6/3/2009 12:46:00 PM
Dealers fight paperwork to cope with O2’s new commission scheme
The first critical three month period for O2’s dealer revenue share scheme has elapsed, with a mixed response from dealers and distributors.
Some have welcomed the transparency it gives dealers on customer spending, but several others have cited the heavy burden of paperwork required to reconcile the data.
At the centre of the new workload faced by O2’s dealers is calculating how much every customer has spent, and whether it is above or below the magic £40 per month level (see below).
It has led to complaints from some dealers that they’ve had to invest in new systems to cope with the paperwork.
O2 first announced and presented details of its revenue share plans to dealers and distributors in the autumn of last year.
But transparency of customer data has been roundly welcomed by dealers who have previously said it is impossible to secure high spending customers without access to how they spend.
O2 did not previously give dealers statistics on customer spend, citing the Data Protection Act.
But now, some dealers have said the weight of data and statistics has led to long hours in the back office, and they have even had to invest in new software and systems as a result, at an unaccounted cost.
One dealer said: ‘We get an Excel spreadsheet with customer figures and there are mistakes that need checking.
‘None of us have been prepared for this change – we have had to change our formula – the administrative burden from the network share is something we weren’t prepared for.’
Another said: ‘Suddenly we require new checks and balances, but we’ve been asking the networks for years to tell us more so we can’t really criticise them now they are.’
One added: ‘If you want to do a share scheme, then you need to work out the figures. It should have been done from day one – people are complicating it.’
O2 dropped upfront commissions in favour of the revenue share scheme in October last year, and was followed by T-Mobile and Orange in April 2009.
An O2 spokeswoman said: ‘Accurate and thorough reporting is essential so our partners can prepare themselves for reconciliation and avoid any surprises. Revenue share delivers long-term stability for our partners by investing appropriately on the contract value of our customers.’
Does ARPU level make revenue share worthwhile?
Dealers are trying to predict low-spending customers, as they barely make a profit for the business under the new scheme, it has been claimed.
O2 has defined customers who spend over its £40 per month average spend as ‘true ups’, and below that level as ‘true downs’.
Dealers said the effort in managing the administration around each customer doesn’t make it viable to serve so-called ‘true down’ customers, and they only break into profit after the minimum 24 month term.
Meanwhile, the money is starting to come in from higher spending customers.
One dealer said: ‘It’s hugely beneficial to be connecting a high-spending customer on O2, but dealers that rely on O2 for the low spenders won’t make money.’