Whitepaper: Using Real-Time Charging

for Promotions and Bundles

Introduction
Pre-paid customers are popularly characterized as being
more transient, cost conscious, and difficult to manage
than their post-paid counterparts. But for many pre-paid
customers, it is a payment method which provides the
most control and flexibility, but it does not reflect the sum
of their communication needs.
Marketers have traditionally treated pre-paid as a single
bloc, while post-paid subscribers have been subject to
advanced segmentation techniques. In highly competitive
markets, pre-paid marketing is becoming increasingly
sophisticated, to support the quest for sales growth.
The pre-paid business objective is changing, and, in
many markets has already changed from one of basic
service provision and credit control, to that of improving
and innovating how pre-paid services are marketed.
Pre-Paid Service Plan Innovation
The language of service provider marketing is
changing. A new vocabulary is emerging that includes
words such as: promotions, merchandising, and cross-
selling; all placing the customer at the centre of system
and process change.

The best marketers recognize that within the category of However, taking the steps to realize this change
pre-paid there are in fact multiple segments, driven by frequently puts marketers at odds with their existing
different needs including usage, value, and lifestyle. A charging systems, many of which were designed
simple illustration of this point is that a student will have originally for circuit-switched technology.
very different needs (usage, time-of-day, and recharge
and profile) than a parent, even though both may be pre-
paid customers.
Promotions
Pre-Paid’s Unique Challenges
Issues such as churn, revenue stimulation, and new
product adoption obviously apply to pre-paid customers.
However, the nature of pre-paid users makes for a
unique challenge, with low customer exit barriers, issues
with account dormancy, multiple personal SIMs, and Bundles
Real-Time
Loyalty Plan
unregistered or missing personal details. Charging

Most pre-paid customers can, in theory, access the same

services as post-paid subscribers. The reality for many is
that they do not, for reasons as varied as limited handset
capabilities, high marketing costs, credit risk, and small
balance amounts. This requires service providers to be Notifications
more creative in what services they offer and how they
reach these customers.
Figure 1: Overview of real-time charging’s influence
For marketers, this represents a very different challenge, on pre-paid marketing
and requires different marketing tools to those used for
post-paid. There is a growing understanding that the Real-Time Charging is now as much about enabling
billing infrastructure in particular real-time charging, the marketing as it is about accurate accounting. A flexible,
mechanism by how pre-paid accounts are managed, is open, configurable Real-Time Charging system can
best placed to address many of the unique challenges of unleash marketing innovation and enable pre-paid
marketing to pre-paid subscribers. marketing to maximize efforts for targeted usage and
recharge promotions, flexible bundling, and to build
While pre-paid ARPU will always lag post-paid revenues, loyalty.
service providers recognize that does not mean that
significant revenues and profits cannot be made. Indeed
the lower customer acquisition costs, with no or limited
handset subsidies, means that pre-paid accounts often
generate a profit more quickly.

1
 Promotions
With pre-paid users perceived as being more value
conscious, promotions play a vital role in stimulating
revenue. However, blanket promotions risk destroying
value by needlessly cutting prices or offering free
services without sufficient operator reward. This is
because what constitutes value depends on the
segment; to be successful promotions need to be
differentiated with relevant benefits.
But with personal data either missing or incomplete,
and lower customer values making traditional
marketing approaches expensive, these promotions
need to be carefully crafted to be profitable. This
requires the use of multiple promotional triggers, and
the ability to run and manage multiple promotional
offers in parallel.
