Telephone Prices - Smart Marketing that are Misleading
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With the three major telephone companies being 'related' in one form or another, and in varying shades of ownership that tie up with GLCs, the final beneficiary is Temasek.
This perfect monopoly in an environment of supposed open competition is the result of ingenious virtual reality at work that lull the minds of a greedy and slow witted population.
Whither cellphone pricing? It's not so transparent
IVAN PNG
FOR THE STRAITS TIMES
UNTIL April 1997, SingTel held a legal monopoly over public mobile and fixed-line telecommunications services in Singapore. Then along came M1 as the country's second mobile telephony service provider. Three years later, in April 2000, StarHub entered as Singapore's second fixed-line and third mobile telecoms service provider.
The accelerated liberalisation of the telecom sector brought about intense competition - in terms of services offered, quality and price. There were daily promotions by SingTel, StarHub, M1, and their various retail distributors in newspapers, television and radio. The intense competition yielded huge benefits to Singapore consumers and businesses.
Mobile telephony, for instance, has been transformed from a luxury for bankers and doctors to an almost universal service. By last December, 3.5 million persons here had subscribed to mobile phone services.
February 2004 may prove to be another watershed in the development of Singapore's telecom sector - but in a different direction.
On Feb 21, StarHub took out full-page advertisements for its cellphones, but these did not state handset prices. Promising 'better handset prices than any other advertised', it offered to charge $1 less than any advertised price.
One week later, SingTel followed suit with full-page advertisements in the Lianhe Zaobao and The Straits Times. These did not publish handset prices either. Instead, the ads declared that 'SingTel's offers are better than FREE! - $1 will be yours for any $0 mobile phone advertised'.
The odd man out, M1, boldly advertised a selection of eight handsets - variously made by Nokia, Sony Ericsson, LG and Motorola - for $0 each.
What do these price-beating offers portend for competition in mobile telecom services? Superficially, offers to beat prices by $1 may seem to be extremely competitive.
Closer inspection, however, reveals them to be a subtle means of price segmentation. Different customers pay different prices. Consumers who are aware of M1's prices can purchase from SingTel and StarHub and pay $1 less than M1's prices.
Because SingTel and StarHub did not publish any handset prices, consumers who do not know that these two retailers are offering to better any competitor's price could end up paying more than if they had purchased at M1.
Does the offer to beat competing prices signal low prices? Not necessarily. Indeed, the objective of price segmentation is to focus the price discount at the informed consumers only.
In a perfectly competitive market, there is clear information about value and price. All buyers swing to the seller offering the best value for money. Where prices are not transparent, the forces of competition are blunted.
The next few weeks will be revealing. Will M1 also cease to advertise handset prices? If it does, local mobile telecom providers will have switched to a new mode of competition, one in which price is no longer transparent.
As a market strategy, this is probably not surprising given that 83 per cent of the Singapore population already subscribe to mobile services. There is not much uneaten cake left: SingTel, StarHub, and M1 can each only grow at the expense of one another.
Under these circumstances, it makes sense for them to de-emphasise price. That would be good news for shareholders, but not such good news for business and personal users.
The writer is Kwan Im Thong Hood Cho Temple Professor and professor of information systems and business policy at the National University of Singapore
http://straitstimes.asia1.com.sg/commentary/story/0,4386,238087,00.html? -
i find it frankly frightening that a "professor" wrote something so off the mark...
the sign of "intense" competition between different telcos is not cheaper handsets, but cheaper call-rates...
it is well known that telcos do not make money selling handsets... in fact, they LOSE money most of the time. how else do u expect a handset that comes "with plan" to be about $200 cheaper than the same model that comes "without plan"?
its blatantly obvious... by tying u down for 2 years, they make more than what they would've made if they charged u full rates on the handset. and if u cancel the plan pre-maturely, u are made penalised to the tune of several hundred dollars.
all these are intended not to gain more customers, but to promote and enforce customer's loyalty. this is especially significant since given the small population and degree of saturation of the market, they can't expect to significantly gain their market share through "new" subscribers anymore... it can only be done by poaching your competitor's share.
so what is this "professor" talking about? the price of handset is never the issue in telco competition. -
Yes.. but to get these new customers to jump telcos... handset prices is one factor of consideration.
Still, i think the point of these professors and that article is that they should focus on product differentiation and quality of service rather than prices in their marketing mix. -
Failure to mention is the level of service and quality provided. People actually don't mind if what they pay for is of high quality.
Putting it in another way, people want to see their money well spent.
All 3 companies can afford to offer the same pricing, definitely. But can all 3 afford to offer the same quality and service?
That would have to depend on their company culture, control & management. -
Unfortunately, CX, not everyone knows that the Telcos are giving away handphones, and is actually making money from the air time used for every calls made.
It is unfortunate that the Telcos should resort to 'misleading adverts' that seem to price each other out over hardwares, and capitalizing on ONE miserly Dollar, merely to snatch the unwitting consumer in an already mature market.
This kind of 'misleading' advertisement is primarily aimed at the less informed and less discerning consumer, who hardly make much checks with regards to the manner that each Telco charges for the air time used, and in the way blocks of times are worked out, and rolled over to the next month.
It will be left to be seen if the new Consumer Act will come into play, when the unwitting consumer wake up to a mistaken buy, due to the misleading advertisements by each competing Telco. -
i seriously don't see a problem here... telcos are justified to use whatever legal means at their disposal to capture market share and increase revenue... they're not charities. u might as well sling mud at time-share companies... they do worse.
and u may be giving the consumer too little credit in this... they're not stupid... and how can u say that:"not everyone knows that the Telcos are giving away handphones, and is actually making money from the air time used for every calls made."
now... i would agree that no one actually knows how much money they make from every call, for every minute... but isn't it absurd to assume that consumers don't know that telcos are making a profit for the amount they charge? like i said... they're not charities...
i call your attention to the "free-incoming call" debate a few months ago. Starhub has always been offering free incoming calls. M1 and Singtel only followed suit not long ago on some plans.
for the longest time, pple were wondering how that can be possible for Starhub when the reality is, Sg is probably one of the few countries in the world that charges for incoming calls.
and lo and behold! we found out that telcos practically do not incur any costs by connecting incoming calls... it is the telco providing the outgoing call service that's doing all the work. but the same cost is duplicated by the ones who're doing nothing but simply allowing the incoming call to go through to their subscriber.
with this being common knowledge especially for younger, more savvy consumers, at least partial free-incoming call plans are here to stay. doesn't that reflect that the telcos do have to cater to knowledgeable consumers instead of just preying on ignorant ones?
furthermore, what "plan" works for you depends on how u use the mobile phone... true, a senior citizen owning a mobile for the first time might not understand the intricacies of peak rates, off peak rates and free airtime, but my experience with senior citizens is that they tend to be very, very light users anyway... the phones were mostly bought for them (and the bills paid for) by their grown-up kids.
the segment of the market that seems more interesting (and objectionable to me), is kids... primary school, secondary school kids, toting flashy mobile phones bought and bills paid for by their parents... that bothers me... but i wouldn't blame the telcos in this... i blame the parents.
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In any way...Singtel will benefit. They sell airtime to M1, Starhub. All other operations are just re-sellers....