Using Machine Learning in Telco Product & Pricing Strategy

In many industries, practices and standards emerge that become such an integral part of the business environment, no one dares to question them. Instead, the status quo is defended. Telcos often launch aggressive discount promotions to keep up with competition without questioning this costly practice. Product innovations often take long to launch as no one challenges the time-consuming process of market research.

Almost all these practices, however, can be traced back to a lack of better alternatives. In an industry as complex and competitive as telecommunication, it is difficult to get valuable and actionable insights with today’s techniques. The lack of better tools lead to guesswork, suboptimal outcomes, and untapped revenue potential. Luckily, new technologies can generate a more profound understanding of current market dynamics and ultimately lead to better revenue outcome. We show how machine learning and robust data helps managers to navigate product & portfolio decisions more confidently and to – quite simply – increase profits.

Product & Portfolio Challenges in Telco

• Pricing decisions too often rely on basic tools or expert judgement and fail to incorporate real world complexity. For instance, connections between one's own pricing decision and competitors' moves often get overlooked.
  
  
• Product and portfolio decisions always near high risks. While innovations are important for a sustained competitive advantage, insufficient knowledge about consumer preferences can lead to costly failures.
  
  
• Promotions have turned more into a necessary evil instead of a tool to gain sustainable profits. Oftentimes promotions do not generate long-term value or even show counteracting effects.

Figure 1: Innovation without Buynomics

Effective Product & Portfolio Strategies with Buynomics

• With its machine learning algorithm, Buynomics can make market- and channel-specific data relevant for your pricing decisions.
  
  Complex interdependencies are automatically detected by the software. Therefore, pricing professionals do not have to worry about manually putting single pieces of information together. Instead, they can simply test an unlimited number of price-product combinations on the Virtual Customers and instantly see the effects on unit sales, revenue, and profit. Each iteration takes only five minutes to conduct, allowing professionals to thoroughly test pricing strategies in real time and without any risk.
  
  
• Buynomics lets users dynamically select and add product features and variations.
  
  With just a few clicks, new products can be created and immediately shown to the Virtual Customers to assess market reactions. The option to combine product features freely allows to test out product innovations with exceptionally low cost and effort. The Virtual Customers provide an accurate forecast of how real customers might react to the new portfolio changes. Since products are always broken down to their individual components, buynomics provides great transparency about which features are most desirable.
  
  
• Leveraging Buynomics channel-specific scenario planning functions, pricing and product managers can optimize promotions.
  
  The Virtual Customers provide accurate insights into the behavior of real customers. They help to predict the effect of different promotions strategies that can be simulated easily and at no marginal costs. The results provide confidence when choosing and planning promotion strategies, eliminating much of the current ambiguity. Thanks to its accurate forecasts, Buynomics optimizes promotions to be more profitable than the status quo. Hence, promotions are no longer a “black box” for sales revenues but can be accurately designed and tested before being introduced on the market.

Figure 2: Profitability of different scenarios compared with Buynomics

Summary

Product & portfolio decisions in the telecommunication industry are complex for various reasons. Competition is fierce, and consumers compare products across multiple channels while showing little brand loyalty. Moreover, promotions too often run counter profitability goals.

Buynomics, a SaaS based pricing platform, solves the current problems in the commercial strategies of the telecommunication industry. Using a sample of Virtual Customers that behave like their real counterparts, prices and product features can be tested at no risk and zero marginal costs. With a >95% accuracy, Buynomics forecasts the impact of changes in prices, promotions, and adjustments to the product portfolio on the market.

As a result, Buynomics helps telcos to increase their revenues by 3-7% and up to 70% in certain promotions. Our clients use buynomics in all relevant portfolio decisions, one of them calling our software the “4P engine” to reflect the broad scope of the software. All this makes Buynomics a powerful tool that saves time and effort while substantially improving the bottom line.

If you want to learn more about how buynomics enables the revenue manager of tomorrow to succeed, download our 11-page Whitepaper here.