Friday, September 03
"Marketing: the matching of what the company can provide, with what the customer needs or wants, in a way that maximises long-term profits for the company". (Professor Peter Doyle)
Data roaming. Do we need or want it? I think we do. We want to check emails, get the weather, get directions, Google something. In other words, use our smartphones abroad as we do at home. But I've generally listened to the warning on my iPhone to turn off data roaming to "avoid substantial roaming charges".
Why do we have the bizarre situation that my iPhone warns me against using itself? It's because all round the world, telcos charge prices so high for data roaming, that they are literally unbelievable to innocent customers, who end up with charges that shock them.
I found this out one sleepy June evening on holiday in Austria. After a good dinner I felt like catching up with my favourite newspaper online. I knew that it would cost me, but I thought, I'm on holiday, I'll treat myself. But 2,800CZK to read a small part of a newspaper?
I should count myself lucky. According to the EU website, a German traveller downloaded a TV programme while in France and got a bill for €46,000!
In July, the EU intervened, quite rightly in my view. It forced telcos to limit monthly charges to €50/month unless the customer agrees to pay more. The result, as I found out on holiday in Germany last week, is that you get a stream of texts from your telco warning you that you can't download any more because you have "exceeded the EU limit on data".
But of course the EU is not trying to dictate how much data you download. If prices were reasonable, most people would have all the data they could reasonably use for €50; and those who need more, would happily pay for more.
How can I be so confident in asserting this? Well, thanks to what I have learnt from this excellent research into the data roaming pricing of the Czech telcos. Unknown to us customers, O2 have a range of prepaid data packages which you can buy to use abroad. We've calculated we can save 90% if we would use them rather than pay the standard rates. Great, eh?
No, actually not great at all. The packages must be profitable for O2, so they simply highlight the outrageous profits they make on the normal tariffs.
The big problem here is that customers cannot measure what they are buying, in terms of data. There is no ‘data meter' on your phone to tell you how much you use in each of the many clever operations that your smartphone provides.
Is this good marketing? Well clearly it is profitable. It seems that profits are ten times higher than they need to be. But can this continue in the long-term and what are the costs?
Even before the EU intervention you have the absurd situation where the phone manufacturer feels the need to warn customers about the pricing policies of its "business partner". Some people do not like the idea of "state intervention" in markets. I can't see the downside to interventions like this, and companies have only themselves to blame that it comes to this. The EU has the modest goal of making us more aware of the costs of data roaming. We actually become aware that we are being royally ripped off. So we don't use the service at all, and we think badly of our own telco (even though all of them are indulging in this rip-off). So: excellent short term profits, but revenue much less than it should be, angry on-line partners who get less traffic than they should (2,800kc to read the paper?), and negative responses in brand research ("expensive", "arrogant", "dishonest").
Good marketing? You decide.
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