Wednesday, July 24, 2013

Wi-Fi Value-Added Services Improve the Retail Bottom-line

Retailing has always been a tough business.  But, the move to online shopping, the challenging economy and changes in shopper’s behavior has placed even more pressure on traditional retail margins.  Retailers are constantly looking for ways to get more people in to their store and to spend more.  Traditional retailers have long envied the massive amounts of valuable data that online retailers have available to help them better understand customer behavior and implement winning marketing tactics.  Online retailers know such valuable information as: how frequently customers return, how long they spend on the site, what they looked at but didn’t buy and where they went before and after coming to the site.  With this information, online retailers are able to rapidly adjust prices, promote certain items, and re-configure the layout of the site in almost real-time in order to increase the probability and value of a sale.  None of these data and insights has been available to bricks-and-mortar retailers - until now.  The increasing availability of Wi-Fi in retail locations is changing all of that.

Shopping malls and retailers are increasingly offering Wi-Fi to their customers as a service to connect their mobile devices to the Internet.  Hidden in this valuable service to the mobile user is an incredible amount of information and insight that retailers can exploit to deliver tangible value to their bottom-line.  In a previous blog, I identified 8 core technical capabilities available in many Wi-Fi networks that allow the collection of massive amounts of useful information that can be turned into key enablers of business value.  Hyper-sensitive location information, device details, identification of returning customers, and sophisticated path analysis are just some of the shopper data that are captured by the Wi-Fi networks.  Best of all, retail venues can now effectively collect valuable information from anyone who enters their store with a Wi-Fi activated mobile device in his pocket.  With over 50 percent of adults carrying Wi-Fi enabled smartphones, and growing, retailers can now capture information on the majority of their shoppers.  However, this does not raise personal privacy issues because only the MAC address of the device is collected and the information is aggregated across all users.

Aggregating the information available from the Wi-Fi access points provides unique insights into where people go, their common paths, and most visited places. Mall owners, for example, are using this detailed data to justify higher rents for stores in high-trafficked areas or to measure the impact of signage on customer traffic patterns. Trend analysis and history comparisons of data can show the effectiveness of changes in marketing programs or store layout. Retail chains are using footfall traffic patterns derived from Wi-Fi connection data to help them better locate new stores in highly trafficked sites of target shoppers.  Shopping malls and large box retailers can use the data to improve operations and security. Real-time shopper traffic flow patterns highlight congestion points and areas demanding more shop assistants, cashiers or security guards. 

Retailers are combining the location and user information from the Wi-Fi access points together with customer relationship management (CRM) and customer loyalty data to provide personalized experiences and offers to shoppers at points of purchase in the stores. Equally, retailers are combining location-based services and shopper services to provide additional product information and help customers navigate throughout the store.  While these Wi-Fi Big Data services may raise privacy concerns, shoppers are typically receptive to the idea if they have control over how their information is used and they are getting real value in return for sharing it with the retailer.  Our mobile user research confirms that shoppers are interested in an enhanced in-store shopping experience (52 percent were either somewhat or very interested) because they think that it will make them more efficient and enhance their shopping experience. Mobile users particularly liked the idea of personalized deals and coupons that would be presented when they were looking to buy something, rather than before or after as is now typically done.  

Despite concerns of show-rooming and loss of in-store sales to online purchases, many leading retailers are embracing mobility and including it as an integral part of their strategies. And many are outfitting their stores with public Wi-Fi access as a cornerstone of those strategies.  Wi-Fi value-added services not only allow retailers to compete on more equal terms against the data-driven world of online retailing but the returns more than justify the investment in the Wi-Fi infrastructure.  Retailers are finding that value-added services and insights are driving up customer spend, store dwell time, and allowing them to run more effective marketing campaigns, resulting in a better overall customer shopping experience.

