Welcome every one on the Eighth day for the Fourth Question.
In most developing countries, the bottom of the pyramid offers an excellent opportunity to the mobile network operators (MNO) for increasing the rural penetration and achieving a large customer base.However, this target segment is price sensitive making it necessary to develop affordable products/schemes.In India,falling mobile tariff over the last decade was a major enabler for increased rural penetration providing increased business volume to the MNO and an enabling environment to the Agri Partner for extending the advisory services to the rural base.
The financial sustainability of the service can be viewed under various dimesions.
1. In the short term, the mobile operator may have to
pass on part of the benefit of acquiring a new customer as an investment for their future annuity that can accrue from customer loyalty,
share a part of the future revenue based on the ARPU,
incentivise the service through the talktime sales to the users.
This arrangement provides the initial impetus for extending a high quality advisory service to the users.
2. In the medium term, the possibility of monetising the services canbe explored.There are existing models which are subscription based. A farmer who is getting value for money would be willing to pay for the services.
3. In the long run, continuousengagement with thecustomers provides an opportunity to extend other value added services related to financial inclusion, education, livelihood, health, etc.,thus adding mere verticals for earning revenue.In each of these, the subscribers can be provided services through mobile phones on subscription basis or usage basis.
4. m-Governance services (which are being activily promoted by Governments) and m-commerce activities have further potential of revenue generation.
Several posts on earlier days of this forum addressed this question. To summarize a few points, a partnership with an MNO can increase the financial sustainability of the service because MNO's are in the business of collecting small amounts of revenue from millions of customers and they have the business systems to support this. They also are skilled at marketing and getting feedback from customers (via focus groups and more) to hone services to fit demand. In short, they have many business skills, systems and discipline that complement the know how that agriculture partners bring to a partnership. They also have a strong profit incentive to keep focused on what is financially sustainable.
In countries where there are two or more MNO's sharing the market more or less equally, I am interested in what others think about the trade-offs from taking a multi-MNO approach versus an exclusive one. Clearly an exclusive relationship will probably incent the MNO in the partnership to work harder at marketing and selling the service. It might be that an agriculture partner could have partnerships with two or more MNO's and enabled each to tailor the service somewhat to give it a differentiator. Would that work or would the strengths of having one, exclusive MNO as a partner be so diminished by a multi-MNO approach, that a multi-MNO approach would rarely be seen as a likely path to financial sustainability? I am thinking of the situation where, say, a government ministry for AG is affiliated with a mobile AG service and wants to stay neutral across MNO's -- and where farmers use a mix of MNO's.
I would like to pick up on Judy's comment about trade-offs in a multi-MNO strategy. Our worry is that MNOs, especially in countries where market share is relatively balanced, will all try to develop their own proprietary m-agri platforms with similiar content and business models, which we believe will result in a race to the bottom.
There are (at least) two solutions that I can think of to mitigate this:
1. Agriculture partners can retain ownership of the data, thereby allowing them to use it on multiple platforms but, as Judy stated, add value to each MNO by supporting them with the development of differentation strategies. For example, an ag partner can work with one MNO to transform data for use through a call center, while working with another MNO to tailor the data for use via SMS or USSD. Or perhaps work with MNOs to create differentiated bundles of services e.g. insurance/mobile payments/weather with one MNO and buy-sell/market prices with another.
To maintain a good reputation, it will be important for the ag partner to be transparent with the MNOs about their strategy in this space (while maintaining confidentiality).
2. Agriculture partners can work exclusively with an MNO but, as part of that effort, work with the telco to establish a fair and transparent pricing model to enable out-of-network users to access the information.
I look forward to comments/critiques of these approaches.
I think both mitigation strategy mentionned above are interesting in working with telcos but I would argue that going after a differentiated offer for each MNO might create complexity for the farmers (I can access through USSD but not voice and it is the opposite for my neighboor...).
Overall, I would argue that multi vs. single MNO approach depends very much on the local telco ecosystem: in some countries like Indonesia, the incubemt (Telkomsel) is so strong in the countryside that is almost worth it to get locked in an exclusivity partnership (for some time only :-).
