A Fuzzy Logic Expert System for Pricing Digital Services: The Case of Price Adjustment for a Mobile Service Provider

Abstract

As connected smart devices and terminals continue to grow along with digital content, data traffic of mobile service providers is also growing, and the price war in mobile markets is driving traffic growth without a commensurable increase in revenue. As a result, network capital expenditure (CAPEX) investment, quality of experience, and customer experience are under enormous pressure. In a competitive mobile market, strategic pricing may play an essential role in managing this pressure only if appropriate tools are available for the service providers. In this paper, a fuzzy knowledge-based expert pricing system was developed with a focus on solving network traffic, price war, and business revenue challenges in a competitive mobile market. Its core lay in its ability to recommend digital- and data services-related price points within a competitive and price war mobile environment. The proposed pricing system was experimentally evaluated through a pilot conducted on a few segments of a mobile service provider's customer base in an emerging market and later scaled up to a broader base. Upon implementation, data services revenue increased, and overall gross margin increased with a reduction in data traffic, resulting in better throughput and network quality and, consequently, better customer experience with improved net promoter score.