Friday, September 10. 2010"Bundling" - Mostly For The Gullible........John Linton .....but perhaps also for the mentally lazy. I have never been a fan of 'bundling' different services together to seemingly give a customer a better deal. Basically it is a con/scam in almost all instances because there is no, for the provider, savings to be made by 'bundling' a wire line telephone service with an ADSL service and/or a mobile service let alone with other even more different services. So what bundling means is that the individual services are priced unreasonably high and some profit can be sacrificed in the illusion that more overall profit will be generated - or something along those lines. However, I realise that this is a personal bias which, like my aversion to "capped" mobile plans is based on my non-understanding of the stupidity of the 'average' customer and my aversion to unethical practices in any part of the supply of services.....an wholly out of date set of views that 'hold Exetel back'. There is another reason that Exetel is highly constrained from using 'bundling' which is we already sell each of our services at the lowest possible margins and there simply is no room for 'additional discounts'. We make better margins on mobiles, wire line telephone calls and VoIP than we do on ADSL which barely breaks even so the concept of giving away some profit on the other services to sell more ADSL which makes no profit has never been a very attractive financial proposition within our simply based organisation. However,such is the strangeness of the current circumstances in the Australian communications business we find ourselves contemplating making some sort of bundled services available due, like 'capped mobile plans' to the apparent innumeracy of a significant proportion of current buyers. Why has this come about? I don't really know but as we continue to lose ADSL customers to Telstra Retail we have to see if there is something we can do about that. We do some checking on why people leave us to go to Telstra and we find two main reasons. The first is straight financial incentives that we cannot begin to think about - Telstra offer more money as a 'welcome back' day one discount than we would make over the average lifetime of the contract. The second is the 'illusion' created by the discounts Telstra offer by 'bundling' multiple services when the customer buys multiple services. Although the 'discounts' are only achieved by agreeing to buy a service that is over priced without the discounts and the products you have to buy to obtain the discounts are similarly over priced and the net result is the customer pays more for three services rather than just paying more for one apparently doesn't register. Like all mug cons this particular 'three card trick' is based on misdirecting the gullible. The 'Telstra Bundling' incidence of the 'short con' is often based on the fact that the customer is already paying for an over priced wire line telephony service (plus even more over priced telephone calls) and an over priced mobile service so all Telstra actually offer is a very overpriced ADSL2 service and then offer to 'discount it' (back to a price closer to reality) by locking the customer into longer contracts for their other over priced services. A bit cynical but basically correct - unless you actually believe the three card trickster really does have the 'lady' as one of the three cards for you to select from - or that Telstra can afford to employ the services of hundreds of people making telephone calls or door knocks AND give the customer a good price for services. I spent some time yesterday looking at one of Optus' bundles and also double checked, via a colleague, the arithmetic on Telstra's current ADSL2 bundles. After almost two hours of 'running the numbers' every which way I could not for the life of me see how any person who even cursorily examined the offers could actually be so stupid as to buy them. So we decided to have a look at what Exetel could do this afternoon. The only basis we can use is to give away the small profits we make on the 'other' services because we make no money at all on the ADSL services and I'm pretty sure that isn't a sensible basis for a pricing policy. However, as this concept is so widely offered perhaps I am missing something and it will do no harm to re-look at the various permutations. Since being 'forced' to look at this scenario again I realised that I was "missing something" and have therefore come up with at least one idea as to how to make it work financially for Exetel but, I'm almost sure Exetel shouldn't have to use such tactics in what used to be a clean and simple business based on technical merits and a degree of altruism. Yet another indication that I'm past my use by date. The answer to all really difficult questions is always something really simple - all you need to do when being confronted by an 'impossible to solve problem' is to remove, one by one, the thoughts that create the impossibility - I keep giving myself this advice but I seem to have a problem remembering it. PS: Now the 'election' is over it was interesting to hear that both Telstra and Optus are applying to re-sell the NBN (Tasmania) fibre services. The mind boggles at how Telstra (or Optus come to think of it) will cope with dealing with NBN (Tasmania) if their experience is anything like ours. Copyright © Exetel Pty Ltd 2010
Trackbacks
Trackback specific URI for this entry
No Trackbacks
Comments
Display comments as
(Linear | Threaded)
I think the one that the one that annoyed me the most was when optus had their "make your own" bundled plan or something similar. It never worked out well and always included a landline. voip is the cheap alternative to any bundled plan.
Comment (1)
We would only offer the opportunity to bundle a mobile and preselected long distance/mobile calls.
We would not want the land line business. Comments (3)
Don't underestimate the intelligence of your Exetel customers John. We all know that what you offer is the best value we can get. Maybe you do lose some customers who cannot see that the bundling and 24 month contracts are not really such a good deal, but the majority of us can see through the "Special Deals"
Comment (1)
Not going to disagree, but there are some cases where it works out almost the same. Having done the maths recently (I was considering moving to get ADSL2 but now thankfully do not have to), at the end of the day, it was $10 difference. In Exetel's favour obviously.
