SMS : Moving out of Commodity Trap

SMS nowadays has become more like a commodity rather than a differentiated product wherein it is being traded primarily on the basis of price, and not on differences in quality or features.  There are many bulk SMS providers and the industry in itself is highly fragmented and competitive. Plus there are resellers who buy bulk SMSes at throwaway prices from the Bulk SMS provider and then compete with the same providers for small deals which the providers cannot afford to sell at a cheaper rate due to their comparatively higher fixed cost in setting up the SMS gateway for the bulk messaging facility.

The problem is that standing out is easier said than done. Commoditization is becoming an increasingly familiar problem in many industries, leaving small business owners scrambling to price their products at a competitive level. Rather than trying to compete on price, one can beat the system and avoid the commodity trap by altering the market’s perception of the product itself. The below diagram depicts the ways to differentiate the bulk SMS product.

SLA here refers to the recredit policy which guarantees that charges for messages sent , if not delivered within an agreed time period as per the contract will be returned to the customer account. This can be an important differentiator and hence delivery reports form a very important feature while evaluating any bulk messaging product.

Product development refers to including features which enriches the user experience. It requires taking constant feedback from the user and comparative study to know functionalities which can create a differentiation.

The database building activity refers to value that can be added to target advertisement exercise being currently facilitated by most of the bulk messaging providers. An updated live database with as many target population as possible will drive greater value and revenue on any day.

Any serious long term bulk messaging provider will like to move up the value chain to finally offer CRM on mobile. This is what many seems to be eyeing for as they know the next consumer revolution will be on mobile.

– Ajay Verma (Batch 2009-11)


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