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of the 'average' customer and my aversion to unethical practices in any part of the supply of services.....an wholly out of date set of views that 'hold Exetel back'.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
ABN 350 979 865 46