Tesco recently announced that Tesco Mobile, its MVNO (mobile virtual network operator) had amassed 3 million UK customers. This supports the growing trend among retailers to set up an MVNO to attract subscribers and increase customer loyalty in the retail market.
Another company that has experienced growth in the MVNO sector is Effortel, a mobile virtual network operator and MVNE (mobile virtual network enabler) specialising in enabling, deploying, and managing MVNOs for retail brands. Its clients include Carrefour, the world’s second largest retailer. Whilst Effortel acknowledges that Tesco Mobile’s success reinforces the case for retail-led MVNOs, it believes that even greater market differentiation can be achieved through closer alignment between its MVNOs and its core business.
Arkadi Panitch, Founder and CEO of Effortel believes that instead of both business units operating independently, the MVNO and the existing retail operation should work hand-in-hand to develop a consolidated business. This approach creates a stronger link between retail and telecom products, and promotions, in the mind of the customer. Using this model subscribers’ can receive free voice minutes, or free access to mobile broadband and data services in return for buying consumer goods. According to Panitch, the MVNO acts as an extension of the retailer, driving footfall into the stores, increasing sales and stimulating loyalty programmes. As a result of this strategy the MVNO becomes an attractive prospect to consumers, particularly with regular shoppers to a retail chain. Technology now allows retail brands to take full advantage of a mobile division attached to their core business; discounts, offers and loyalty card schemes can all be focused on a single SIM card.
Panitch explained: “Retail brands can create a strong retail-telecom linked market proposition, with the mobile element playing a central role in developing customer loyalty. Customers will use the services hand-in-hand responding to linked offers, and promotions, delivered to them via both channels. Customers will receive simple but powerful marketing messages encouraging them to consume one service in return for discounts on the other. For example, when a customer pays for their shopping at the till they would receive free minutes on their mobile account in addition to the loyalty points they will have acquired; giving them the added incentive to shop with the retailer that also provides them with their mobile phone service.”
However, retailers are still faced with the challenge of developing a business model that facilitates a single market proposition. Typically both business units operate separately, so implementing integrated loyalty schemes can lead to disputes over costs. Panitch’s view is that if the MVNO is making a serious contribution to retail sales and expanding the loyalty scheme then a compromise should be reached between both units on cost. This can be achieved by working with an MVNO partner that can successfully integrate its resources and functionality with the existing retail business. Through closer alignment the MVNO can provide greater value to a retailer’s business than just additional revenue. By adopting this strategy brands can create a working and balanced business model (based on a single P&L) between the MVNO and the retail business making it easier to balance costs and measure benefits. This single market proposition will allow retailers to increase market share, frequency of visits and basket size, and establish the MVNO as a respected telecoms brand.