As for the 24 month contract, this doesn't worry some people as they, usually incorrectly, assume their supplier will ensure that any changes will flow on and be better for them. Comment (1)
This sort of reminds me of how you used to provide free VoIP calls, websms and email2fax with all services. I thought that was a good added incentive for customers to choose Exetel, and in a way it was 'bundling'.
Comment (1)
True - this time we are proposing that a customer buys their mobile service from us in exchange for a $15.00 discount per month from their ADSL or ADSL2 monthly bill.
As our ADSL and ADSL2 plan prices are already the lowest cost in the market this could be seen as a major benefit. Comments (3)
John,
You have often commented about mobile phone users bundling handsets with voice and not undertstanding the logic. I dont fully understand your position. I know this isnt the cheapest/best value handset on the market but if I wanted an Iphone 4 I would need to pay around $850 for it on the outright buy market - with little to no price competition. if I buy it with 24 months network access and some value ($300 of "credit" and 300mb data) of included calls it will cost me $1050. That $300x24 surely must be worth the same or more than the effectively $200 I am paying for the network access? Sure you can buy cheap phones and cheap plans (with or without voip) but I cant see a better value way to buy higher end handsets. If someone is selling handsets with "computer equipment" like retail markups I havent found them. Comment (1)
I'm sure you are correct.
My family (except me who only buy a phone when the previous one breaks) buys iPhones direct from New York stores on line at 50% of the Australian store prices. Anyone with a little experience does the same, the equivalent or something better. Generally only the wealthy, the lazy or the naive pay 'retail' prices for anything. Comments (3)
This sounds like a fair good deal.
iPhone store has the iphone4 for $299, but locked to a 24 month AT&T contract. The outright one (as a "gift") seems to be $699. It's close to the Aust price. Apple have always been such that the smaller aust market has higher prices. Comment (1)
The Samsung Galaxy S is a much better phone overall -- I have one and decided on it over the iPhone 4 for a number of reasons.
Comments (2)
the AT&T iPhones, even the outright ones, are locked to AT&T and they do not offer an official carrier unlock so it is still a subsidised price, the price can't be taken at face value like that, Australia is one of the cheaper places to buy an iPhone that is not carrier locked
Comment (1)
Bundling has it's place, but I too place it in the "cap" arena -- mostly, it doesn't work, but it can.... for some.
I had an "argument" with RACV on car insurance renewal. Allianz gave me a better price and RACV would only come close to "matching it" if I also insured my home. I don't like this kind of marketing, so I gave my business to Allianz and RACV lost out. In my opinion, each product should be priced "right" and then I'll buy the product on it's own merits, not because of a bundle deal that is required to make it "market" price in the end. If RACV wants my business again in the future, they better not insist on bundling to get me a "fair" deal. Comments (2)
I suspect one purpose of caps and bundles is to confuse - or obfuscate. I don't know how anyone could know whether they are getting value for money on many of those deals - especially caps. I don't think people actually understand them.
There are some advantages to bundling though for both consumer and provider. For both there is only one bill a month (or one credit card / direct debit) to worry about. I suspect many are willing to pay a price for that convenience. For the provider, there are some savings but mostly I suspect it is about keeping a revenue stream from the competition. The assertion that it is for the "gullible" or "mentally lazy" is little harsh or arrogant. It is a lot of work to find the best value and I doubt anyone fully surveys the market. If I were to put a price on my time to do that analysis, I cannot save the kind of money of the price of a fair analysis. More than likely people are going to prune the market using a set of criteria or heuristic before looking for value. Most use a poor set of criteria. For most people, Exetel will be pruned. This is the most frustrating part of Exetel. The plans keep changing and any analysis done is obsolete in a few months. I find it hard to recommend Exetel because by the time a person might make a decision, the option I recommended isn't there any more. And then there is the psychology of it all. People don't make rational decisions. They make decisions for a number of otherwise illogical or irrational reasons. For example I've seen people presented with clear facts that one option is the best value and yet choose another option because it seemed like it was a bargain. And they'll be happy because it feels like a bargain. The illusion of getting a bargain is far more powerful than the reality of getting value - even when value is cheaper than bargain. And don't be the person to break the illusion - you'll be the bad person who makes people feel awful. Comment (1)
I see bundling much like loyalty schemes - An incentive to encourage repeat business. It means the customer sees your stock more often and your customers stock less often and so is more likely to buy a new product from you than from them as that is easier than thinking.
So the costs involved could be seen as part of the advertising budget. Of course if you don't have an advertising budget.... Comment (1)
|
Calendar
QuicksearchArchivesCategoriesBlog AdministrationExternal PHP Application |