Usage Promotions
Usage promotions encourage service uptake,
especially for new services. The freedom to configure
promotions using a combination of: service type,
usage, and balance results in highly attractive and
creative promotions (see Figure 2). Typical of the
types of flexible promotional use cases now possible
are the following:
• Spend X and the rest are free - this promotion
is designed to incentivize subscribers to spend
slightly more than they normally would. The value
proposition to the customer is that all service above
a certain threshold will be zero-rated for a given
time span, typically for one day
• Spend X and the next X are free - this is a variation
on the above theme but with a limit on service
usage, e.g., send 12 SMS and the next 10 are free
• Buy one get one free - a popular idea borrowed
from retailers. This promotion enables a service
provider to allow a customer to pay for one service,
such as a ringtone and get another for free. This
idea can be extended, to allow any ratio of services
to be combined e.g., three for the price of two, etc
• First use free - service providers have a growing
number of data, content, and multimedia services.
However, many customers are reluctant to try new
services. This approach allows a customer to easily
try a service, prior to subscribing
• Free Sunday / Favourite Day - calls or messaging
is free for those who have maintained a balance of
a certain amount or have recharged their account
within the month
• Cross product promotions - to encourage
customers to try new services, new services can be
provided at a reduced price or on a complimentary
basis for a period of time. E.g., spend $10 on text
messaging this week and receive mobile TV free for
the next week
2
Re-charge Promotions
Subscriber churn is a particular problem for pre-paid
subscribers, as unlike post-paid customers, where
contracts typically lapse on a particular date, pre-paid
accounts simply (and quite often gradually) become
dormant. Adopting a life-cycle management driven
perspective, including associating expiry dates with
balances, can pay dividends by keeping accounts
active and flagging any changes in state. This could
be used for example, to apply multiple lifecycle states
as an account goes towards dormancy. So, when an
account enters a certain stage, it would be subjected
to an intensive period of promotions to re-animate
usage.
Recharge promotions if structured correctly, are an
ideal approach to encouraging customers to stay
active and reduce churn. There are a number of ways
that service providers can encourage subscribers
to not only maintain their balance but also use it.
Examples of effective recharge promotions include:
• Recharge bonus - i.e. every time you recharge you’ll
receive a credit
• Encouraging multiple refills of an account during a
defined period - e.g., recharge 4 times this month
and have weekend sms free
• Varying recharge rates - to incentivize refills that use
low cost channels (ATM, IVR, USSD etc.), to reduce
the cost of fulfilment
• Persuading a subscriber to maintain a minimum
balance level to enjoy lower rates - e.g., maintain a
balance of more than $30 and enjoy reduced voice
calls
• Committing a customer to an automatic monthly
recharge in exchange for a bundle of services
Legacy charging platforms are almost universally
poor at launching rapid promotions. In some cases,
it’s not even a feature. And where it does exist, it is
often a new module, built as a requirement into the
onboard rating and balance software. Because of
these limitations, service providers have started to
move these capabilities onto new platforms. With
the new platforms providing the flexibility needed to
support more complex rating models such as flexible
discounts.
Figure 2: Examples of usage and recharge
promotions
 Bundling
Customer buying trends are driving the increased
importance of bundled and packaged service offerings.
End users are attracted to bundles because of the
price, convenience and peace of mind they offer. From
an operator’s perspective, they make for both a high
value offer and a driver of revenue.
Of particular interest to pre-paid subscribers, are
occasions when they want to enjoy equivalent
advantages to a post-paid subscriber, but without
changing their payment plan. Allowing customers to
bolt-on packages, can provide an additional source
of income, and enable a subscriber to gain access to
services at a more favourable rate.
