enjoy network independence and a system that will evolve with them through 3G and beyond.

Giving the consumer more flexibility to use and pay for services in the manner they choose will help carriers gain a deeper insight into why consumers choose those services in the first place. By applying that knowledge across the customer base, regardless of payment type, carriers can deliver offerings that the competition will find tough to match.

The author is a senior manager for marketing and PR at CSG Systems. She can be contacted at Sherie_ng@csgsystems.com