5/13/2009 11:29:00 AM
Dealers hit by revenue share commission schemes
Several dealers are likely to fall by the wayside as Orange and T-Mobile join O2 in implementing revenue share commission schemes for dealers, according to Hugh Symons Communications business manager Bob Sweetlove.
He also said the move to reduced upfront payments, with the remainder deferred over the duration of the customer contract, has been inevitable.
Sweetlove made the comments on the impact on the dealer community in a statement last week, urging dealers to shift their business to only attract customers spending over £40.
O2 moved to its current scheme – which has an ARPU of around £50 – from its upfront model in October 2008. Orange launched its own scheme, with 10% in deferred ongoing commissions, in April this year, alongside T-Mobile, which offered 80% up front and 20% deferred.
Sweetlove said: ‘After many years of customer acquisition and base-building, it was inevitable that the commercial model of mobile would start to move from subsidy towards revenue share.
‘A parallel can be drawn with the fixed-line channel, which is almost exclusively revenue based. The winners in that channel are the businesses who bill the most customer revenue.’
Sweetlove also said the mobile dealers who concentrate on building and maintaining a higher spending customer base will ‘ultimately thrive in a revenue share world’.
He added: ‘We do expect there to be casualties of revenue share. Dealers with high fixed costs and low cash reserves may struggle to cope with the reduction in upfront commissions.’
Sweetlove (pictured) warned that dealers with an average customer spend of under £40 ‘may not see sufficient revenue share coming through quickly enough’, and said: ‘These businesses are at risk and need to take immediate corrective action.’
He also advised continued dialogue with the networks, and said: ‘Big changes often require slight modifications before they settle. We need the operators to understand the inevitable volume impacts as the channel and the customers react to the changes.’