Combining the attractiveness of lower prices, with pre-
paid cost control, bolt-on packages offer subscribers
new value and operators’ incremental revenue (see
Figure 3). Below are some use cases typical of
temporary bundles:
• Bolt-on service packages - in addition to the
standard rates, customers can bulk purchase a
service for a set price. This usually works best for
popular and high-usage services such as message
credit bundles e.g., for an extra $10 buy 500 SMS
per month
• Bolt-on roaming packages - provides a customer
with a better rate for international services for an
upfront payment, usually with an expiry date. For
example, you are going on a one-week holidays
you will receive a defined quota for text and calls, to
control costs
• Service passes - allows ad hoc purchases of
internet access or to a specific service for a limited
period of time, volume (KB), or access amount
• Credit Packages - purchasing usage represented by
a credit to one or more services, for example, 1 credit
= 1 music download
• Cross-service bundles - for example, a ‘youth’
package that provides access to voice calls, sms,
mobile tv, and data
Bolt-On Options
International roaming voice 60 min.... $10
International roaming texts 100 SMS.. $5
Mobile Internet 5GB ........................... $50
International Roaming Blackberry
- email ............................................... $25
- with internet .................................... $60
Figure 3: Examples of recurring and non-recurring
bundle offers
3
Service providers should be able to offer these bundles
as a once off, non-recurring bundle. Available from
the date of purchase until they have been used up or
the associated expiry period has been passed. After
which the customer pays the current standard service
agreement amount.
Alternatively, these offers can be paid for as a
recurring charge, allowing a service provider to gain
regular, incremental revenue. With a recurring credit
subscription, customers’ accounts are decremented at
regular intervals, with unused credits from the period
being either reset to zero, or rolled over to the next
calendar period. Again once the credits are used
up, the customer pays the current standard service
agreement amount or where credits are unused, they
are rolled over or expired.
Loyalty Points
The high cost of acquiring a customer, makes it
essential that subscriber relationships are cultivated to
meet both retention and profitability targets. Operators
investing in relationship marketing initiatives, do so
with the intention of retaining their most important
subscribers i.e. those with the highest ARPU and with
the longest relationship. Loyalty Programs increase the
cost to customers of leaving one service provider for
another.
Pre-paid users yet again represent a different
challenge to loyalty plan management, as their worth
to the organization is principally calculated on refills.
Customer lifetime values are heavily influenced by a
subscriber’s retention period, providing an additional
bonus based on the length of relationship, can provide
a customer retention incentive.
Additionally, one of the overlooked influences of pre-
paid subscribers is comparing the ratio of outgoing
versus incoming calls. Pre-paid subscribers often
receive many more calls than they make. Awarding
points, as a reward for incoming calls, can increase
operator inter-connect payments, and act as a magnet
to attract customers to your network.
A customer loyalty program, that rewards subscribers
with ‘free’ network services in exchange for points, can
be a vital component of a successful customer retention
strategy. But these points are only effective if used by
the customer. A properly structured loyalty program will
provide usage-based incentives, to reward the most
valuable customers best.
Reinforcing the value of a loyalty plan, means ensuring
users are informed of their loyalty points’ status.
Automating points-earned confirmations, redemptions,
and the communication of other loyalty-related
information, using alerts by way of a text messages and
an online portal, can provide both convenience and a
sense of ownership for loyalty plan members.
 Notifications
Notifications provide a simple, yet very effective
communication channel for subscribers. Being able
to trigger timely notification messages, based on
subscriber balances or rate plan changes, can have a
powerful marketing effect. Configuring an alert based
on a changed threshold state, contributes to a ‘low
touch’ marketing, which can prompt subscribers into
action. Notifications can be configured to be sent to:
• Advise a service balance is at zero to prompt a refill
• Advertise the availability of a service promotion
• Notify that a promotional balance is about to expire
• Confirm a change of rate plan
• Verify a successful bundle subscription
• Inform that a bundle balance has expired and normal
costs apply
A practical example of these capabilities is when a
service balance has been exhausted. Rather than wait
for a subscriber to refill, a timely prompt can have a
positive revenue effect, encouraging customers to refill
earlier than usual, taking days off the charging cycle.
Addressing The Challenge Of Pre-Paid
Marketing
The billing infrastructure, or more specifically Real-Time
Charging, is one of the best placed systems to take on
the challenges of marketing to pre-paid subscribers.
Legacy systems were designed for infrequent changes,
few services, and simple pricing. These have been
pushed by subscriber growth and new data services
to the limits of their capabilities and capacity. This has
resulted in service provider delays in new services
introductions, rate plan changes, and promotional
roll-outs.
