Sales promotions and campaigns are gaining popularity as an important part of the promotional mix employed by marketers to improve their sales. Because of growing competition and the fight for largest market share, telecommunication companies have also realized the significance of using promotional campaigns as part of their marketing strategy. However research has shown that this tool is not as simple as it may seem. On one hand, promotions can produce a short-term hike in sales and an increased service usage, but on the other hand, can they really help telcos resolve more critical issues in the long-term i.e. declining revenues and increasing churn rates? We address this question in a series of two blogs on this forum.

 

The most pressing issues that the telecommunication companies are currently facing are the declining average revenue per subscribers (ARPU) and increasing churn rates. According to the Annual Industry Survey Report (2016), when asked about the biggest challenge being faced by their company, 14% of the service providers gave their votes to declining ARPU. Telcos are actively exploring different options and employing different strategies to tackle these issues. To bring an immediate surge in revenues, sales promotions and campaigns prove to be one of the most convenient and handy solutions. In addition, promotional campaigns may also help telcos develop customer loyalty amongst their resellers, distributors and subscribers.

 

Sales promotions in essence are “a direct inducement that offers an extra value or incentive for the product to the sales force, distributors, or the final consumer with the primary objective of creating an immediate sale” (An Assessment of Sales Promotion as Effective Tool for Customer Retention in Telecommunications Industry of Ghana). In the context of mobile network operators, for example, sales promotions could mean giving one time bonuses to distributors on selling X amount of airtime to subscribers, or giving Y amount of free balance to resellers on subscribing to their network. They may also offer attractive commissions to resellers and distributors on each monetary transaction that they carry out during a certain time period.

 

Such promotions are primarily popular amongst network operators owing to the fact that they have proven to spur a boost in sales in the short term. They also have the ability to convince a reluctant and price-oriented distributor to buy airtime by increasing the value that he can extract from a transaction. With the help of technologically advanced softwares and platforms, operators can also map the instantaneous increase in transactions to an ongoing promotion and make sense of its effectiveness quantitatively. Lastly, because every player in the market is using such tactics to attract customers, most of the telcos are compelled to follow suit (An Assessment of Sales Promotion as Effective Tool for Customer Retention in Telecommunications Industry of Ghana).

 

Despite the apparent increase in short term sales; tracking the effects of sales promotions in the long run can be tricky. A research carried out in Nigeria to study the behavior of subscribers in response to promotional campaigns, revealed that very few customers increased the long term consumption of services offered by telcos even though they were being offered sales promotions. This could be mapped to the high level of illiteracy, high rate of rural dwelling and low income of the subscribers (Sales Promotion in the Marketing of Telecommunication Services in Nigeria: Impact Analysis). This is a case of subpar return on investment of promotional strategies. Likewise, sales promotions could also result in an increase in service adoption only for the duration of the campaign. In such a case the long term effect of the campaign is neutral, with no lasting benefit for the operator. Such cases reveal that uninformed campaigns created without proper knowledge of the target customers or intelligent analytics can end up as a cost rather than income for a telco.

 

To derive maximum and long lasting value out of sales promotions and campaigns, telcos need to make use of intelligent campaigns that target the right segment of customers with the right incentive to induce repeat purchases. Such smart campaigns can help network operators retain customers in the long run, as shown in the below survey results.

Source: An Assessment of Sales Promotion as Effective Tool for Customer Retention in Telecommunications Industry of Ghana

 

Not just that, promotions targeted at properly segmented customer groups with just the right mix of incentive and timing, have proven to help operators convince customers to switch to their network.

 

Source: An Assessment of Sales Promotion as Effective Tool for Customer Retention in Telecommunications Industry of Ghana

This means that there is more to sales promotions than short term gains.

But how can mobile network operators and telecommunication companies create such well informed and effective campaigns? The answer is Campaign Management System.

Read our next blog to see how campaign management system can help telcos derive long lasting value by championing sales promotions.