Tariffs Transformed

It’s tariff turnabout time. The fallout from T-Mobile FlexT variable-content tariff and 3’s clever ways with bundles have seen all the networks looking for a competitive solution, especially in the midrange £25-30 per month market. Time to check out what networks starting with ‘O’ are doing …

The thinking at Orange has been to look for a differentiator – something that makes the product stand out. All sellers need something that distinguishes them from the competition, so the animals theme isn’t a bad idea in principle. True, the traditional approach of the networks has been to compete on value (how much the punter gets for their money) or, at the low end, price (the least impact on the pocket). But that’s becoming a bit of a minefield; monthly specials, bundled deals and the fact that tariff boundaries aren’t the same across all networks makes life very difficult for the would-be subscriber who is shopping around.

It puts a lot of emphasis on the retailer to come up with the best deal for the individual user at that particular time, but then the retailer has other influences to accommodate – notably the amount of commission on offer from one candidate or another.

Orange’s approach is basically simplicity by psychology. If the customer can connect to a particular service proposition, and if it manages to look like an ok deal, they’ll feel reassured and relieved to found a safe haven. That’s the theory, anyhow. At Orange the sales message for the animals campaign is “what kind of user are you?” rather than “how many texts and calls do you get through in a month” – or more prosaically “how much do you want to spend”. In other words, the customer is treated as something more than a payer – he or she has needs, drives, wants, desires, and all the other apparatus of marketing-speak.

Customer types
The idea of customer profiling isn’t new, of course, and undoubtedly it’s something that all the networks do on an internal basis: it makes their life a lot easier if they can develop products for a particular type of user with identifiable characteristics. In Orange’s case, that was simply extrapolated into four target groups. That’s fine if it works, of course. And it works if the potential purchaser can indeed identify, and if they do indeed feel they’re getting value.

Which is why it’s interesting to see Orange stepping back from the “what kind of user are you” offer to “here, have lots more minutes and texts”. From the start of August, the bundles are being boosted – by as much as 50% additional minutes and texts. And customers who buy direct will get unlimited off-peak usage on contracts over £35 a month.

So the segmentation strategy doesn’t work? The answer seems to be yes and no. It certainly hasn’t gone down well on the High Street, where the competition centres on price: when the Orange animals packages have sold well, in many cases that has been because the relatively generous commissions could be used for cashback deals to attract low-spending bargain hunters. The segmentation doesn’t seem to be having the required effect in terms of producing solid, safe, quality connections …

… Except when Orange sells them direct. Anecdotal evidence indicates that the animals have gone down much better at Orange stores and via the website, and this too could be a matter of psychology: it’s easier for the network to foster a sense of comradeship and belonging when it doesn’t have to compete with the in- store or on-page clamour from other suppliers.And yet again it’s the direct route that gets the sexy  extras like those unlimited free off-peaks.

Options at O2
O2 too has revamped its monthly tariffs, though this time its essentially more of the same – more texts, more minutes, better value. O2 already had some of the strongest tariff competitors, and it’s also been clever with special one-off promotions. But basically it hadn’t really revised its tariffs for three years before the July reworking. The new plans look both simpler and better-value – exactly what the punters want.

O2 Anytime gets seven price points between £20 and £70 per month; there are 100 free messages a month (texts or MMS) for all but the starter package (£20pm gets you 25 bundled messages); and to encourage customers to commit for longer, the inclusive voice-minutes allowance is 50% higher if they sign for 18 months.

The deals look pretty good, especially for the longer term. At £35 per month, for example, the plan includes 400 minutes on 12-month contracts or 600 on 18-months, both plus the 100 texts. That replaces O2’s former £35 package which bought just 200 minutes (plus a double-for-six-months offer for anyone signing up for 18 months).

At Vodafone £35 buys an Anytime 275 contract on 18 months – 275 minutes and 500 texts. The Orange Canary plan at £40 has 300 minutes and 100 texts. FlexT still remains competitive at this price point, however, FlexT 35 at £35pm gives an allowance of £180 to spend across texts at 10p, picture messages at 20p and voice at 20p per minute. So it could provide 100 texts and 850 minutes. So O2’s kicker is the ‘long weekend’ proposition, with free UK calls to any mobile or landline number from midnight Friday to midnight Monday every week. Yep, that’s Monday as well as Saturday and Sunday. And yet again this is one offer that is denied to the retailer – it’s only available in O2 stores or by calling O2 direct.