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The UK’s telecoms market is a mature competitive market, with three major challengers looking to unseat the market leader, BT. With easy switching from one provider to another, even the smallest pricing change can have a significant impact on market share.
As the former monopoly provider, the team at BT knew they’d need to work hard to maintain their market leadership. That’s why, for 20 years, they’ve used Kognitio to model the impact of new tariffs and understand customer lifetime value.
Awash with data
For many businesses, pricing decisions are complicated by a lack of data: it can be hard to judge how a pricing change will affect business.
Telecoms providers have the opposite problem: every call and text message generates a chunk of metadata. These Call Data Records contain everything needed to bill the customer, along with technical details such as the route the call took through the network.
With millions of residential and business subscribers, BT had a wealth of historic call metadata with which to model potential tariff changes. In 1997, when BT began this modelling, they faced a significant problem: their current tools were unable to handle the sheer volume of Call Data Records generated by the company’s customers.
Instead, BT’s Business Analysts had to make do with limited samples of data loaded into spreadsheets. Filling in the gaps was a matter of making assumptions based on past customer behavior. This largely manual process was slow and, worst of all, led to inaccurate results.
For BT, asking “what if?” involved too much guesswork to be reliable. As competition grew following the deregulation of the UK’s telecoms market, the company needed a fresh approach to modelling price changes.
Kognitio brings clarity
That fresh approach was Kognitio. After a thorough competitive evaluation process, BT selected Kognitio to enable them to accurately model the impact of tariff changes.
For the first time, BT could work with complete sets of Call Data Records, experimenting with different pence per minute rates, set-up fees, minimum call charges, price caps and rounding methods to help identify how new tariffs would affect their customers.
Not only was this more accurate than the previous mix of spreadsheets and guesswork, but it was faster thanks to Kognitio’s in-memory data processing and a custom call repricing plugin that Kognitio developed so that analysts could model changes without needing to write complex SQL queries.
Now, pricing analysts could ask just about any “what if?” question that occurred to them: “What happens if we cut evening calls by a penny per minute for customers on plan A?,” or, “What happens if we move customers from plan A to plan B but give them 100 free minutes each month?”.
Pricing becomes a science, thanks to Kognitio
“Our relationship with Kognitio can be summed up as a strategic partnership in the true sense of the phrase,” explains Arthur Winn, Head of Pricing at BT. “We have been able to rely on Kognitio and its technology to help us stay ahead of the game. We have true insight into our business and the effects that pricing changes would have on it. It’s incredibly beneﬁcial to the company to be able to analyze all the data as opposed to data samples and assumption-based analysis.”
BT now routinely models any tariff changes against 15 months’ worth of full Call Data Records, enabling them to minimize customer churn while maximizing revenue. But that has been just the starting point for Kognitio at BT.
“By working with Kognitio, a whole new world of possibilities has opened up,” Winn says. “By virtue of fast data analysis, we can instantly see the beneﬁts of re-pricing. Kognitio has consistently provided detailed output in very short timeframes. As such, we have a wealth of information and possibilities that we can explore on an iterative basis.”
One use of that wealth of information is an insight into customer lifetime value. By using a customer’s full history of call and billing data, BT analysts can track how pricing and service changes have impacted customer loyalty and satisfaction.
“By working with Kognitio, we have obtained more of a scientiﬁc approach into the art of pricing,” continues Winn. “We no longer must rely on gut-feel assumptions, since the analysis is penny-perfect. Everything is re-priced. It is fundamentally true re-pricing of every call made. Normally, businesses would struggle with this and would just rely on using a sample of call data.”
Thanks to Kognitio, pricing changes at BT are now made with a confident understanding of the impact they’ll have. With 20 years of partnership behind them, in some ways this is just the beginning for BT and Kognitio as more teams within BT start to use Kognitio to gain ever deeper understanding of their data.