Further details on how service providers can create new and innovative sources of value from Wi-Fi can be found in our recent white paper:  Wi-Fi: New Business Models Create Real Value for Service Providers

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Monday, July 22, 2013

The Mobile Paradox

Today’s world is characterized by what I call the “mobile explosion”—an environment defined by mobile cloud becoming a platform for delivering everything. It is a world of heterogeneous networks, licensed macro small cell networks, and unlicensed small cell networks (Wi-Fi for example), all seamlessly combined. In this world, however, I believe we are facing a mobile paradox: on the one hand, there is a staggering demand for data from our smartphones, tablets, and other connected devices; on the other hand, the telecommunications industry is grappling with business and monetization challenges around profitability, how to build up these networks fast enough, and competition from over-the-top (OTT) operators.  But, operators are struggling with building the business case and understanding how to make Wi-Fi pay.

The much quoted Cisco Visual Networking Index (VNI) predicts that global mobile data traffic will increase 13-fold from 2012 to 2017, reaching 11.2 exabytes per month. In parallel, the use of unlicensed small cell networks (Wi-Fi) for Internet access is exploding as more mobile devices are Wi-Fi-enabled, the number of public hotspots expands, and user acceptance grows. Until recently, most technologists and mobile industry executives viewed Wi-Fi as the “poor cousin” to licensed mobile communications.  And they most certainly never saw any role for Wi-Fi in mobile networks or their business. The explosion of mobile data traffic has changed all of that. Most mobile operators now realize that offloading data traffic to Wi-Fi can, and must, play a significant role in helping them avoid clogged networks and unhappy customers.
In the “Business Models and Monetization Video” in Big Thinkers in Small Cells, my colleagues and I discuss revenue opportunities and challenges mobile operators face today with small cells, both licensed and unlicensed. Mobile operators understand the business case behind offloading data traffic to cheaper Wi-Fi—deferring significant capital expenditures for further build-out of the licensed network.  However, operators around the world are asking if there is more to Wi-Fi than just data offload (the simple answer is “yes”). Or, more appropriately, how do they actually make money from Wi-Fi—turning a cost of doing business into profitable business models?

The Cisco Internet Business Group (IBSG) has identified and built business cases with service providers around additional ways to benefit from Wi-Fi, beyond data offloading. Our recent white paper (Wi-Fi: Service Providers Can Make Money with New Business Models) describes each of these business models in more detail – laying out the economics and providing case studies of success operators. 
As the pervasiveness and customer adoption of Wi-Fi continue to grow exponentially, these new business models provide meaningful opportunities for service providers. For example, we are seeing home broadband providers improve their customer retention by 10 to 15 percent by bundling their broadband service with access to free public Wi-Fi. In addition, we believe that operators can generate $10 to $15 per business user monthly by establishing a Wi-Fi-enabled “Business Anywhere Service.” Or, the could drive an incremental $100-$150 per retail store by delivering enhanced, value-added retail experiences, on top of the $50-$250 that operators charge per wireless access point to run a managed Wi‑Fi service for retailers. 

But, don’t just take my word for it. End users tell us that they want these new Wi‑Fi business models and truly see value in them. Unique Cisco IBSG customer research revealed that mobile users not only appreciate the lower cost and unlimited data usage of Wi-Fi, but also greatly value the flexibility and convenience that it offers. In particular, customers were very interested in the national/international roaming business model and the Wi-Fi value-added retail offering that would make them more efficient, save them money, and enhance their shopping experience. Remarkably, among U.S. broadband subscribers we surveyed who have free public Wi-Fi as part of their subscription, 61 percent said the inclusion of Wi-Fi was “very” or “extremely” important in their choice of broadband provider. Wi-Fi is a good way not only to attract subscribers, but to keep them as well.
Of course, not all business models are attractive to all service provider segments. In addition to aligning the business models to different industry segments, providers need to set priorities and plan where to start. 

We feel that Cisco IBSG’s research, insights, and approach arm SPs with guidelines for setting priorities and determining which approach is best for making real money from all small cell technologies. Click here to learn more about what additional Big Thinkers in Small Cells have to say about Business Model and Monetization Opportunities.
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Monday, July 8, 2013

The Next Generation of the Internet Is Mobile

No one could have imagined the fundamental impact the Internet would have on both society and the economy—changing our lives forever. The Internet has already transformed the way we work, live, play, and learn. And, this is only the beginning.

