Operators Adopt Different Strategies on UK High Street

A Trip to Bluewater Reveals the Variety of Approaches and Some Common Themes

Last week, following a busy summer for the UK network operators, I decided to compare positioning and tactics at point-of-sale. A trip to Bluewater shopping centre near London revealed some interesting trends.

Prepaid was a major theme, with all four leading networks making a push for new customers through a variety of offers. The UK pay-as-you-go market seems to be finally sparking back into life after years of decline. Low-cost smartphones were also prominent, with Vodafone and EE promoting their own-brand devices. However, there was limited focus on high-end devices following a lack of recent flagship launches. Other focus areas included SIM-only, shared data and roaming tariffs, but the operators are giving surprisingly little attention to the fast-growing wearables category.

In the O2 store, two major initiatives stood out: Big Bundles and Priority. Both have helped drive good momentum for the operator this year.

O2 launched Big Bundle pay-as-you-go tariffs in May. Three options are available, at £10, £15 or £20 per month, and inclusive data ranges from 500MB to 2GB. In a significant move, 4G is included in the £15 and £20 bundles at no extra charge. O2 also recently revamped its Priority scheme in an effort to offer a more consistent approach. It was used an impressive 1.3 million times in 2Q14, helped by a £1 Monday lunch offer. The operator's marketing collateral focused on the Sun+ Goals app, a timely move to coincide with the start of the new Premiership football season. However, the service is only available on very high-end tariffs offering 5GB of data or more.

Promotions in the 3 store focussed on disruptive initiatives such as inclusive 4G, free calls to 0800 numbers and Feel at Home, its roaming offer for selected markets. The operator's 321 prepaid tariff – 3 pence per minute, 2 pence per text and 1 pence per MB of data – also featured prominently. An important selling point of this tariff is that there's no time limit on how long credit remains valid. Against the wider market trend, 3 reported a slight increase in prepaid customers in the year to June 2014, suggesting that it's proving popular among consumers.

In the EE store, I noticed an increased focus on home broadband. The operator is pushing this part of its business harder through external advertising and a dedicated area at point-of-sale. It's finally seeing some good momentum: revenue was up almost 20% in the last year. One key element is EE's offer of an extra 10GB of data to mobile pay-monthly customers also subscribing to a fixed-line package.

EE is pushing its in-car Wi-Fi device, Buzzard. It's featured on the front page of the operator's latest magazine and is prominently positioned in-store. The device is cleverly packaged in a bright yellow tub that fits into a car's cup holder. In my view, this is a low-risk first foray into the connected car opportunity that draws on the operator's wider 4G coverage compared with rivals.

Vodafone is focussing on two main areas: pay-as-you-go smartphones and shared data. It recently became the last UK operator to bring 4G to prepaid, a much-needed move given that its premium service has struggled to gain traction so far. Vodafone is offering the Smart 4 turbo device to prepaid customers at an eye-watering £79 when purchased with a £20 Freedom Freebee. This offers 2GB of 4G data, unlimited texts and 500 UK minutes. However, access to Spotify or Sky Sports is only included in Vodafone's £30 and £40 pay-as-you-go tariffs, and Netflix is solely reserved for contract customers. In my view, Vodafone may need to become more competitive to regain lost momentum in the UK 4G market.

Vodafone's new shared data plan, Red+, featured prominently in the shop window and on the front page of the in-store magazine. Its concept is similar to that from EE, though there are some subtle differences. Vodafone's offer allows up to ten people to connect, compared with only five on EE, but EE's plans offer more data: 20GB per month compared with 13GB on Vodafone. However, the most important differential could be that Vodafone's plan gives customers the ability to allocate individual data allowances to sharers, from 500MB to 4GB. This gives more control to the leader and prevents participants from using a disproportionate amount of data.

Reflecting its strategy for content, Vodafone is pushing its link-up with Netflix, to which Red 4G customers on plans starting at £26 per month can gain access, and the media-streaming Chromecast device, which is available at a reduced price of £25 for Red subscribers.

Overall, I saw a varied approach to retail that reflects not only the highly competitive UK market but also the differentiated positions adopted by the UK's four network operators. However, while there was plenty of innovation, I saw nothing game-changing that could significantly reshape the market. Maybe the evolution of quad-play or a focus on the connected home will alter the retail landscape next year. In the meantime, I'm looking forward to seeing how the networks gear up for their high-profile Christmas campaigns and how they position new Apple products in their portfolios.

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