Are CPI price rises damaging your margins?

Recent CPI changes and volatile market conditions are having an enormous impact on telcos worldwide. Infrastructure demands are not slowing down and costs across the board are rising. Compounding factors are causing margins to be squeezed. Furthermore, as customers’ needs and consumption behaviours evolve in line with the increasing CPI, the threat of churn grows for large and challenger brands alike. So, what can telcos do to remain resilient into the future?

And what is the best strategy to adopt today to maintain value and continue meeting the changing needs of their customers?

Because traditionally, when telcos wanted to offset increasing costs and declining profitability, the most common tactic has been to increase pricing. But this is a tricky balancing act and one that’s becoming less effective and less popular in a customer-led and hyper-competitive market. In fact, many challenger brands are deliberately not raising prices, recognising that they see there is more to gain by acquiring customers who are disenchanted with their telcos CPI price increases than a percentage price increase across the base.

Now more than ever, if telcos raise prices in response to their own rising costs, customers are reluctant or simply unable to pay more. A 2022 EY study found that 60% of households were concerned about their broadband provider increasing the monthly price they pay.

People recognise the need for connectivity, whether that’s their mobile service, broadband, phone, or something else. But they aren’t afraid to shop around for an option that suits their needs, usage, and budget. This is particularly true as the cost of living intensifies. Even if a customer doesn’t leave a provider, if they downgrade to a lower price point with more realistic usage allowance, this reduction in ARPU offsets any gains that may have been achieved from portfolio repricing and product restructuring.

Strategic and data-backed decisions must be made. Telcos can no longer rely on gut-based decision-making or traditional business models from years gone by. Simply asking your customers to pay more every time your cost base goes up might not be the right answer. It’s more complex than that and there are a lot of variables to consider. Decision-makers need to consider the context across the lifecycle.

That is why ongoing learning and adjustments are critical to maintaining relevancy and momentum. And this is exactly where data-backed decision intelligence and forecasting tools can be so valuable, providing deep customer insights that allow telcos to make strategic product offering updates and pricing adjustments with confidence.

AI and decision intelligence: a fundamental in the future of telco

AI and decision intelligence is critical to helping telcos overcome many of the issues that exist today. AI-driven technology that allows you to harness data at scale can optimise the full value of the customer lifecycle – from acquisition through to retention and churn.

By using AI-driven technology, telcos have the power to better understand their customer segments at scale and identify the types of customers that have churned previously due to RPI increases. With these insights, they can build out their product and marketing strategies accordingly. Telcos can also identify high-risk churn customers and develop engagement methods and strategies to retain them while also identifying upstream drivers of churn. AI also enables teams to identify the optimum time to serve up new offers to increase customer value or drive retention, critical during times of economic volatility. Ultimately, AI-driven technology enables the customer base to grow organically and without arbitrary annual price rises, which in turn creates a telco that is highly attractive to new customers and engenders loyalty in existing customers.

Furthermore, by optimising and streamlining the customer journey, AI can significantly lower the cost of operations and resourcing by reducing the need for high-cost engagement methods. This is an important point, as high cost to serve is one of the biggest issues facing telcos today. In fact, in the current market, it needs to come down by at least 20 to 30%.

Democratising AI-powered decision intelligence for MVNOs

Typically, AI decision intelligence tools have only been available to large telcos with dedicated teams of data scientists – a cost base smaller challenger brands such as MVNOs and sub brands have just not been able to sustain. SourseAI’s Atlas platform is helping to bridge this gap and democratise decision intelligence.

It provides decision intelligence and data science as a service, using models that have been specifically designed for telecoms and allow teams to utilise AI-generated insights in less 90 days. This makes decision intelligence capabilities much more accessible and allows teams to take advantage of the benefits far more quickly and cost-effectively than they could if they were building out their own solutions. In fact, several brands across Australasia, including Vodafone TPG Group, have already recognised the power of decision intelligence and harnessed the power of Atlas to deliver vast benefits to their challenger brands. 

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