Catalyst enables micro-segmentation to turbo-charge digital sales for telcos

In just six months, a TM Forum Catalyst team has developed a digital sales tool which already shows commercial potential in telecoms and beyond.

Annual global revenues for operator-billed voice and data services are expected to fall by over $50 billion over the next five years, from $837 billion in 2017 to $785 billion by 2022, according to Juniper Research. Telcos are under pressure to transform their businesses to increase revenue and drive down costs, and they are making progress with digitization and self-service initiatives. The next frontier, according to a TM Forum proof-of-concept Catalyst team, is selling better digitally.

The Real-time Campaign with Big Data Monetization and Open API Catalyst champions are China Mobile and Telenor. Catalyst champions bring a business challenge and work alongside participants – in this case, AsiaInfo, awareX, Data-u -- to rapidly develop a solution. China Merchant Bank also provided the team with input to help shape the direction of the project.

Making communications count

China Mobile set this challenge due to some of the country's unique and strict rules around marketing, but the benefits extend to the whole telecoms industry (as Telenor's involvement shows) – and way beyond it too.

In China, telesales is strictly regulated and based around an opt-in model. Many platforms, such as Alibaba, Tencent and WeChat, also set limits on the number of communications companies can send – it is customary in China not to send any more than four marketing messages to the same customer in one month.

Companies like China Mobile need to do more digitally and ensure that every single communication counts. Following a recent transformation of its business support systems (BSS) with AsiaInfo, the operator, which has over 900 million mobile subscribers, is well placed to use data to achieve this.

The Catalyst team’s solution, which was demonstrated last month at Digital Transformation World in Nice, France, is a user-friendly digital engagement app from awareX, underpinned by an innovative vector-tagging system developed by AsiaInfo. This system provides detailed segmentation which enables organizations to push highly targeted and personalized offers at the right time. awareX pushes the product information to digital channels, and Data-u, a specialist analytics company in China, provides algorithms for the solution.

How micro-segmentation works

AsiaInfo’s vector tagging system, which was revealed publicly for the first time as part of this Catalyst, creates detailed tags for every individual customer, about everything from their age, tariff and usage patterns to product preferences and more. In this case, the team populated around 600 tags from communications service providers’ data sources, but in the future, up to 20,000 general tags and 70,000 industry-specific tags could be used to generate customer insight.

The system is permissions-based and GDPR-compliant. “That allows you to do micro-segmentation of the user base,” explains Alex Hawker, Chief Business Officer at awareX. “Once you have these vector tags done, you can group people with similar factors into micro-segments that you can market to.”

Telcos typically have tens of thousands of products in their product catalogs, and they’re increasingly working to pull in third-party products to better serve their customers. This vector-tag-based system offers a new way for telcos to push the right product to the right customer, in an instant. The system combines these micro-segments with the product catalog to produce highly targeted recommendations.

“The recommendation engine suggests the number-one product for a customer,” Hawker says. “And it’s in real time – at this time, to this specific customer, in this physical location. It also recommends 12 other products the customer is likely to be interested in.”

These could be the telcos’ own products or those of third parties. China Merchant Bank, for example, showed how the tool could be used to promote financial products like phone insurance. Further, telcos and third-party marketers can set certain parameters for targeting, such as age, location, contract-type, etc. All this information is pulled through using TM Forum’s Product Inventory Management Open API and presented to the customer via an app where they can buy the recommended offers with one click.

Eye-popping numbers

The Catalyst’s findings so far are already making marketers' eyes pop.

In telecoms, the average marketing email clickthrough rate (CTR) is 2.2%, and that seems very generous. The CTR on mobile display ads is 0.57%. By sending targeted messaging to specific customer segments, the Catalyst team reports CTRs as high as 36%. The lowest was 7%, with an average of 30%. “When we showed this to some marketing companies, they almost fell on the floor,” Hawker says. “They have never seen this before.” Further, the purchase rate – which is typically not even tracked as a KPI because it is so low – was 7%.

“This is the proof of the pudding,” Hawker adds. “And the secret is using data to ‘talk’ to the product catalog, then bringing that into the digital engagement channels.”

Because of these high numbers, AsiaInfo is able to offer a revenue-sharing model in some cases, using cost per lead rather than cost per click, demonstrating a shift to a business-driven rather than advertisement-driven approach.

Closing the loop

At Digital Transformation World, the Catalyst team showed the experience of a customer buying a new mobile phone. The transaction was passed via an API to the vector tag system which immediately recommended a phone insurance package, through a dynamically updated app banner server from the awareX content management system, as well as other related products.

The customer was then prompted to take a Net Promoter Score (NPS) survey, which feeds back into the tags to “close the loop.”

A key focus of the TM Forum Catalyst Program is the rapid development of solutions over six-month ‘sprints’, reflecting the urgency with which telcos need to transform. Often, over multiple sprints, a commercial product is developed.

This Catalyst team has worked even faster than is typical, though, and is already considering commercializing their solution. And Hawker notes that it has the potential to be deployed not only in telecoms but also other industries since its principles are universal.

TM Forum tools

The Catalyst program also serves to show how TM Forum’s tools and best practices can be used to solve real challenges and develop new products. Hawker puts the team’s rapid progress down to the fact they developed the cloud-native digital engagement platform in line with TM Forum’s Open Digital Architecture (ODA), which aims to act as a de facto standard for the design of open digital platforms.

The team also used the Product Inventory Management API and has submitted a significant update back to TM Forum’s community for consideration. The team’s amendments will allow for richer graphics and content in the API – features which will be essential for the way telcos sell digitally in the future.

Watch this video filmed at Digital Transformation World to learn more: