Sunday, March 23. 2008The Cost/Value Of ADSL1 CustomersJohn Linton Of course, I understand the concept that at some level of business, particularly if you aggregate your ADSL, mobile and land line spends, you will get some accommodations from either Telstra or Optus but I would think such discounts would be unlikely to exceed 15% - if that - however I don't know. Similarly once you get your IP needs up towards 2.4 gbps you can certainly get some major savings from buying in to either SX or another cable supplier and achieve some very significant bandwidth cost savings; but those savings are beginning to rapidly dwindle with the new 'round' of IP price cuts from the major cable providers and their 'partners' I remember smiling when I read the price paid by EFTel when they bought the customer base of the bankrupt aaNet - which looked to be around $100.00 per customer with the total customer base actualy not only NOT making any money but losing a great deal of money each month - as it turned out I probably underestimated just how money losing that base was when you look at EFTel's subsequent 'profit' results. Of course nothing is going to even vaguely get close to the stratopheric price per customer that was originaly paid to MalcomTurnbull et al for Ozemail - something like $A850 a customer - Malcolm Turnbull certainly found his 'Alan Bond' and even the price subsequently paid by iiNet to buy a much more realisticaly 'sized' "Ozemail" some years later was over $A300.00 per customer and more like $A400.00 whenthe 'dust had settled'. Where is the common sense in these sorts of transactions? Economy of scale? That has to be the answer somewhere but I can't begin to see where it would be delivered. Why am I wasting my time on thinking about such things on a not unpleasant Easter long weekend? The main reason is that I'm trying to work out what Exetel might have to "pay" to build the 5 locations in which we don't have PoPs to a level where it can be financially justified on an ongoing basis. One 'approach' woud be advertising which is something I haven't seen any sense in for over ten years and still don't see the sense in today.I looked at the various ads by Telstra, Optus and TPG in yesterday's and today's papers and still can't work out how anything that Exetel could afford would be able to make any impact on the giveaways being offered by Telstra and Optus. Ignoring the cost of preparing the ad and then the insertion costs the 'give aways': Free activation Free modem Four months free over the life of the contract you begin to see how some people think that an ADSL customer is worth $250.00 to buy - because these freebies plus the advertising cost would add up to more than that (at least at the prices that Exetel has to pay). So my mind was diverted down this path - how much could Exetel afford to pay/sacrifice to double the current ADSL1 user base overall in Queensland, NSW and Victoria and quadruple it in the other States and the two Territories? For the past two years we have been pursuing a quite different operational plan that was aimed at building other parts of the Exetel business while maintaining a very slow growth in the ADSL1 business -something that has been accomplished with some pain but accomplished none the less. I think it would be very, very dificult, to grow the ADSL1 business in one year to double the size it has taken to grow it to over the past 4+ years but then I also see no reason why any particular number can't be aimed at if there is a realistic rationale. Constructing the rationale and then building the components that would allow the rationale to become real and then executing the various aspects of the overall plan would be tricky but then so is everything else in business - scale is seldom the issue - only the validity of the concept. So the negatives can easily and clearly be identified as: 1) Telstra's targetting of ADSL1 users in the 900 most 'popular' Australian exchanges. 2) Optus give away advertising frenzy. 3) ADSL2 generally being flogged to all and sundry by those ISPs/wholesale customers of those ISPs who have ADSL2 capabilities in some subset of the Telstra 900 exchanges. 4) The push by the mobile carriers to take the bottom end of the ADSL market 5) Declining discretionary incomes across much of Australia Pretty formidable negatives when you write them down like that. So - positives...anyone....anyone...... .....it will need a lot more thought. Trackbacks
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One positive You are Exetel. You have amongst the best value plans that can be found, and are well placed to suit a population growing used to new moderately bandwidth-heavy technologies like Joost, Torrents, streaming this and that.
These are things more people discover each day, and soon find that their 'cheapie' BigPond plans just don't suit. By the time their two year sentence is up, there's a good chance they've heard of you from friends who can use these new goodies. (Word of mouth still being the best form of advertising, with us agents hopefully coming up a close second? ) You service a market for people who want to take full advantage of their service, more so than those who just want to check email, or those who want to download every movie ever made. (Hopefully while still making a profit!) In financially challenging times I guess you might also see a little growth from people wanting to keep their download habit but needing to reduce their monthly spend - I'd rather lose my hot water than my broadband! One side thought - with basic ADSL modems now wholesaling as low as $33 (TP-Link) perhaps you can find a way to massage one of those into some plans in order to greater compete with the free modem offers. That and the activation fee probably scare off 20-30% of my curious customers. (/me wonders about the economies of one modem versus one bird saved) Anyway, happy easter John & Co - or should that be happy chocolate eating day! Comment (1)
You make some good points Michael, but whilst TP-Link make some good network gear, modems are not to be included in this from my experience. I got one to test out from a supplier and it was the worst modem I had ever experienced using, absolutely no comparison to any other modem I have ever used. It's sync speed was very poor and it's web interface was horrible. Guess they are cheap for a reason -- needless to say I returned my unit for a credit.
