Leveraging VAS to take the lead

Jean-Claude Delcroix/Gartner
20 Apr 2012

In the next three years, communications service providers (CSPs) will try to redefine their business scope and participate in new areas beyond traditional telecom services. One area for expansion is value-added services (VAS) which, in the broadest sense, will have a direct influence on revenue and profitability as well as on the market share for traditional services.

VAS comprise of activities beyond traditional CSP networking revenue, including IT services and cloud computing, fixed and mobile content services or advertising and payments. Offering a wide range of products and solutions to users is attractive, but creating long-term competitive advantage and gaining leadership in geographic markets is all about differentiation.

Gartner identifies nine main competitive factors that enhance the competitive position of a CSP when offering VAS. Operators should build a lasting and comprehensive VAS strategy and stick to it. The strategy should span fixed and mobile services, across enterprise and consumer sectors.

The first competitive factor is an attractive VAS catalog with services, applications and content that are richer and more adapted to market segments (by age of social cultural dimensions) than competitors'. Offering a large range of good VAS at acceptable prices makes consumers happy and they do not churn.

Differentiation and competitive advantage may come from CSPs' products that offer the widest range of content and applications in several languages as well as add-ons and supporting devices. They also come from the most user-friendly search engines and preference management, and the best links to social networking, recommendation engines and free content. Search engines are important to guide users or to present titles that meet their preferences. Most CSPs stick to the top 1,000 or top 3,000 movies (sometimes fewer than this).

Second is better brand value and advertising power, through a broad range of VAS as well as good design and functionalities, including advanced lifestyle applications and hyped content. The investment for this type of content can sometimes cost more than the direct selling of content subscriptions, but it also increases market share in other products.

Creating a high-value brand brings premium prices for services and customer loyalty. It also increases the product recognition and makes advertising more attractive and efficient. Operators should highlight the wide range of VAS in their branding and advertising, and consider some innovative VAS trials as advertising methods. They should also promote the power of their content and other applications through social networks, and use websites and mobile apps to help with finding and using VAS.

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