What is required is a massive step forward in efficiency,
to scale and manage the execution of complex
business logic required to support the deployment of
flexible promotion, bundle, voucher, and other balance
or rating oriented changes needed by marketing.
Modern real-time charging systems (see Figure 4)
treat each incoming service request independently,
managing the associated rating and counters steps
separately, to allow multiple prices and promotions to
apply to the same service.
This architecture delivers a high degree of flexibility.
With bundles, promotions, and recharge management
capabilities as native features, it allows:
• Promotional information to be abstracted away
from rating functionality, making it easier to execute
campaigns and re-use business logic
• The rapid turnaround of promotions. Employing
usage and allowance counters, provides readily
available subscriber specific balances
• Rollover, recurrence, thresholds, expiry dates,
balance status, and account status capabilities to be
re-used
4
As bundles become the go-to-market mechanism of
choice for many service providers, the definition of
balances is being transformed. Balances are becoming
fragmented and re-configured to support a multi-service
sell. As subscribers buy different types of services, the
definition of balance is changing to:
• One that extends beyond the concept of a single
cash balance
• Includes support for many different balance types,
such as service-specific balances, promotional
counters, vouchers, shared balances, and of course
money
• Applying business rules based on subscriber status,
rather than exclusively by subscriber type
• Enabling an operator to perform subscriber
contextual tracking
Figure 4: Real-Time Charging architecture
Pre-paid charging is a real-time process requiring
latency to be kept to a minimum, posing some
unique and serious engineering challenges. As
more complexity is loaded onto a charging request,
there is a danger that system latency will increase
to unacceptable levels, i.e. the time it takes for the
customer to have his request fulfilled becomes
noticeable. There needs to be confidence that
systems can scale to handle the increase in real-time
transactions, driven by the more complex processing
required for bundles and promotions.
Finally, it is increasingly important that system costs
scale with linearity, as they handle more subscribers,
more data driven services, more rating and balance
management complexity. To do this, software must
perform to its maximum to successfully process
10,000s transactions per second. It requires software
fine-tuned with both the operating system and modern,
multi-threaded, multi-processor hardware technologies;
to extract the most cost-effective performance of the
parallel processing capabilities available.
 Conclusion - The Power Of Real-Time
In The Network
The approach to pre-paid customers and marketing
is changing. The catalyst for this change - rapid rate
plan changes, multiple and varying bundle definitions,
promotional versatility, better lifecycle management
- need to be recognized for the important marketing
tools they are. Speed and flexibility in their
management, will be essential if these tools are
to be the foundations upon which a competitive
organization will be built.
In highly competitive markets, pre-paid marketing
has become more sophisticated, to support the quest
for sales growth. It is increasingly understood that
customers, who have selected pre-paid, are in fact
multiple segments, requiring marketing, bundling, and
pricing dexterity.
Real-Time Charging, the mechanism by how pre-
paid accounts are managed, is now as much about
marketing and promotion enablement as it is about
accounting. Openet provides a convergent all-in-one
real-time charging, rating, and balance management
solution, providing native promotional features,
centralised operations, and maintenance to support
the rapid launch of new services and marketing
initiatives.
Openet As Your Technology Partner
Openet is the network-edge solution expert. Its
event-processing and transaction-management
solutions are used by many of the world’s largest
and most innovative service providers in the world,
including AT&T, BT, Orange, Telstra, Verizon Wireless,
and others, to leverage transactional intelligence
and extract value from the activity on their diverse
networks.
At the heart of its solution offerings is FusionWorks™,
a platform for event-processing and transaction-
management. FusionWorks is a modular software
platform that delivers the performance, scalability, and
flexibility required in today’s provider networks. The
modules are preintegrated to ensure interoperability.
Currently, Openet solutions process more than 20
billion events and transactions every day and bill more
than $10 billion in revenues each month.
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