It seems a great idea, until you realise that Carphone Warehouse’s e2save is one of the biggest cashback sites around. Sure, the earning potential is great, and the pay-out rate is high at 60%; but that still leaves 40% off customers who are going to feel short-changed. How many off them are going to come back when their contracts are up?
And 60% pay-out is the highest rate that I’ve heard – anything over 30% is considered high. That’s the trend across the industry. Dealers and multiples are so desperate for customers that they’re constantly thinking of new cashback gimmicks to lure in
The trick is to find the most attractive deal, which will get lots of volume but will have as low as possible a pay-out rate; the fewer customers who get the money, the more for the dealer, and the more chance of the formula working.
Best of all, get an attractive deal, gets lots of customers in, and when it comes to pay-out time customers will find that the mobile phone shop they took the connection from has gone bust and so they can’t get the cashback – even though there’s a new phone shop on the same premises, which just happens to be owned by the previous owner’s
It’s another typical example of the short-termism that’s plaguing our industry. Let’s look at what cashback means for us. No matter how much you tell them it’s their own fault for not fulfilling the terms and conditions, the many customers that do not get their money back are still going to feel cheated. The dealer has more likely than not lost that customer, and his friends and family, for good.
Even for the customers who get paid (more likely to be B2B customers), it sets an unreasonably high level of expectations. I’ve had customers in store who think £35 is too much to pay for FlexT £35. We’ve seriously devalued our own industry.
It started out, initially on 3, as a half-price line rental for six months offer, then went to half-price for 12 months, then 18-months half price, then £4.99 for six months, then 99p per month … it’s got to the stage now where, on certain well known websites, you can pick-up a Nokia 6111 for “12-months FREE line rental” on a 12-month contract! Where the money comes from for anyone to make a profit on that deal, I’ll let you guess.
There are now lots of customers who actively seek out these deals. All they want is cheap minutes. It’s this trend which made 3 known as the £4.99 network, and some even find that expensive. Never mind the fact that you can get data speeds of up to 384kbps, or that you can see who you are talking to, or that you can download the latest song to your phone.
Price vs value
Dealers don’t advertise this stuff anymore. We only know how to compete on price – we’ve taken the passion and excitement of mobile phones out of the industry, and turned it into a race between who can offer the most minutes, for the least “effective line rental”.
Let me take this opportunity to commend Matt Chambers at Kent dealership the Phone Chambers. Matt’s mainly B2B-focussed; he had a customer who’d been offered a competitive share plan from Carphone Warehouse’s Business team, with a hefty cashback which Matt couldn’t possibly match. Matt told the customer he’d be better off with a vehicle tracking package, with free set-up and running costs for one year.
The customer phoned CPW back, and asked if they could offer vehicle tracking? The poor sod on the other end of the phone didn’t have a clue what was being talked about, and Matt had bagged a lucrative contract.
Remember, if you try to compete on price, and price alone, there’s always a bigger fish! Don’t let your connections business be at the mercy of a shoddy one-trick pony. The minute the customer realises that he can get a bigger cashback, with more likelihood of getting his money at Phones4U, where do you think he’s going to take his business?
Ultimately, this is an issue which divides the industry. I’m still not sure what to do about this Hugh Symons e2save offer. I don’t want to do it, but some of our concession partners are very keen. I’ll be checking the forum to see what you guys think.
THIS MONTH’S TOP THREE DEALS
1 – Vodafone TV 500 package. Good value at £35 per month for 500 mins and 100 texts, plus Stop the Clock and Vodafone Passport – and free Sky Mobile TV for six months. £300 pre-phone commission on selected 3G handsets.
2 – O2 800 18-month contract at £40 per month, giving 800 minutes and 100 texts – with commission support to easily beat the best of T-Mobile’s flagship package. £276 pre-handset commission plus commercials.
3 – T-Mobile Web’n’Walk Pro Data Card. £20 per month on a two-year contract for anytime anywhere broadband. Data speeds are going up to 3.6Mbs by the end of the year.
THIS MONTH’S TOP THREE GRIPES
1 – Networks direct deals undercutting dealers shocker! What better way to confuse your customer?! Especially from networks with pink and grey branding …
2 – Handset delays. For example, why did Orange advertised the HTC TyTn (SPV M3100) in its July price book – when it has no chance of being available in July, and probably not in August either?!
3 – Customer service. As a country in general, we are totally crap at customer service. That’s something for a future column, or maybe even a future book. If you have any real bad experiences you want to share, post them on the forum.
THIS MONTH’S Jaffa Cake GOES TO:
Vodafone and Carphone Warehouse for the excellent TV500 tariff, giving Free Sky TV for six months. There is still some passion left in our industry.