Gaining access to distributors’ data is one of the main challenges Mobile Network Operators (MNO) face in Latin America. Increasing the performance for any indirect channel begins with the valuable information that distributors have on their points of sale. In this blog post, we will examine how a major telecom operator managed to successfully gain access to its distributors’ data and the benefits of such a relationship. Gaining access to distributors’ data is, by all means, a competitive advantage for any telecom operator.
How it all began
Getting access to distributors’ data can be challenging for telecom operators. Even when it is specified in a distribution agreement, most distributors are reluctant to share their data. However, before deep-diving into this topic, let’s take a step back and discuss how this problem began for telecom operators in Latin America.
Back when mobile phones were still a novelty, Latin American operators came up with the idea of “scratch cards,” or prepaid calling cards. The idea behind this was to increase the adoption of mobile phones and to make mobile calling services more accessible to new subscribers.
To focus on their core competencies, these MNOs paired up with third parties to help distribute the prepaid cards. It was a natural partnership: on one side, operators gained access to new sales channels, while on the other hand, distributors got access to a product with high demand that was easy to sell at the point of sale (POS).
The calm before the storm
Given the high margins, points of sale were eager to offer prepaid cards to customers. Furthermore, problems such as capillarity or out-of-stock were uncommon or too insignificant to be tackled by the telecom operators in Latin America, who were primarily focused on their advertisement campaigns and on-boarding of new customers.
Fast forward a few years, when the customer base stabilized and distributors started to see competition from peers. As such, they were faced with the classic dilemma: increase their activity area and risk losing loyal points of sale to their competitors, or specialize in their region and offer a premium service for their points of sale.
Distributors started to go out of the market, and points of sale complained about the poor service provided by the remaining distributors. Given these circumstances, Latin American Mobile Network Operators signed exclusivity agreements with the distributors in order to avoid losing their market share. The remaining distributors agreed to restrict their operations in the assigned activity areas in exchange for less competition and higher margins.
The operation proved successful. Soon enough, distributors recovered and started to provide premium services and new offers for the points of sale, including mobile money, gift cards, and several other types of digital service.
From prepaid cards to digital tokens
In the meantime, telecom operators in Latin America started to digitize their operation and update their system from scratch cards to tokens, which are purchased electronically and sent virtually instantaneously to the point of sales, further reducing their distribution cost and the final price paid by the on-boarded end customer.
Hoping to increase the numbers of distributors that would adopt these systems, telecom operators were keen to provide tokens in exchange for simple payments, without requiring further information regarding the points of sale where those tokens were delivered.
The strategy worked, and nowadays, more than 90% of prepaid credit in Latin America is sold through tokens sent out electronically to distributors.
However, with the roll-out of 3G and 4G networks, Latin American MNOs are eager to align their distribution with their network expansion strategies. In this new context, having a precise view of the points of sales becomes a competitive advantage as it allows the operator to increase margins and promote services in regions with high potential.
Access to the distributors’ data
In this context, MNOs in Latin America require POS data from the distributors, but this operation is typically manual and prone to errors due to incompatibilities between operators’ and distributors’ IT systems, thereby making distributors’ data a “black box” in the eyes of the operator.
Furthermore, as mentioned above, operators de-prioritized problems such as capillarity and out-of-stock in favor of advertisement campaigns and on-boarding processes, given that market share was dictated by new customers. Thus using the gained access to this data as a competitive advantage.
To solve this issue, a major telecom operator developed a new IT system, making it easy for distributors to share their data through a standard API; in return, they started offering discounts for distributors that sent them high-quality data of their points of sale.
To be considered “high quality”, the data must be sent through the standard API in the operator’s own format and systems.
The discount allowed the distributors to make the needed investments to upgrade their systems and share their data with the operator in near real-time.
Today with the help of standardized and reliable data, the operator can make strong use of data analysis techniques to plan effective actions and ensure business impact.
One telecom operator in Latin America expressed that “before, it was impossible to know what POS was on the edge to be lost, but now we are able not only to react quickly on this POS at risk, but also to work hand in hand with the distributor to define the action plan most adapted to each point of sale, sometimes even reducing the number of visits, but making them more valuable to the POS.”
Final thoughts
The operator also reaps other benefits from this arrangement. Not only does the reduction of visits to the point of sale reduce the overall distribution cost, but getting reliable sales performance data can help the operator better adapt to the market changes (e.g. improving its network in areas where sales are hit due to lower network coverage in commercial centers, or testing new offers in a limited area before expanding throughout the country).
Finally, the operator can better follow its expansion strategy when rolling out new 3G or 4G networks. Indeed, by easily observing the area limits of the data purchases, it can focus its roll-out in high-demand areas while promoting its services in areas with high potential.
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About the author
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Marc Rosenfeld
Project Manager at Riaktr |