What’s the Best Way to Implement a Price Increase?
In this series of insight articles from HAUD, we ask two of our senior experts – Global Head of Market Intelligence, Joanna Kuligowska, and VP of Pre-Sales and Product Manager, Ron Bonnici, to share their thought in the A2P market, and offer up actionable areas of focus around messaging monetisation.
Our last article here we looked at the impact of price increases on the wider A2P Messaging market dynamic.
In this one we ask, what is the right way to implement a price hike.
With business messaging ever more important, over the past few years many MNOs have been tempted to implement A2P SMS price increases.
It’s a tempting solution to quickly grow revenue, but as we outlined in the last article here, there can be significant risks attached too – not least the wider impact on market dynamics.
So is there a right way to go about it?
For Joanna and Ron, the answer is yes, but it requires a strategic, data-driven approach that’s fully thought through – not just a reactionary move.
For them, it begins with developing a thorough understanding of market dynamics, customer behaviour, and global pricing benchmarks.
When considering a price increase for A2P SMS termination, our experts advise mobile operators begin by assessing their market elasticity. Factors such as market size, operator market share, and prevailing termination rates set by other Mobile Network Operators (MNOs) and aggregators should all be considered.
This can immediately throw up opportunities, for example where operators are not currently monetising at the market rate. In these situations, an increase might be less disruptive, as the operator aligns with the existing market trend, minimizing risks.
The role of global intelligence is also a crucial element in formulating pricing strategies. Our experts stress the importance of studying similar regions and economies to an MNO or aggregator’s local market – to understand their A2P termination pricing. Additionally, analysing traffic profiles and identifying any signs of significant erosion or specific use case declines can provide valuable insights.
All of these can then be used to design an effective – and attractive – pricing structure as part of a wider, comprehensive, pricing strategy. You’ll be able to see the likely elasticity in your market – and ensure you don’t price yourself into an outlier position, with the risks to recurring revenue and market sustainability that it brings.
Market stability is also a key factor in the price increase process. In Joanna and Ron’s experience, frequent price increases or fluctuations can cause strain on brand messaging budgets and disrupt campaign planning. Brands often seek pricing stability to facilitate effective planning and execution – take that away, and their desire to work with you can drop off.
Furthermore, the manner in which price changes are communicated t brands and wholesale partners is also considered vital. Providing sufficient notice and allowing stakeholders time to prepare for price adjustments contributes to a smoother transition – and the smoother things go, the less likely they are to turn to alternative channels.
Abrupt changes can also incentivize undesirable behaviours, including traffic trashing and dumping to mitigate potential losses, as well as switching to ‘cheaper’ options – whether via grey routes or onto OTT services. These practices, while aiming to offset increased costs, can ultimately impact the subscriber experience and brand reputation.
So, price increases are part of the industry, and all MNO’s have a duty to secure the right level of monetisation from their network and assets. But the overarching message here is, use as much industry data as you can to help define your price rise strategy and flag changes to your partners with as much time as possible – or you risk undermining this part of your business.
In the next part of this series, we will look at price ceilings – how to spot you’ve hit one and the impact of it – and we’ll look at the role of next generation firewalls, like HAUD’s, in driving sustainable messaging monetisation.
Meanwhile, feel free to reach out to HAUD below to find out more about price increase implementation in your region and the best strategy for doing it sustainably.
Do you want to find out more about price increase implementation?
Speak with one of our messaging revenue specialists