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A lot of the activity in the market is targeted at the low end user, low quota, low dollar, not only are they spending big money to get these customers but their ROI is terrible anyway, not sure if this will push their pricing up but it can't be cost effective in the short term at least. The problem with these campaigns is that they are either expensive to operate, like the Telstra direct marketing, or have to cover a wide scope of different media to try and capture the attention of the consumer, is it any wonder why an ISP would think a customer was worth $250, that's probably a realistic figure compared to what it cost to get their customers, run a million dollar advertising campaign and how many customers do you actually get, divide it into the cost.
Without having an Optus or Telstra like advertising budget these methods can't work anyway, your best asset is your data base of existing and perhaps even previous users and what you can sell to them or alternatively have them offer through a referral scheme. A lot of the activity in the market right now does seem targeted toward the low end user, correct me if I'm wrong but the costs to service a $35 a month customer would be similar to the costs to service a $75 a month customer, if so then there is a good argument to look at building not only the quantity of customers but also the quality, perhaps an increased focus on the mid and higher tiered offers. Also keep in mind that it's not always about downloads, prioritising VoIP, VPN, Terminal server etc traffic could be just as important a feature to attract a mid tier user Given the recent increase in churns can this in part be attributed to the fact that Exetel have short contract periods, a 6 month contract in an ever changing market is appealing to a consumer but it also makes it easy for them to churn away on a whim, perhaps offer something to users that choose to renew, could be a discount, an additional feature on the service, spam filtering etc, another Exetel service as at discounted rate, VoIP, mobile etc If a greater percentage of your user base has been with you for more than 6 months already then any number of them could churn away at any time, in this case I would want to be securing my own customers as a first point of business rather than let them fall victim to some of the offers out there. I’ve worked in a retail environment where there was an expectation to sell ADSL services, it never worked well as the reality was that it is much easier to capture this business in its own environment, online, I’d say your positive is your user base, look at how you can improve retention, additional services, increased spend per user, rewards and referrals, the cost per user to do this will be much cheaper than any large Telco is paying to steal your customers now. Work smarter not harder Comment (1)
What most people forget about advertising by the likes of Telstra and Optus is that whilst they appear to target new customers for broadband products, they also covet customers to their whole product range including fixed line services and mobiles in a big way.
The 'cost' of advertising also includes the 'benefit' of further market recognition and just keeping themselves high on the radar for anybody looking for any product or service they offer, not just broadband services -- a 'starter' discount here could be the start of a long term loyal customer; espeically if they are locked in to using ISP email domains or other related services.... Comments (2)
Well I would suggest some marketing. The most precise method would be geographically based use of Australia Post Unaddressed Mail (http://www.auspost.com.au/BCP/0,,CH3368%257EMO19,00.html)
Use a list like this http://forums.whirlpool.net.au/index.cfm?a=wiki&tag=Australian_Exchange_Guide and target a 5Km radius of exchanges that have only Telstra DSLAMs (thus nearly all ADSL1 customers) and exchanges that Exetel resells ADSL2. (Non-Telstra 3G wireless closely follows non-Telstra ADSL2 coverage so will be mostly excluded automatically) Comment (1)
In terms of some free advertising which could possibly bring some results, and which would certainly gain Exetel some increased exposure, I'd suggest having a look at APC magazine's monthly list of national ISPs.
In this Whirlpool thread which was created some time ago... http://forums.whirlpool.net.au/forum-replies.cfm?t=433065 ...Dan Warne (the editor at the time) explained the criteria for inclusion as being... - full national coverage - a 13/1800 number for tech support - having plans that meet certain (very liberal) value criteria in a number of categories. In the early days, Exetel did not satisfy some of these requirements, but today, I believe it does, so why not see if theres a possibility of inclusion. You'd beat the pants off many of the plans which are currently listed, and expose Exetel to some readers who've never heard of you before. And AFAIK, it's free. Comment (1)
Hi,
- We have full national coverage. - We have a 1300 number for support (cost of a local call). - I believe Exetel has plans that cater to almost every possible demographic. Comment (1)
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