The extraordinary growth and transformation of the Internet is unprecedented, but what does the future of technology hold, and where is the Internet heading? Business executives, technologists, and policymakers are not only asking these questions—they also are looking for a map of the future that will help them assess changes in the Internet, and possible out-comes and implications of those changes for business, national policy, and regulation.
Recent research by Cisco IBSG has identified 10 major technology trends that we believe are shaping the direction of the Internet today and, most certainly, will change its direction in the future.

1.    A World Gone Mobile

2.    Cloud: A New Way of Delivering Technology

3.    Everything Can Be Delivered Over-the-Top

4.    Big Data: The New Oil

5.    A Global Village: Connecting the Unconnected

6.    Powerful Devices: The World in the Palm of Your Hand

7.    Bring Your Own Device: The Consumerization of IT

8.    The Internet of Things Is Already Evolving

9.    The New Mobile

10.  Converged Networks: A New Platform Architecture

Mobility is core to each and every one of these trends.  Whether it is the access, the devices that we are constantly carrying or the cloud services and big data that power our applications and experience, mobility is at its heart.  Mobility is redefining network architectures, and allowing both people and things around the world to achieve a level of connectivity that is unfathomable in a non-mobile world.  So, no matter how the Next Generation of Internet evolves one thing is certain: it will have mobility at its core.
Cisco IBSG has developed a plausible scenario for how these 10 disruptive technology trends might come together to shape the future of the Internet. We call this the “New Digital Explosion.” Why “new”? Changes in devices, networks, applications, delivery models, user behaviors, and mobility will create a step change in demand for and reliance on the Internet. 

The New Digital Explosion is not just about technology; it covers all aspects of consumers, the information and communications (ICT) industry, and global/national economies. One thing is certain: the New Digital Explosion will change the ICT industry, impacting all players across the value chain: There will be greater competition, redefined value chains/business models, and new strategies, resulting in both new challenges and business opportunities. Furthermore, the role of government will need to evolve to create an environment that encourages business and technology innovation, and investment and competition to the greater benefit of their societies.
Cisco IBSG’s recent point of view, The Next Generation of the Internet: Revolutionizing the Way We Work, Live, Play, and Learn, provides details on the 10 major technology trends, maps out the future of the Internet, and discusses the implications and opportunities for Internet businesses and governments in this new hyper-connected world.

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Tuesday, July 2, 2013

Creating a Wi-Fi Monetization Virtuous Circle

In the decade or so that Wi-Fi has existed, most technologists and mobile industry executives viewed it as the “poor cousin” to licensed mobile communications.  Now mobile operators around the world are asking how they can effectively use Wi-Fi to help them cope with the huge surge in mobile data traffic and to meet customer needs and expectations.  In addition, they are all eager to understand how they can make money from Wi-Fi and to make the business case to justify investments in deploying Wi-Fi networks. 

Based on extensive research and consultative engagements with leading global service providers Cisco has identified a number of new and innovative business models which we characterize as The Wi-Fi Monetization Pyramid – 3 layers of monetization opportunities which support the subsequent layers below (described in detail in our recent white paper W-Fi: New Business Models Create Real Value for Service Providers).

Approaching the fundamental question of Wi-Fi monetization as a pyramid, or series of layers of business opportunities, creates not only significant new business value for a service provider, but also a virtuous circle that leads to ever-increasing sources of new Wi-Fi value. As the Wi-Fi Monetization Virtuous Circle outlined below shows, the reinforcing network and scale effects of Wi-Fi investments not only deliver unique business benefits at each of the levels, but also establish a valuable platform to exploit additional monetization opportunities at the next level.

Deploying an initial public, home, and business Wi-Fi network provides a compelling ROI through Baseline business models. However, after this initial network is established there are now New Revenue opportunities that can be built on this platform. And, expanding the network through managed services and roaming agreements at key venues allows service providers to offer additional Value-Added Services to extract new sources of value from the Wi-Fi network. Now we have come full circle: Expansion of the network to new venues and the addition of new services make the network even more valuable to end users, making the ROI for the baseline models even higher.
Service providers who are successfully delivering business value from Wi-Fi do not view individual monetization opportunities in isolation.  Rather, they view investments in Wi-Fi as a platform upon which they can deliver a pyramid of new business models, creating a Monetization Virtual Circle of increasing business value.

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