Our experience in talking to MNO's in south-east Asia was not always easy. Although tapping into rural population is an attractive value prop for them, it is not simple to quantify incremental revenues:
A mobile Agri solution catters to decision makers in the fields: these are heads of families, landlords, village influencers, etc. We had always assumed this was the majority of the people in the countryside but it is proving to be only a fraction of the total rural population. Hence, the need for being realisitc on SMS or voice traffic generated.
So far Mobile Network Operators (MNOs) look like the only stakeholder that can enjoy indirect revenues from Aagri VAS in addition to obvious direct revenues (subscription or pay per use) availble to other service providers.
Those are:
- Increase in ARPU of existing user base. Compare: ARPU of your regular rural user vs. ARPU of rural user of Agri VAS on the same network, multiply the difference by the number of Agri VAS subscribers.
- Increase in market share. Increase in number of rural customers attributed to Agri VAS is a source of additional ARPU every month. You could expect new customers' ARPU to be equal regualr rural ARPU.
- Increase in loyalty and decreased churn. Compare: churn rate in a regular sample vs churn rate in a sample of Agri VAS users. This % difference multiplied by number of Agri VAS multipled by rural ARPU is your saved revenue due to decreased churn.
- Reduction in aquisition cost. Your acquisition cost per customer multiplied by number of new network subscribers attributed to Agri VAS is your saved aquisition costs.
Once indirect reveunes listed above are considered, the challenge of financial sustainability in MNO neutral approach becomes even more obvious. MNO-neutral service provider not only has to invest heavily in marketing, but can only rely on B2C and B2B revenue streams. Not to mention the revenue sharing with MNO that has little or no incentive to provide the service at the network rate or lower in this case.
It is clear that MNO’s have the ability to collect micro payments from millions of customers and also have the necessary technical / billing infrastructure to manage this process. Something that is difficult for an external entity - agriculture partners - in the value chain. However it remains a point worth discussing if MNO’s will be willing to undertake marketing, getting feedback from customers and customizing the offering to fit demand (if any). Even in the more traditional ‘app economy’ how many MNO’s are actively sharing market intelligence, feedback with developers (agreed that MNO’s don’t have much say in this scenario)? Not to mention that such activities involve a cost for the MNO and being non-core to their revenue model it is unlikely they would invest one time / continuously in such exercise.
I remember one of the leading MNO’s in India clearly stating that if your offering is good we will keep it on our marketplace. If it brings in revenue for you it brings in revenue for us and your place on the market will continue to grow. If not it will get pushed down on the shelf and we would not be able to push it.
Then comes the question of exclusivity. When there is already a substantial struggle to ‘sell’ the agri content I am not sure there will be many takers for exclusivity. However if the agri content is customized and filtered enough (customized as per local needs) placing the same in a shopping cart is relatively easy. But such customization cannot be expected from a government ministry level. Such customization happens via the extension agencies. They sit at the crossroads where content is absorbed, customized, disseminated and implemented. To me extension services are (or should be treated as being) very broad in nature. I don’t think they are restricted to just the government outlets in districts or villages. To me Iffco fertilizer co-op is an extension service, to me a shopkeeper in a rural area is an extension agent. That is where farmers get most of the information compared to a government department.
Collins NwekeMillicom International CellularUnited Arab Emirates
In Africa between 50% to 80% of the work force depend on Agriculture and in most cases it also represent its GDP, so considering the transaction that goes on in the Agriculture industry and the little experience most MNO have about this sector it will be worth it for them to take a look at this industry.
The current price war on tariff amongst most MNO will be another reason for the MNO to look for other ways they can increase the ARPU per customer.
The best way for an MNO to learn fast about this industry will be to Aline with an Agriculture partner and understand how farmers conduct their business and over a period of time, they can build products that will help farmers enhance their yield and and in turn increase the profitability of the MNO.
