8/27/2008 10:59:00 AM
Price hikes in tough times
I have received two letters and a text message in the last couple of months with the subject: ‘changes to your account’. All three showed remarkable creativity in trying to soften the blow of a price hike. My insurance company even attempted to convince me it was doing me a favour by increasing how much it charges me.
With the realisation that there are very few new customers out there, mobile companies have looked at other areas to improve the balance sheet. First, cost cutting: job cuts are everywhere. Sony Ericsson has said that 2,000 jobs around the world will go, and Vodafone, Orange and O2 have all either completed or are currently embroiled in consultations with thousands of employees that they are letting go. It has been the same story in distribution. 20:20 is cutting jobs, and Hugh Symons Communications has also made cuts.
So what comes after cost cutting? For Vodafone and 3, the answer is trying to tweak its terms and price rates as a reminder that, even in the fiercely competitive UK market, the priority is squeezing extra revenue. Ideally, that comes from finding new customers for great-value, exciting services. When that’s not possible, the strategy turns to pushing prices up from the existing base. Vodafone has upped its prices on certain numbers, and on calls for contract customers outside their bundles. 3 this week has dropped per-second billing and introduced new charges for printed bills and direct debits.
Just as the pressure is there for millions of people to try and balance their household budgets amid the tightening financial climate, big companies are looking to do the same. Even 3, which has spent heavily and worked hard to bill itself as the ‘consumer champion’, has reminded everyone of the bigger picture.