DUBLIN, Ireland-In the wake of the phenomenal success of “ready-to-go” prepaid packages, many European mobile phone subscribers are concerned they are paying more than they need to for their service. This issue came to a head earlier this year in the United Kingdom where carriers have come under fire from customers who feel they should be informed when there are more cost-effective tariffs.
The advantages of securing prepaid customers are clear: Operators receive their money in advance and can reduce the percentage of administrative resources devoted to billing and invoicing while charging up to 50 pence per minute (about US75 cents) for calls.
As a result, phone shops are full of prepaid literature and massive marketing budgets are devoted to promoting these services.
However, operators have been less anxious to inform post-paid customers they could be getting more for their money or paying less for their existing service.
Several customers of the Orange network made their case publicly in January, writing letters to the national press and pointing out that they could have received twice as much talk time for a slightly lower monthly charge. Further investigation showed that these customers could have obtained their 15 minutes per month for even less by paying for 12 months of service in advance.
The problem was that U.K. operators simply didn’t advertise these offers or-more importantly-didn’t inform their customers of them.
Orange competitors Vodafone and One-2-One were similarly slow to promote their most cost-effective offers, and while the situation has improved, the overall attitude of the cellular industry toward customer over-paying is still less than satisfactory.
Cellnet has taken the lead with an initiative that credits money to customers if they are not on the right tariff for their usage. The company claims it has signed up 658,000 customers in first quarter 1999-its best ever three-month performance-by guaranteeing that users always benefit from its lowest monthly call charges, no matter what digital tariff they are on or how often they use their phone.
“Customers are refunded the difference between what they have paid and what would have been the best Cellnet digital tariff retrospectively each quarter on their bill,” explained marketing director Kent Thexton. “This is the only package of its kind in the U.K.”
Customer bills are monitored on Cellnet’s behalf by Intelecom, a U.S.-based professional monitoring agency.
Thexton said the scheme was introduced to help build long-term relationships with customers. Cellnet carries out a First in Fairness check-up every three months and issues a credit if the customer was not on the best Cellnet monthly call plan for their usage in that period.
If this approach has worked so well for Cellnet, surely the other networks have followed its example?
Well, only to a certain extent.
Check-up plans
Vodafone is less proactive but does offer “health checks” for customers who want to know if they are on the most appropriate tariff. Emma Terleske, spokeswoman for the United Kingdom’s largest cellular network, said customers are free to contact the company for advice on the most cost-efficient tariff for their needs.
She also recognized it is in the interest of the carrier to ensure the customer is not paying more than necessary. “Obviously if the customer is paying too much, they will be unhappy. Often when a customer comes from a different network, we will suggest a more effective tariff.”
Changing tariffs is free for Vodafone subscribers and can be done every month if necessary.
As for Orange, which was at the center of the storm back in January, the company has not responded directly to customer claims.
Graham Howe, deputy chief executive and chief financial officer, plays down the importance of call costs. “Orange believes, and our own research shows, that people do not choose a mobile phone service based on price alone. They are far more interested in value, service and performance.
“This belief is corroborated by the fact that Orange has consistently attracted high-value customers, generating the highest chargeable usage in the industry. Significantly, Orange also has the most loyal customer base, reflected in the fact that our churn rate at 18.1 percent (as at 31 December) is the lowest in the industry. Orange is focused on continuing to attract high-usage, high-value and loyal customers to a growing subscriber base.”
But despite Howe’s views on pricing, Orange has introduced a value promise-effectively a price guarantee. The carrier offers its customers the equivalent of any “current popular digital package.”
“Customers can choose a competitor’s package and still benefit from using the Orange network, but Orange will charge in the same way as the competitor would for the package in question, including international call charges, answer phone charges, itemized billing and text messaging,” said Howe.
