Sep 27, 2009

Psychology behind pay-per-call schemes

Tata recently launched the Pay-Per-Call , Pay-per-second schemes and its variants for SMS as well.

Naturally, while some have praised this scheme as a brilliant marketing, some others have pointed out this is outright price war and will lead to an overall lower earning for entire industry (this assumes that others will follow suit).

What is it that must have led to this scheme?

The obvious first reason is the upcoming Mobile Number Portability deadline. This implies a subscriber can change his / her service provider yet retain the number for a small fee. This scheme is a carrot for new customers and bigger carrot for other SP's subscribers (assuming their SP will not offer this scheme).

More importantly, will this scheme not bleed the firm offering such an offer?

Generally, the way customers behave, it is said, is that people pounce on any such scheme in hordes initially. That is proven by the recent stat that Tata added more subscribers than Airtel in August. But what about the possible cash outflow for Tata because of customer's overusing this scheme?

Well, initially, it will. But eventually, all customers will "settle" to their initial needs. Most people who use such schemes in small to medium businesses etc. will not speak beyond a certain time because of diminishing marginal utility. The only possible group that may cause a hit by overuse are the youngsters who will use this to the end. But are they a substantial majority?  I don't know but probably not. Also, they are not the probable target for such schemes. Also check the finer details like the pay-per-call is still not in Mumbai where the highest concentration of users is.

So the gist - initially there will be a mad rush for the scheme as well as mad usage to capture the entire surplus, yet in time it will settle down to older levels, perhaps slightly more than older levels.

And does not matter, in long run most of service providers will offer about everything that is available and people opting for a switch must have had a really really poor experience from their SP.

References :
MNP deadline
Diminishing Marginal Utility


Paddy Killimangalam said...

The prices are already quite low that it is unlikely that a regular user will switch operators and go thru hassle of communicating the new # just to save a few bucks. The target might be small neighborhood business guys who already keep 2-3 cell phones and might buy another sim to take advantage of these rates.

You are also right about MNP...

Siddharth said...

Yes Paddy. I read somewhere that the fee for opting for MNP is expected to be Rs.150 or so. That seems high enough to ensure only genuinely aggrieved customers use this facility.


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