I took part in a retail panel discussion on the last day of an industry trade show. One of the panelists, Scott Bauhofer, a merchandising vice president for Best Buy, titled his presentation: Retailers are from Venus; Carriers are from Mars. He talked about the gap in communications between these two key players. Bauhofer’s appeal to carriers: Understand the retailer’s business and language. When might you expect this understanding to take place? Here’s a clue – you may have a long wait. Here’s another clue – To gain influence with carriers, understand their business and language.
Esteemed mangement consultant, Peter Drucker, says this:
It is the recipient who communicates … [The recipient] can only perceive what [he or she] is capable of perceiving [based on his or her experience] … One can only communicate in the recipient’s language or in his terms. So, if you seek to communicate more effectively with carriers, which terms might help you get through to them? Gross profit? ARPU? Inventory turnover? Churn? Cost of goods sold? COA? CPGA? Sales gain? Net adds?
Carrier lexicon To help you use their terms – the words and phrases carriers use to identify the key results areas that matter most to them – consider this mini-glossary.
ARPU \ ar-poo not ay-ar-pee-yew \ 1 : Average Revenue Per Unit or Average Revenue Per User – the total monthly revenues from all of the carrier’s customers divided by the total number of customers ·Our ~ has eroded from $74 to $45. 2 : sometimes called airtime
churn n : the percent of total customers who discontinue service or switch to a competitor’s service each month ·our ~ is 2.6%
COA \ cee-oh-ay \ 1 : Cost Of Acquisition – the carrier’s total expenses incurred to support a channel of distribution (retail, indirect, direct) divided by the number of customers obtained through that channel ·Our ~ for our dealer channel is $386. 2 : sometimes called CPGA (Cost Per Gross Add or Cost Per Gross Activation)
Gross Adds 1 : the total number of new customers generated 2 : sometimes called gross activations
Net Adds 1 : gross adds less churn ·Since we churned 2.6% of our 10 million customers last month, our gross adds of 300,000 customers only resulted in 40,000 net adds. 2 : sometimes called net activations
Payback : the number of months required for a carrier to recoup its COA ·Since our COA is $386 and our ARPU is $45, our ~ is 8.6 months.
To get what you want, help carriers get what they want.
If you can understand the six terms above you may gain empathy for the carrier’s dilemma – eroding ARPU; high COA; and long payback periods. By the time customers become profitable, they may switch to the competition’s service. Is it possible you might gain influence and earn their attention if you can work in partnership with the carriers to help resolve their issues?
With this in mind, here’s what carriers need from retailers:
Distribution: locations and store environments that make it easy for customers to buy their wireless products and services
Knowledgeable salespeople: personnel who can and will (a) sell wireless voice and data products, services, and applications to qualified customers, and (b) answer customers’ service questions
Visual merchandising: display of the service provider’s service story and products
Advertising support and participation.
Operational compliance conforming to the carrier’s standards of processes, practices, policies, and procedures
Can we define an agenda where both you and your service providers realize payoffs? In our next installment we’ll explore new ways to create a double-win.
The Edmond-Howard Network
© 2004 by The Edmond-Howard Network
