Making real performance improvements in the network is an ever-more-important issue on operators’ agendas. This is being driven by three strong trends in the market: word-of-mouth marketing, the growing importance of Net Promoter Score and user selection criteria for mobile services. As a result, we are entering an era with clearer correlations between real performance and profit margins, one in which you don’t want to be left behind.
Wharton@Work recently presented a study that showed that 84 percent of consumers trust advice they get from friends and family. This is just one example of how word of mouth in marketing has never been more important – a reality that any network provider must consider. This trend is driving the current focus on Net Promoter Score as the most important KPI for network operators, with network performance also the most important user criteria for staying with or leaving a given network provider.
With this in mind, it is time to consider alternative views on the value of real performance in the network – one in which profits can be derived from how you and I talk about the performance of our operators’ networks.
A new study, “The value of performance”, conducted in collaboration with Columbia University has analyzed the correlation between increased investments in network performance and enhanced profits. One of the key observations in the study is the correlation between increased capacity and market share gains. A one kbps increase in downlink speed resulted in 0.012 higher market share the following quarter. Another way of looking at this opportunity is to see what a 10 percent yearly increase in capex would generate in terms of increased profit margins. In both the US and Brazil, a 10 percent increase in capex has been found to deliver 5 percent higher revenues and a greater than six percent increase in EBIDTA.
With a future around the corner in which video barrels are going to replace data buckets as the user reference for how well networks meet their needs, we have a new scenario in the market. 50 percent of mobile traffic will be video in 2019, and 40 percent of YouTube views are mobile already today. Therefore, investments over the next three years in network performance are central to growing market share and profits. There were doubts about the mobile broadband business case in 2006, and the market adoption of smartphones then took us with storm. There might be doubts about the business case for investing in network performance in 2014, but it will be a risky decision to bet against it.
My predictions for the future of a performance- and profit-correlated future are:
• Network performance will continue to be the number one selection criteria for users, and will only grow in importance.
• Network performance will only grow in importance, driven by video-, VoLTE-, mobile enterprise and M2M-driven applications.
• The most valuable conversations about network performance will take between you, your friends and your family. Performance is and will be an easy topic to discuss as a personal experience.
• Network investments focused on performance will pay off and will be central to operator strategies.