Cost Cutting Strategies at The Bottom of The Pyramid: The SMS Story, Missed Calls, and Others

Cost Cutting Strategies at
the Bottom of the Pyramid

The SMS Story, Missed Calls, and
others
www.lirneasia.net
Lorraine Carlos Salazar
salazar@lirne.net
LIRNEasia Media Workshop: Singapore 28 February 2007

fieldwork by funded by IDRC
Agenda
 Research methodology & key findings:
 Harsha de Silva
 The SMS story, missed calls, and
others
www.lirneasia.net
 Lorraine Carlos Salazar
 The next billion customers
 Ayesha Zainudeen
General ‘cost cutting’ strategies
due to high cost perceptions…
 SMS
 Second-hand mobile handsets
www.lirneasia.net
 Missed calls
 Prepaid subscription
It’s true: Philippines is the SMS
capital of the world
% of mobile owners who use SMS
Use of SMS
100%
100%
90%
80%
70%
60%
60%
50%
www.lirneasia.net
50%
40% 35%
30%
30%
20%
10%
0%
Pakistan India Sri Lanka Philippines Thailand
Lack of meaningful information? Of local-language capabilities on

handsets?
Who types the SMS?
Sri
Pakistan India Philippines Thailand
Lanka
I type my
77% 88% 92% 99% 98%
own SMS
Someone
www.lirneasia.net
else types
23% 12% 8% 1% 2%
the SMS for
me
Lower literacy levels in Pakistan & India

Key barrier to SMS use among non-
users
Sri
Pakistan India Philippines Thailand
Lanka
I do not know
79% 66% 39% n/a 83%
how to use SMS
Reason for not using SMS
100%
% of mobile owners at BOP
www.lirneasia.net
80% Other
60%
None of my contacts
use it
40%
I do not know how to
20% use it
0%
male
female
male
female
male
female
male
female
Pakistan India Sri Thailand
Lanka
Frequency of SMS use
100%
% of mobile owners at the BOP
90%
80%
70% Less than once a month
60% Once a month
www.lirneasia.net
50% Once in tw o to three w eeks
40% Once a Week
30% Once in tw o to three days
20% Daily
10%
0%
75% at BOP use SMS on a daily basis

Filipino SMS use aided by language advantage, and driven by high cost
of use?
Urban vs. rural SMS use
Use of SMS
Urban Rural
Pakistan 55% 39%
India 48% 40%
www.lirneasia.net
Sri Lanka 51% 63%
Philippines 100% 100%
Thailand 49% 26%
Anomaly in rural Sri Lanka…Perhaps to do with

prices, or the outdated def’n of urban and rural
Why so much SMS in
Philippines?
cost-cutting through SMS,
missed calls, and more…
www.lirneasia.net
General ‘cost cutting’ strategies
due to high cost perceptions…
 SMS
 Second-hand mobile handsets
www.lirneasia.net
 Missed calls
 Prepaid subscription
High expected per minute costs
Expectation of the cost of a one minute local call (US cents)
100%
90% Betw een 21c - 35c
80% Betw een 16c - 20c

Betw een 11c - 15c
70%
www.lirneasia.net
Betw een 6c - 10c
% of BOP
60%
Betw een 2c - 5c
50%
Less than 1 cent
40%
30%
20%
10%
0%
…especially on mobile
Expectation of the cost of a one minute local call (US cents)

100%
90%
80%
70% Between 21c - 35c
www.lirneasia.net
% at BOP

Between 6c - 10c
40%
Between 2c - 5c
30%
Less than 1 cent
20%
10%
0%
Mobile owner Fixed owner* Non-owner
Philippines *low base
India Sri Lanka Philippines
Bharti
Dialog KIT Smart TnT
Package AirTel
USD USD USD
Calls/minute
Outgoing on net 0.02 0.06 0.11
www.lirneasia.net
Outgoing off
0.04 0.06 0.13
net/fixed
SMS/message 0.03 0.02 0.02
Ratio to SMS
Outgoing on net 0.7 3.5 5.5
Outgoing off
1.3 3.5 6.5
net/fixed
High expected initial cost of getting
connected
Expected cost of a new phone by non-owners
100%
90%
80% >USD 176
% of non-owners at BOP
70% USD 146-175
www.lirneasia.net
USD 116-145
60%
USD 86-115
50%
USD 56-85
40% USD 26-55
30% <USD 25
20%
10%
0%
Pakistan India Sri Lanka Philippines
‘Cost cutting’ via use of second hand
mobile handsets at half the price!
Handsets: brand new vs. second-hand
100% USD 160

