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Understanding which elements of a phone package customers value most

Sector: Technology

Team: Ruth, Umar, Michael, Jess

Partner: CogCo

Choice experiment

Understanding which elements of a phone package customers value most

We conducted a choice experiment to understand which components of a phone package customers value most when choosing a mobile phone contract.

The Challenge

Mobile phone operators have a wide variety of services and products that they can offer to their customers. They can provide more data; better coverage; shorter contract terms; and even free gifts, like a 6 month subscription to Netflix. But each of these elements comes at a cost, so it is useful to know exactly what value customers place on the different component parts of a contract. This might not be a problem, if customers were able to articulate clearly their preferences. But it turns out that we find it very difficult to do so accurately: it is challenging, for example, for any of us to come up with a figure when asked how much you might be willing to pay for a shorter contract.

The Approach

To overcome this challenge, we ran a large-scale, online choice experiment with 2,000 mobile phone customers across the UK. Rather than asking people what they would like in a mobile phone contract (a difficult thing for people to respond to), we asked them to choose between two differently configured contracts (a relatively simple thing for people to do). The contracts differed across seven different elements - including brand; price; how much data was included; and what kind of promotional free gift it included.

In the example shown below (Figure 1), someone may conclude that they would prefer a lower cost, 12 month O2 contract that includes 30GB of data and a Disney+ subscription; to a higher cost Vodafone subscription that is a shorter plan length and includes a free travel mug. Once they had made their choice, they were asked to choose between two more contracts in which different elements had again been varied. By giving thousands of consumers around 12 choices each, we were able to cover every conceivable combination of choices. And in doing so, were able to ascertain the true, underlying preferences of customers.

Figure 1: An example of the choice that participants were asked to make (would you prefer A or B?)

The Results

We discovered that price was the most important attribute of a contract. An £11 contract, for example, was around five times more likely to be chosen than an equivalent contract priced at £23. Data was the second most important. People were three times more likely to choose an unlimited data package to one that only had 1GB. But there was no statistically significant difference between ‘unlimited’ and 30GB of data (presumably because 30GB is more than enough for most people).

As well as the extent to which it drove customers’ preferences, we were also able to discern exactly how much people were willing to pay for each element (see chart below). People were willing to pay £9.05 more for 30GB of data, for example, compared to a 1GB tariff. And they were prepared to pay more for Netflix (£2.56) than they were for Disney+ (£1.55) compared to receiving a free travel mug. The most valuable brand turned out to be O2, for which there was a £3.19 premium above our fictitious ‘Acorn’ brand.

Figure 2: Chart showing the price customers are willing to pay for each ‘attribute’

(C) CogCo

This is just one example of a methodology that CogCo uses to understand what customers and users of products and services really value most. It is driven by the simple insight that individuals find it easier to make a choice between alternatives than they do to explain and articulate why they made that choice, and the monetary value that they might have placed on different elements of it.

"At CogCo we use choice experiments in all kinds of situations to understand which elements of a service or product people value most"

-Ruth Horry, Head of Experimental Methods, CogCo

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