Freedom of

choice Presenters:

Frank Smidt, Vodafone

Robin de Rooij, SKIM

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€ 30 € 45 € 60

50 mb/s

50 TV channels

9 ct p/min

100mb/s

100 TV channels

Unlimited fixed

500mb/s

150 TV channels

Unlimited

Predefined package / Old Vodafone fixed line-up

Vodafone NL offered predefined packages in the fixed telecom market. Although these were easy to understand, they did not give much freedom for prospects to customize to their own needs.

Fixed market

PREDEFINED

PACKAGES

PREDEFINED

PACKAGES

Although competition was fierce, most competitors were offering very similar predefined packages. As the main parameters are similar across brands, differentiation mainly occurred on brand, price and promotions.

FREEDOM

OF CHOICE?

Fixed market

PREDEFINED

PACKAGES

PREDEFINED

PACKAGES

FREEDOM

OF CHOICE?

As a challenger in the fixed market, Vodafone needed to set itself apart and offer something different. The product team considered offering a portfolio with more flexibility for prospects to customize the product to their own needs.

50 mb/s 100 mb/s 500 mb/s

50 TV channels 100 TV channels 150 TV channels

9 ct p/min Unlimited fixed Unlimited

Freedom of choice

If Vodafone could offer this type of line-up, prospects could choose the most suitable option for each service individually. A risk to such a portfolio is that as prospects optimize their product, average spending may decrease

What is the

ideal portfolio

structure?

Sales &

revenue impact

for Vodafone?

In order to be able to perform such a drastic change to the portfolio, including all the required changes to IT systems, etc. Vodafone needed strong evidence that a portfolio with Freedom of choice would truly perform better, both for Vodafone and for consumers in the market. To do so, they came to SKIM with these two research objectives.

Predefined packages Freedom of choice

We needed to understand and quantify consumer preferences for the two portfolios. The first, and easiest step, was to measure preference for the portfolio as a whole.

Predefined packages Freedom of choice

To do so, we simply asked prospects to choose which of the two portfolios would be more attractive to them, and to explain the reason for their preferences.

Predefined packages Freedom of choice

However, that’s not the full story, as consumers do not choose for a portfolio, they choose for a specific product option within the portfolio.

As the Vodafone team had hoped, we saw a preference for the Freedom of choice portfolio.

Predefined packages/ Total € 45,- Freedom of choice/ Total € 35,-

As mentioned, a potential danger of the Freedom of choice portfolio was that consumers could optimize the product to their own profile, leading to lower spending, negatively impacting Vodafone revenues.

We saw this effect as we asked prospects to make specific choices within each portfolio. For example, with predefined packages, those who wanted medium internet speed had to choose for the middle option. In the Freedom of choice portfolio, some of these people could reduce their spending considerably by choosing cheaper TV and phone options.

Predefined packages/ Total € 45,- Freedom of choice/ Total € 45,-

However, we also saw another effect occur. Some prospects who would prefer to have the very fastest internet connection did not choose for the most expensive predefined package, as this would be too expensive. However, with Freedom of choice, they were willing to pay the price premium for internet, as they were not forced to also pay for a larger phone and TV bundle.

€ 45,- € ??,-

Predefined packages Freedom of choice

The Freedom of choice portfolio caused prospects to choose more extremely, using both the bottom and the top of the product offer. Both effects impacted average spending in the new situation, which we will not disclose in this online document for confidentiality reason.

Freedom of choice

To really understand how the portfolio change would impact Vodafone though, we need to look further. Vodafone does not exist in isolation, and at SKIM, we always try to take into account the full context of consumer decisions.

Freedom of choice Predefined packages Predefined packages

The big questions was of course: “Can this new portfolio really convince more people to choose for Vodafone?”

To measure the impact of a portfolio change for Vodafone, we need to ask prospects to make realistic choices between Vodafone and its competitors, each with its own product offer.

Freedom of choice

• Using our simulation model, Vodafone was able to test different possible ‘Freedom of choice’ product lines in competition and determine what their impact would be on sales shares.

• As we know which prospects would choose for Vodafone in context of its competition and we know the expected spending for these prospects, we can also get a reliable revenue estimate with this simulation model.

For confidentiality reasons, we can not disclose forecasts on shares and revenues for Vodafone in this online document.

Sales potential Revenue potential

Freedom preferred?

Freedom higher spending?

Freedom higher shares?

Freedom higher revenues?

Summing up, in this research we were able to evaluate the new product portfolio for Vodafone on a number of criteria, so they could make a well-informed decision on how to proceed.

FREEDOM

OF CHOICE?

The first results of the portfolio’s performance are promising and in line with SKIM forecasts.

The research gave Vodafone great insights into the performance of freedom of choice and enabled the team to convince management to go ahead and introduce the new portfolio.

Drop by at our booth E261

to find out how to optimize

your portfolio

Presenters:

Frank Smidt, Vodafone

Robin de Rooij, SKIM