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COMMERCIAL FEATURE THE WORLD IS NOT FLAT Why three billion consumers in developing markets need a different approach to mobile B rands looking to seize the digital opportunity in developing markets will fail if they replicate their developed-world strategies – they need a technology partner versed in these markets. With advanced economies fast reaching saturation point and consumer acquisition becoming more challenging than ever, the developing markets, with their three billion-plus consumers, are an enticing prospect for tech brands from Google and Netflix downwards. Even with the current slowdown, the purchasing power of these consumers is increasing rapidly. International Monetary Fund reports forecast developing market growth to average 5.2 per cent between 2015 and 2020, compared with just 1.6 per cent for developed markets. Mobile will be a critical area of opportunity, given it is more accessible to users than laptops or tablets. However, the challenges are serious and those looking to tap into enticing new markets in Africa, Latin America and BRIC countries – Brazil, Russia, India and China – with their vast potential will be making a serious mistake if they use the same marketing strategies that worked in the developed world. "The world is not flat," says Marco Veremis, chief executive of Upstream, a leading mobile commerce enabler to the next three billion consumers in high-growth markets. "These new consumers behave very differently compared to those in the West. A one-size-fits-all solution, when it comes to acquisition and monetisation, won't work; rather to deliver mobile services that successfully resonate with consumers, you need to be aware of the marketing limitations specific to developing markets." First, these new markets have a lower GDP per capita, with considerable variations from one country to another. This affects consumers' ability to pay and so requires differential pricing. The Global Findex data set shows that access to financial services in low- income countries is in stark contrast to those in the developed world, with only around 1 per cent having a credit card and 6 per cent having a debit card, leaving consumers virtually unbanked. "The only way to charge customers for services is to do it through a digital currency – consumers' pre-paid mobile airtime balance," explains Mr Veremis. The complexity of billing is illustrated by comparing the top-up frequency of users. "In Brazil people recharge their mobile credit once a month, whereas Nigerians top up multiple times per week with a very small amount," he says. "So, when you set up a subscription-based service, should you bill your subscribers monthly or weekly? If you opt for monthly in Nigeria, you'll face problems with failed charged attempts due to people's insufficient credit." The second challenge for digital brands is technological. Wi-fi usage is extremely limited and so the key providers of internet access are mobile network operators (MNOs). Additionally, internet access is slow and patchy. While speeds of around 30Mbps (megabits per second) might be standard in the United States, in Brazil they're only about 10Mbps and Nigeria might only achieve one hundredth of that speed. "Smartphone usage here is much less than in the West, mobile devices are mostly basic feature phones or web-enabled handsets," says Mr Veremis. Therefore, rich media with video-streaming and data-heavy content, for example, will struggle with expansion due to low bandwidth and limited device compatibility. Nor is this situation about to change any time soon; by 2018 smartphone penetration will remain below 50 per cent. The third hurdle for those moving into the developing markets without an experienced partner is cultural. "If products and services are to be engaging, they must be localised and adapted to take into account local languages and cultures," Mr Veremis points out. In a 2014 study conducted by Upstream and Ovum, The Next Mobile Frontier, 78 per cent of developing market consumers cited the importance of mobile content being offered in their local language. Upstream is a leading end-to-end m-commerce facilitation platform of valuable digital services across the developing world. It already has more than 65 million users through a micro- payments subscription model offered via direct carrier billing and is growing at around 50 per cent year on year. Present in 41 developing markets and leveraging its integration with mobile operators, Upstream reaches more than one billion consumers, providing its offerings across all types of mobile devices and internet access. Working with Upstream, content providers and app developers can distribute and monetise their offerings effectively. Upstream facilitates providers of mobile services with a seamless billing process (like PayPal), effective subscription management (like Zuora), while maximising customer acquisition (like iProspect). Companies looking to grow in the developing markets are realising that customer acquisition is far trickier because of the lack of reach of large Western aggregators that utilise the advertising opportunities provided by networks such as Google and Facebook. To target and meaningfully engage new customers in developing markets, deep knowledge of MNO channels is essential, as is the technical capability to integrate and carry out sophisticated targeted and optimisation processes. On top of Western-like digital channels, Upstream also utilises 20 to 25 different channels across operators, from traditional SMS, SIM Toolkit to IVR and smart push notifications, and tests a wide variety of different combinations to see which appeals to which audience and is best for each operator. Upstream's proprietary technology platform MINT utilises gamification across each and all channels, and compares against various promotion mechanisms such as prizes or upgrades to new products. MINT can accurately identify which marketing offers will suit which consumers – be that a free trial or a "freemium" version – as well as how to promote bundles of different digital services effectively and offer highly valuable mobile experiences to consumers. Guy Krief, Upstream's chief marketing and innovation officer, explains: "Through intense optimisation, you end up with a selection of 'story boards' – combinations of audiences, channels, messaging and marketing set-ups." In a recent case study in South Africa, where Upstream, working with a leading local mobile operator ran a campaign to distribute a video portal service, it managed to recruit 8 per cent of the targeted user-base to the free version of the service. Following that, 27.4 per cent of the recruited users opted in for the subscription- based premium version. "Overall, success rates were much higher than in typical developed markets," says Nir Aloni, general manager for sub- Saharan Africa at Upstream. Western companies are also increasingly approaching Upstream for help to unlock the complexity of billing. Billing through the pre-paid mobile airtime balance, the most ubiquitous digital wallet of high- growth markets, is not a standardised commodity. Instead, it's a science – a combination of identifying the optimal price, and then knowing exactly where and when to collect fees from the customer. Just blindly enabling operator billing in developing countries, like other mobile payment providers do, would yield charge success rates of just 5 per cent or one in twenty subscribers billed successfully. With Upstream's optimisation techniques, such as credit-based billing and half- billing, and its unique capability to integrate to the MNOs' live top-up feed, charge success rates can soar to 50 per cent. "Entering these markets can be like walking into the wilderness without a guide – you'll not survive," says Mr Veremis. "However, if you have a partner with detailed knowledge and a proven track record like Upstream, the opportunities are tremendous." www.upstreamsystems.com DEVELOPING MARKET DATA PENETRATION RATES, 2014 Source: Global Findex, World Bank/GSMA Intelligence Payment cards Mobile handsets Developed Developing 40% 80% x1.58 x15.3 Multiplier difference [x] 120% 20% 60% 100% To deliver mobile services that successfully resonate with consumers, you need to be aware of the marketing limitations specific to developing markets RACONTEUR raconteur.net 17 THE DIGITAL ECONOMY 28 / 01 / 2016

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