O2’s revenue share scheme was a major landmark for the dealer sector. Now, Orange and T-Mobile are also lining up similar models.
Criticisms of O2’s scheme have revolved around cashflow, and the inability to forecast future revenue.
Two months into the revenue share model, many dealers are temporarily making a loss on new connections, as they have forked out on expensive handset subsidies and are now banking on cash trickling in over the coming months.
O2 took its direct dealers to Prague last month, where its business team briefed dealers on what was in store, opening up the allaying fears about the revenue share model.
Three respected business dealers give their thoughts.
Uplands Mobile, Bristol
Revenue share makes sense and is inevitable. It pushes dealers to act more like specialists, which is a good thing.
It does mean that a dealer with average spends of below £30 per month and high churn should be worried.
The scheme comes as our customers are trying to bring their costs down, and O2 is looking for higher returns; however, it is possible to offer the customer a more efficient telecoms package across email, mobile and fixed, which saves them money and satisfies the operator in terms of spend
We operate in a climate where, if a customer is simply motivated by price, we really won’t beat Carphone Warehouse, Phones 4u or Argos.
You have to take the conversation beyond cost.
It requires us to move away from customers that believe they are entitled to a free shiny piece of kit and cheaper minutes every year.
Criticisms of O2’s revenue share revolve around how it was implemented. We talked through the entire scheme. I had 16 questions, and had an answer to eight of them within five days. Of the remaining eight, O2 was willing to tweak a couple, and had to draw a line on a few, which is fair. In my experience, from account manager to the very top, all have engaged and listened.
My only concern is the quality of the reporting we get back from O2. We are already seeing some very detailed information on every mobile phone number we connect, and that is very encouraging.
It raises the stakes on O2’s systems to be robust. I would ideally like to have live information on all live billing, and O2 has said it will assess that.
Everyone needs to recognise that this is a radical scheme, and it is still early. Let’s see after the first quarter, and then have a proper review after the first 12 months.
Communicate Better, Manchester
We don’t work with O2, but we have revenue share on fixed-line services we sell. Mobile operators appear suspicious about sharing data, and that makes revenue share problematic for the dealer.
It requires full transparency on the customer’s billing, so we can allocate our resources accordingly.
My customers will show me their bills, and the response from some networks is, ‘who are you to do that?’ This really isn’t helpful for the collaborative approach that is required for an effective revenue share model.
We offer brilliant services to all of our customers, but clearly there is a need to provide a better service to higher spenders. The dealer and the network have the same objectives of ensuring that the customer isn’t poached by a rival.
Effective revenue share also requires the networks to provide clear, relevant and accurate information, rather than the Chinese whispers that are often the case when dealing via some distributors.
I would love to embrace revenue share because most of my customers are high spenders. It just requires trust and transparency.
Mobile Radio UK, Somerset
This was always going to happen, and dealers who resist it are fighting a losing battle. You just have to embrace it.
It is a wake up call that requires dealers to change their approach, in terms of trying harder to drive revenue out of the customer.
It will affect those dealers with a poor balance sheet. If you don’t have a sufficient overdraft facility, or operate on a hand to mouth basis, you could be in trouble.
Many who have over stretched in the past will find this more serious, and staff commissions may need to be tweaked to a profit-sharing system.
Dealers also need to manage their systems, particularly during the transition period where some customers will be on the old, upfront system, and some on the new revenue share model.
I didn’t initially like the idea; no-one really likes change, but the bottom line is you have to bend to this model rather than resist it, otherwise you will break.
We trust O2 and we’re comfortable with what is happening. It has been reasonably clear in what it is doing.