Abstract and Keywords
The long-run goal of each carrier's pricing strategy in wireless telecommunications is to maximize the overall expected profitability of its customer base. In this context, pricing tactics are used to grow the customer base through the acquisition of new-to-wireless subscribers or subscribers switching from a competitor; to increase the average revenue per user; and to increase the duration of the customer's relationship with the carrier, hereafter referred to as customer tenure. The decision about what rate plan to offer to which customers has major implications for the economics of an individual rate plan as well as for the mix of customers on different rate plans in the portfolio. Three essential analysis steps should be carried out to effectively maximize profitability: determining customer segments; modeling rate plan economics; and, ultimately, the construction and management of a rate plan portfolio. By following these steps, the carrier attempts to maximize the overall discounted cash flows of the customer base. This article discusses each of these steps.
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