9/17/2008 1:03:00 PM
Orange’s balancing act
It’s not getting any easier for Tariff Daddy to earn a decent crust. If the credit crunch wasn’t bad enough, now operators are shaping to squeeze his cashflow by switching to ongoing commissions. It’s early days for Orange’s initiative, but the early take on it from dealers is that it will put the bite on smaller companies. As one senior distribution source put it, ‘everyone wants £100 now, not £100 over 12 months’.
Ongoing commission is not a new idea, but it often rears its head when the market is sluggish and operators’ minds turn to retention and upgrades, rather than the hunt for new customers. ARPU-related pay requires a difficult balancing act: the package must be rich enough to keep dealers’ interest, but not so rich that they’re paid money for old rope.
Vodafone was the first to pioneer ARPU-related commission about five years ago, but watered down its original plans after the furore they caused. Indeed, Orange had been mulling over this one for a while too. Mike Newnham talked about it two years ago before heading off to Orange Home.
There are plusses and minuses for dealers. Cash is king in recession, and there is no guarantee of what customers will spend. But the best dealers should also do reasonably well out of it, because they know they sign good customers. They can also take comfort that an ongoing commission scheme implies that they are part of Orange’s future plans, even in a mature market.
There are downsides for Orange too. If it gets the terms wrong, it can sit back and watch dealers switch allegiance to the opposition. Much will also depend on the attitude of rival operators, in particular, will T-Mobile and 3 decide it’s better to beat ‘em or join ‘em?