Ave. price paid for handset

90% USD 140
80%
USD 120
70% 64% 60% 66%
60%
72% 72% USD 100
www.lirneasia.net
50% USD 80
40% USD 60
30%
USD 40
20% 36% 40% 34%
10%
28% 28% USD 20
0% USD 0
using second-hand using brand new

ave.price paid for second hand ave. price paid for brand new
More Filipinos use second hand phones

‘Cost cutting’ via missed calls
Use of 'strategies' to minimise call costs
Make calls at off-peak hours
70%
60%
50%
40%
30%
www.lirneasia.net
Fixed to fixed calls only 20% Use of missed calls
10%
0%
High miss calls in
the Philippines,
less in India where
call prices are low
Use phone as an incoming device
Mobile to mobile calls only
only

The use of ‘strategies’ to minimize call costs at the BOP
South Asia South-east Asia
Thailan
Pakistan India Sri Lanka Philippines d
Use of missed calls 39% 36% 34% 65% 40%
Make calls at off-peak

16% 16% 42% 14% 16%
hours
www.lirneasia.net
Use phone as an
21% 25% 29% 13% 33%
incoming device only
Mobile to mobile calls

47% 26% 7% 24% 7%
only
Fixed to fixed calls

33% 14% 4% 6% 4%
only
Use of 'missed calls' to minimise communication
costs
70%
60%
50%
Male
% of BOP
40% Female
www.lirneasia.net
30%
20%
10%
0%
Missed calls more popular among male

mobile owners in South Asia
‘Cost cutting’ via prepaid
connections
www.lirneasia.net
Prepaid
mobile 99% 95% 92% 99% 96%
connections
Reason for choosing prepaid (rather than post-paid)
100%
% of prepaid mobile owners at BOP
90%
Other
80%
70% Lower per-minute
charges
60%
www.lirneasia.net
No billing procedures
50%
No monthly rental
40% charge
To control
30% expenditures
20%
10%
0%
Prepaid helps to control expenditure

Expenditure control evidenced by
infrequent top-ups in PK, IN, LK & TH
How often prepaid mobile account is topped-up
% of prepaid mobile owners at BOP
100%
90%
www.lirneasia.net
80% Twice a week or more
70% Once a week
60% Once in two weeks
50% Once a month

40% Once in 2 months
30%
Once in 3 months
20%
Less often than once in 3
10% months
0%
In sum…
 High price expectations lead to
adaptive cost-cutting measures –
which in turn creates a way of life in
the Philippines and in the other
countries...
www.lirneasia.net
 SMS is now a way of life in the Philippines
 BUT, this is not a bad thing: as it is
driving affordable access at the
bottom of the pyramid
Ownership and GDP per capita (USD, PPP)
90% 81%
9,000
80% 76% 8,000
GDP per capita, USD (PPP)

% at bottom of pyramid
70% 64% 7,000

59% 60%
60% 6,000
50% 5,000
www.lirneasia.net
38%
40% 4,000
30% 23% 22%23% 23% 3,000
18%
20% 14% 2,000
9%11% 7%
10% 1,000
0% 0
Own a mobile Own a fixed phone

Own nothing (but use something) Per Capita GDP PPP (US $)
Thank you for your attention
www.lirneasia.net

Cost Cutting Strategies at The Bottom of The Pyramid: The SMS Story, Missed Calls, and Others

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Cost Cutting Strategies at

the Bottom of the Pyramid

LIRNEasia Media Workshop: Singapore 28 February 2007

 Second-hand mobile handsets

Lack of meaningful information? Of local-language capabilities on

Lower literacy levels in Pakistan & India

40% Once a Week

30% Once in tw o to three days

75% at BOP use SMS on a daily basis

Anomaly in rural Sri Lanka…Perhaps to do with

 Second-hand mobile handsets

80% Betw een 16c - 20c

Expectation of the cost of a one minute local call (US cents)

50% Between 11c - 15c

70% USD 146-175

100% USD 160

Ave. price paid for handset

using second-hand using brand new

More Filipinos use second hand phones

Pakistan India Sri Lanka Philippines Thailand

Use of missed calls 39% 36% 34% 65% 40%

Make calls at off-peak

Mobile to mobile calls

Fixed to fixed calls

Missed calls more popular among male

Pakistan India Sri Lanka Philippines Thailand

Prepaid helps to control expenditure

70% Once a week

60% Once in two weeks

50% Once a month

GDP per capita, USD (PPP)

70% 64% 7,000

Own a mobile Own a fixed phone

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