Author: Sanjay Krishna Goyal, Founder & CEO, ACL Mobile
In this age of cut-throat competition, where enterprises are adopting every possible tactic to allure more and more customers to their web based businesses, a new tactic has emerged recently to attract mobile device users called ‘Free Data’. The companies pay for the data consumption by their customers occurring when they browse through their website or app. This means that the consumers don’t have to worry about the cost of visiting the website or watching a video within it as it would not reflect on their monthly bills.
Basically ‘Free Data’ is the next big tactic being embraced by the internet based companies after ‘Free Shipping’, as an effort to encourage cost-conscious consumers to give them a try on their phone. The internet service providers are rolling out plans where the companies pay for data its subscribers consume. Although it appeared that these plans had a very slim chance of being able to attract the traffic generated by sites like YouTube and Facebook, the idea is starting to get some traction.
Steering this idea forward, an obvious question that arises in the mind of every business owner is ‘Whether the cost of data he is bearing for each user is justified’. To give a better perspective of this tactic to these business owners, let us consider the eCommerce companies that are giving the brick and mortar stores a run for their money. The cost of data for a user visiting an eCommerce app is mostly not more than Rs.10 per user, per month, which is a miniscule amount as compared to Rs.50 to Rs.100 that they pay for acquiring a new user. Additionally, the amount goes higher when it comes to servicing customers via Cash on Delivery (COD) and product discounts. Similarly, banks can significantly benefit by expanding their mobile banking customers and reduce their branch visits, which cost them a lot more to service a customer.
Adding to the perspective of these merchants, another not-very-evident question that might arise is ‘If it is wise to pay for the cost of a consumer who is anyway paying for data and willing to come to one’s mobile app’. For such companies to see through the existing state of affairs, they need to understand that a difference between a zero data cost app and regular app must be created to build curiosity amongst the consumers. The zero data cost app could be limited in features and experience, whereas the regular app, which the users pay for the data costs, could be richer in experience.
In this scenario, brands would potentially be the biggest gainers as they can practically engage with the entire mass market of India, and finally the Government, which can provide zero cost access to all government service and programs on the mobile phone thus giving a big impetus to the Digital India initiative.
The concept of free data which is also termed as ‘sponsored data’ or ‘toll-free mobile data’ is believed to be as beneficial to the consumer as to the enterprises. Among the pros of the situation are customers getting lower phone bills, content creators gaining new users, advertisers getting more attention from consumers, and mobile network operators seeing the stress on their networks reduced.
In the whole scheme of things, it is important to understand the issue of affordability of mobile data by a majority of Indian mobile users. The Average Revenue per User (ARPU) in India is approximately Rs.100, whereas the cost of one GB of data is Rs.250 and is still rising. 95% of mobile users in India are prepaid users, which indicates that they are highly sensitive to the cost of their mobile phone bill. Though there is no specific published data on the subject, from various forms of communications from the mobile carriers and the customers, it can be established that more than 50% of all mobile users cannot afford to spend more than Rs.50 per month on their phone bill. Furthermore, if a business or an organization makes the cost of data zero for its customers, there is little doubt that the customers would visit that site or app more frequently and also spend more time on it.
The zero cost of mobile data is a no brainer in the Indian context, keeping in view that majority of Indians cannot or may not, for another decade, be able to afford the cost of mobile data. Also, the value an enterprise gets from acquiring and retaining an additional user is way greater than the cost it has to absorb.
For now, it’s too soon to say if the practice of companies’ paying for data will become widespread but, if it continues to catch on, it might spell big implications for consumers and phone carriers which they should be aware of.
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