By Andrea Bassanino, Partner, Strategy at EY and Antonio Maresca, Senior Manager, Strategy at EY
Under increasing price pressure from a competitive market, telecom firms are seeing a decline in traditional revenues from phone calls and mobile data. And, as a result, they are on the lookout for new sources of revenue — particularly from their extensive customer bases. The digital signage (DS) market is one high-potential yet underexplored area. DS uses multimedia screens to present advertising, promotion and information, usually in shops and other sales locations. With only a small outlay of manpower and money, opening or expanding a DS offering could lead telecom businesses into markets with potential for increased revenue.
So far, however, potential revenues do not provide a sufficient return on investment (ROI) for large businesses. Hence, DS is not yet a priority for the C-suite, so why should telecom firms be interested in it?
Exploiting the DS boom
As businesses progress from basic to interactive services, DS can help enable and support more sophisticated functionalities and reach customers better. DS can be used by telecom firms to offer advertisers targeted “proximity marketing” (i.e., promotions and advertising) directly to their customers’ mobile phones — for example, receiving offers via text for stores that they are just passing.
Telecom businesses are paid a fee for every communication sent to their customers’ mobile phones. Some telecom companies are already providing services along these lines, and most are aware of the possibility of proximity marketing. However, this is a small market for big firms, with low margins and little potential for growth, and the majority are hesitant to invest. So what other, more profitable, opportunities are being investigated?
Turning DS and proximity marketing into a profitable business model
Proximity marketing and DS services involve a tight cooperation of three main directors within a telecommunications organization: CTOs, CIOs, and sales and marketing directors. In particular, CIOs of telecom businesses are well placed, given their technical expertise and knowledge of current industry trends, to help their companies exploit this new development. Considering the following could help:
- Data monetizing: One of the biggest benefits that proximity marketing offers telecom companies is the potential revenue from their customer databases. Where CIOs can help their firms is by harnessing the power of existing customer information and knowledge – a valuable resource for advertisers.
- Gaining market insights: Though the income generated from proximity marketing is still modest, the real ROI could be gaining new insights into market trends. CIOs in the telecom sector could help their businesses understand what messages clients want to distribute to their customers, the value of these messages and how telecom customer bases will react to them.
- Exploiting tangible experiences: Telecom companies need to build a body of real-life case studies that show the objectives and results from their work in proximity marketing. This could provide them with metrics to help support their proposition when approaching potential clients for broader targeted marketing. CIOs in telecom businesses can also use their capabilities to help demonstrate how proximity marketing can yield good results. For example, they could assist in developing the technology infrastructure that would support more sophisticated marketing to target customer bases. This infrastructure could certainly ensure the necessary administrative tasks are executed efficiently, but it could also monitor messages and marketing feedback, and track relevant measures, such as ROI.
The key challenge for CIOs when trying to kick-start proximity marketing in their businesses will be convincing leadership to invest in it. To address this, in discussions with the board, they should emphasize two key factors. The initiative requires minimal financial outlay, and it provides the ability to build credentials based on real-life case studies.