Your wireless operator doesn’t care whether you like Android, the iPhone, or are stuck in the 90s and just talk and text. As long as you give them money, they’re happy. Their worst fear is churn, which is defined as you leaving them for a competitor’s network. Over the years operators have figured out ways to reduce churn by making it a less attractive option. They use techniques like making it cheaper to call or text people who happen to be using the same network, bumping up early termination fees so you stick with them for the full length of your two year contract, and then there’s the age old atrocity known as phone locking, so that you can’t use your device on any network other than the one who gave you your smartphone.
Back in October 2010 one of the prepaid brands in America, BoostMobile, introduced a new concept called “Shrinkage”. The premise is easy enough to understand, pay your bill on time for 6 months in a row and they’ll knock $5 off your bill. Do the same for 12 months, that’s $10 off your bill. Pay your bill for 18 months in a row and that becomes $15 off. They don’t offer any additional discounts after said $15, but still, that’s a savings of $180 a year. Their idea to reduce churn isn’t to penalize the customer or make it difficult for them to leave, but instead reward them for their loyalty.
During the past few months I’ve been trying to avoid excessive screen time, so I’ve taken up listening to podcasts and venturing out to my local library to read magazines and newspapers for free. Looking at the cover of a periodical like The Economist, you immediately notice that it’s a rather steep 6 Euros, yet if you go to their website they say things like: Subscribe for 3 months and save 45% off the cover price; 12 months saves 56% off the cover price; 36 months saves 60% off the cover price. Why can’t wireless be the same?
For people who want to pay month to month, let them cough up $100 every 30 days, but for those of us who know we’re not going to switch, why not reward us by letting us pay $250 every 3 months, or $400 every 6 months, or $750 for a year of service? How much more attractive would the subsidy model be if you told customers that for $899 they can get a brand spanking new iPhone and 12 months of service? If they decide to quit before their 12 months is up, who cares, they already paid!
Some people define innovation by the creation of new hardware, such as the microprocessor; new applications, like Apple’s Siri; and new services, like Google Docs. I’d argue that there’s just as much innovation in tweaking your billing model than most people care to admit. It’s why prices end in $0.99, why people clip coupons, sign up for loyalty cards, etc.
What do you think of this idea? Is it in an operator’s interest to try something new?