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Does this scenario sound familiar?
A premier wireless retailer has great locations, robust handset selection, top-notch agents and an advanced in-store experience – it is the model for retail success … until you look behind the counter and find:
–Under-performing devices – SKUs that move slowly and rising inventory obsolescence.
–Heavy stock write-offs, big discounts and subsidies, while being out-priced by competitors for like products.
–Poor retail availability and frequent launch delays.
And worse … no insight into why these conditions exist.
Regrettably, poor portfolio performance is all too common in the wireless marketplace. The good news is that there is a way for operators and retailers to get out of this mobile device mire. The solution begins by understanding and measuring device performance and return on investment.
Analytical vs. anecdotal view of the device portfolio
Mobile sellers typically look at customer and store metrics to drive marketing and sales strategies. This makes sense because the data can inform how best to optimize advertising, promotions and store resources to maximize sales. When it comes to device portfolio management, however, the tendency is toward relying on instinct or on original equipment manufacturer relationships to determine the device mix. Rarely do mobile retailers look at the device sales performance as main point of analysis and as such, end up selling what the OEM is promoting versus what is best for the operator or retailer.
Savvy operators are learning that data-driven analysis – which shows actual performance metrics on devices in their portfolios – can inform device strategy and buying decisions in a way that maximizes sell-through of every SKU. The device data analysis looks at key performance indicators such as:
–How many of the devices sold.
–What was the profitability and ROI of each SKU and how can we leverage this learning.
–Which devices achieved or exceeded historical portfolio performance.
The analytic process also uses sales data to identify which devices and customers connect to higher rate plans and attach to more lucrative service packs, such as data, SMS and international roaming. Armed with this information, sales and marketing teams can create incentive and promotional programs to push these high attach rate devices and services at the point of sale. To calculate ROI from a device sale, a customizable data-mart and reporting tool helps operators understand device revenues generated at the POS and beyond versus expense events associated with the sale (commissions, incentives, etc.)
The data-driven process enables invaluable strategic portfolio optimization, including:
–Applying analytical learnings against future roadmap opportunities to select more winners and fewer under-performers.
–Understanding which devices should have their lifecycles extended beyond normal length due to continual strong performance.
–Repositioning devices or re-allocating subsidies based on high and low profitability SKUs.
–Adjusting POS commission and incentive models to align with device ROI.
Analytics can also help evaluate promotional campaigns – comparing volumes, margins and expenses to calculate campaign ROI.
Device Portfolio Management: Practical Application
A major operator was writing off 6% of its inventory to slow and non-moving SKUs. For a billion dollar inventory, that’s a $60 million write-down. By implementing and executing an analytics-driven device portfolio management strategy, the operator was able to reduce the write-down to 3% in the first year and ultimately to 1.5% annually.
Measuring performance with high-level oversight: Operating rhythm
While device portfolio management is a data-driven discipline, the process of developing and implementing the right strategy begins with people. It’s essential to have an analytics team that understands the industry at the ground level and can structure the analysis and key performance indicators around real sourcing, purchase and fulfillment scenarios. It’s also critical to have informed collaboration, with all product teams involved in the process – from client retail to pricing, supply chain and finance. Everyone has skin in the game and a voice at the table, and everyone shares the success.
Having the right team in place enables a structured operating rhythm that governs all inventory and product decisions. When a retailer achieves operating rhythm, product management teams work as one well-oiled machine, with shared accountability among all segments. Everyone is focused on the business issues at hand, looking broadly across the whole business for impact and synergy, and actively analyzing data, communicating results and deriving solutions.
The operating rhythm can also ensure that device portfolio management is working in concert with other strategic supply chain functions, such as planning and strategic sourcing. Integrating these disciplines can drive more efficiency and minimize competing product decisions, like, for example, when a discount promotion for one SKU knocks a separate value-priced unit out of the game by slowing sales or even rendering it obsolete.
Operators and mobile retailers that embrace data-driven device portfolio management are proving that the approach improves forecast accuracy, optimizes stock levels, reduces the levers needed to move products and minimizes write-offs. By looking at their device portfolios from an analytical versus an anecdotal point of view, operators and retailers can drive more revenue, while optimizing the expense side of the P&L.
