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2 09 2014

Hi, thanks for visiting, my blog has now moved.

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See you there



Why are vodafone charging customers to remain loyal?

14 07 2009

I visited my local vodafone store today, to ask about getting an iphone. However, despite being a vodafone customer for nearly 2 years, it’s not as simple as signing a contract extension and paying for the phone. Instead, they wanted to charge me “between $150 and $400” for the privilege of signing up for a longer and more expensive contract.

Charging customers who want to commit to a longer relationship at a higher price, seems a strange strategy. Banks have tried it with mortgages, but the fee is usually compensation for locking in a lower interest rate. Meanwhile local energy companies are falling over themselves to offer customers money to stay or return.

The language vodafone are using reflects the penalty for ‘breaking a contract’, not the benefits of extending a relationship. In contrast, airlines will let customers change a ticket (their contract) for free on most non-budget fares, and they have limited capacity to juggle. And could you image the reaction if a marketer at Sky TV suggested charging customers a break fee to upgrade their package with new channels..?

The point that vodafone appear to be missing, is that customers aren’t lining up outside stores to get the vodafone experience; they’re lining up to get the iphone experience. And until now vodafone were the monopoly that could provide it, and their pricing and in-store attitude reflected it.

But that’s starting to change. Apple New Zealand now sell the iphone online, for $50 less. And Telecom have launched a guerrilla marketing campaign to encourage customers to buy an iphone and then defect. They’re offering a $600 account credit – enough to cover the break fees – and the prospect of the iphone 3GS working at full speed nationwide (apparently the vodafone network drops to GPRS outside urban areas, and inside our building).

So what will stop customers defecting? According to the vodafone spokeman quoted in the NBR article, it won’t be a problem because tethering on the XT Network would be very expensive by comparison. But I have to wonder who sees tethering as a ‘killer app’? The customer wanting access to the mobile internet, or the mobile companies wanting to sell larger data plans?

I’m told I’m geekier than the average person, yet I’ve never once tried to tether my laptop to my phone. For a start, it takes to long to load the pages. So I’m confident that most people buying the iphone, are buying it for experiences other than tethering. And all those experiences are available on any mobile network, at a wi-fi hotspot and even on a plane.

As a consumer, I’m looking forward to watching the competition, and hopefully seeing some price innovation to match the Australian market.

What’s the price of cheap flights? JetStar’s 1st impressions

29 06 2009

I love flying Virgin Blue / Pacific Blue, because they continually remind me that you don’t need to be dull, just because your all competitors are. While most airlines focus on providing a service (A to B, on-time with some food thrown in), Virgin Blue provide a whole experience.

I remember my 1st impression of the Virgin experience, was that more of their staff smiled more often than other airlines. And they made eye contact…as if they were genuinely pleased to see me. This experience continued with safety announcements that were engaging enough to listen to (who says compliance can’t be fun) colourful seat back information cards and unscripted banter.

The point here, is that cheap prices don’t have to mean cheap experiences.

Compare this with the 1st impressions that JetStar passengers have been getting in New Zealand. JetStar launched with lots of cheap or free ticket offers, to gain market interest. But they have been plagued by complaints of long delays, rescheduled flights and bumped passengers.

No doubt JetStar will recover and improve, but their first impressions haven’t aligned with customer expectations. Jetstar took over from parent Qantas, so excuses about untrained staff and strict 30mins check-in cut-offs weren’t what customers expected. What’s more, these experiences are re-setting customer’s expectations in line with the cheap prices. Several people have already said to me “well I can’t complain, the ticket only cost me nine bucks”. Unfortunately, while JetStar see this as just opening offers, customers are starting to see it as a fair price. And while introductory offers can be effective at tempting trial, price alone wont keep them coming back.

Of course, airline service doesn’t have to be great. Ryanair have become very profitable offering overtly ‘cheap service’, to the point of even threatening to charge for toilet visits. But the big difference here, is that their customers are getting exactly what they expect.

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