Will be most interested in your response / model as I am working on a proposal to present to a Mobile Opperator.
thanks,
Jack
Jack, I'm sure that others will join in this thread soon! I hope you have found the conversation useful so far, and best of luck with your proposal.
Michael
Welcome every one on the Eighth day for the Fourth Question.
In most developing countries, the bottom of the pyramid offers an excellent opportunity to the mobile network operators (MNO) for increasing the rural penetration and achieving a large customer base. However, this target segment is price sensitive making it necessary to develop affordable products/schemes. In India, falling mobile tariff over the last decade was a major enabler for increased rural penetration providing increased business volume to the MNO and an enabling environment to the Agri Partner for extending the advisory services to the rural base.
The financial sustainability of the service can be viewed under various dimesions.
1. In the short term, the mobile operator may have to
This arrangement provides the initial impetus for extending a high quality advisory service to the users.
2. In the medium term, the possibility of monetising the services can be explored. There are existing models which are subscription based. A farmer who is getting value for money would be willing to pay for the services.
3. In the long run, continuous engagement with the customers provides an opportunity to extend other value added services related to financial inclusion, education, livelihood, health, etc., thus adding mere verticals for earning revenue. In each of these, the subscribers can be provided services through mobile phones on subscription basis or usage basis.
4. m-Governance services (which are being activily promoted by Governments) and m-commerce activities have further potential of revenue generation.
Several posts on earlier days of this forum addressed this question. To summarize a few points, a partnership with an MNO can increase the financial sustainability of the service because MNO's are in the business of collecting small amounts of revenue from millions of customers and they have the business systems to support this. They also are skilled at marketing and getting feedback from customers (via focus groups and more) to hone services to fit demand. In short, they have many business skills, systems and discipline that complement the know how that agriculture partners bring to a partnership. They also have a strong profit incentive to keep focused on what is financially sustainable.
In countries where there are two or more MNO's sharing the market more or less equally, I am interested in what others think about the trade-offs from taking a multi-MNO approach versus an exclusive one. Clearly an exclusive relationship will probably incent the MNO in the partnership to work harder at marketing and selling the service. It might be that an agriculture partner could have partnerships with two or more MNO's and enabled each to tailor the service somewhat to give it a differentiator. Would that work or would the strengths of having one, exclusive MNO as a partner be so diminished by a multi-MNO approach, that a multi-MNO approach would rarely be seen as a likely path to financial sustainability? I am thinking of the situation where, say, a government ministry for AG is affiliated with a mobile AG service and wants to stay neutral across MNO's -- and where farmers use a mix of MNO's.
Judy
I would like to pick up on Judy's comment about trade-offs in a multi-MNO strategy. Our worry is that MNOs, especially in countries where market share is relatively balanced, will all try to develop their own proprietary m-agri platforms with similiar content and business models, which we believe will result in a race to the bottom.
There are (at least) two solutions that I can think of to mitigate this:
1. Agriculture partners can retain ownership of the data, thereby allowing them to use it on multiple platforms but, as Judy stated, add value to each MNO by supporting them with the development of differentation strategies. For example, an ag partner can work with one MNO to transform data for use through a call center, while working with another MNO to tailor the data for use via SMS or USSD. Or perhaps work with MNOs to create differentiated bundles of services e.g. insurance/mobile payments/weather with one MNO and buy-sell/market prices with another.
To maintain a good reputation, it will be important for the ag partner to be transparent with the MNOs about their strategy in this space (while maintaining confidentiality).
2. Agriculture partners can work exclusively with an MNO but, as part of that effort, work with the telco to establish a fair and transparent pricing model to enable out-of-network users to access the information.
I look forward to comments/critiques of these approaches.
Hello everyone, I am a newcomer on that forum :-)
I think both mitigation strategy mentionned above are interesting in working with telcos but I would argue that going after a differentiated offer for each MNO might create complexity for the farmers (I can access through USSD but not voice and it is the opposite for my neighboor...).
Overall, I would argue that multi vs. single MNO approach depends very much on the local telco ecosystem: in some countries like Indonesia, the incubemt (Telkomsel) is so strong in the countryside that is almost worth it to get locked in an exclusivity partnership (for some time only :-).
Our experience in talking to MNO's in south-east Asia was not always easy. Although tapping into rural population is an attractive value prop for them, it is not simple to quantify incremental revenues:
A mobile Agri solution catters to decision makers in the fields: these are heads of families, landlords, village influencers, etc. We had always assumed this was the majority of the people in the countryside but it is proving to be only a fraction of the total rural population. Hence, the need for being realisitc on SMS or voice traffic generated.
Feel free to challenge!
Mathieu
So far Mobile Network Operators (MNOs) look like the only stakeholder that can enjoy indirect revenues from Aagri VAS in addition to obvious direct revenues (subscription or pay per use) availble to other service providers.
Those are:
- Increase in ARPU of existing user base. Compare: ARPU of your regular rural user vs. ARPU of rural user of Agri VAS on the same network, multiply the difference by the number of Agri VAS subscribers.
- Increase in market share. Increase in number of rural customers attributed to Agri VAS is a source of additional ARPU every month. You could expect new customers' ARPU to be equal regualr rural ARPU.
- Increase in loyalty and decreased churn. Compare: churn rate in a regular sample vs churn rate in a sample of Agri VAS users. This % difference multiplied by number of Agri VAS multipled by rural ARPU is your saved revenue due to decreased churn.
- Reduction in aquisition cost. Your acquisition cost per customer multiplied by number of new network subscribers attributed to Agri VAS is your saved aquisition costs.
Once indirect reveunes listed above are considered, the challenge of financial sustainability in MNO neutral approach becomes even more obvious. MNO-neutral service provider not only has to invest heavily in marketing, but can only rely on B2C and B2B revenue streams. Not to mention the revenue sharing with MNO that has little or no incentive to provide the service at the network rate or lower in this case.
It is clear that MNO’s have the ability to collect micro payments from millions of customers and also have the necessary technical / billing infrastructure to manage this process. Something that is difficult for an external entity - agriculture partners - in the value chain. However it remains a point worth discussing if MNO’s will be willing to undertake marketing, getting feedback from customers and customizing the offering to fit demand (if any). Even in the more traditional ‘app economy’ how many MNO’s are actively sharing market intelligence, feedback with developers (agreed that MNO’s don’t have much say in this scenario)? Not to mention that such activities involve a cost for the MNO and being non-core to their revenue model it is unlikely they would invest one time / continuously in such exercise.
I remember one of the leading MNO’s in India clearly stating that if your offering is good we will keep it on our marketplace. If it brings in revenue for you it brings in revenue for us and your place on the market will continue to grow. If not it will get pushed down on the shelf and we would not be able to push it.
Then comes the question of exclusivity. When there is already a substantial struggle to ‘sell’ the agri content I am not sure there will be many takers for exclusivity. However if the agri content is customized and filtered enough (customized as per local needs) placing the same in a shopping cart is relatively easy. But such customization cannot be expected from a government ministry level. Such customization happens via the extension agencies. They sit at the crossroads where content is absorbed, customized, disseminated and implemented. To me extension services are (or should be treated as being) very broad in nature. I don’t think they are restricted to just the government outlets in districts or villages. To me Iffco fertilizer co-op is an extension service, to me a shopkeeper in a rural area is an extension agent. That is where farmers get most of the information compared to a government department.
In Africa between 50% to 80% of the work force depend on Agriculture and in most cases it also represent its GDP, so considering the transaction that goes on in the Agriculture industry and the little experience most MNO have about this sector it will be worth it for them to take a look at this industry.
The current price war on tariff amongst most MNO will be another reason for the MNO to look for other ways they can increase the ARPU per customer.
The best way for an MNO to learn fast about this industry will be to Aline with an Agriculture partner and understand how farmers conduct their business and over a period of time, they can build products that will help farmers enhance their yield and and in turn increase the profitability of the MNO.