Finding the perfect package
O2 recently announced they were putting the consumer in the driving seat by launching Custom Plans. This new launch promised plans ‘as individual as you are’, allowing users to customise key dimensions such as upfront cost, data allowance and plan length.
At face value this solves one of the age-old consumer frustrations in the mobile market – ‘why can’t you tailor a plan based on what I need?!’ However, one of the other questions this also raises is one of the oldest in marketing…. Do customers actually know what they want? I’m reminded of a hotel I stayed at in Asia many years ago which had the concept of a menu-less restaurant – ‘you tell us what you want and we’ll cook it for you’. In theory the concept was brilliant but in reality it was simply overwhelming… what should I order when there’s nothing to choose from?!
It’s nearly 15 years since Barry Schwartz wrote ‘the paradox of choice’ which introduced the concept of satisficers (those who have criteria they want to meet but will settle for ‘good enough’ ) and maximisers (those who need to be assured that every decision they have made is the best it can possibly be). The telco space is no different to many other service categories; on the one hand, a day to day purchase where we all probably have better things to worry about but, on the other, an incredibly complex purchase decision with a myriad of choices for the consumer to navigate through. It’s no wonder that, in this environment, many consumers simply settle for the best deal from their existing operator rather than actively trawling the market.
Of course, the concept of tailored plans in mobile is nothing new. In the home telecoms market, Swisscom have arguably led the way through their inOne plans which use a simple H/M/L interface to configure the bundle that’s right for you.
In the UK, Orange first attempted to tackle this insight with Your Plan back in 2003. Whilst the ad might have chosen some odd examples (although beards feels oddly prophetic!), the promise of ‘more of what you like and less of what you don’t’ clearly resonated. The challenge was that, for the most part, customers didn’t want to choose ; they wanted to be recommended to.
Your Plan therefore evolved to Best Plan – an initiative to allow customers to migrate onto their optimum price plan based on their prior usage. Whilst this was an incredibly appealing proposition at launch, our obsession with premium smartphones made it seem oddly out of date -we no longer appeared to care about being on the best plan, we simply wanted a way to afford the ‘must have’ device du jour.
So what’s different about the latest offering from O2? Well firstly, it sees a more prominent return of the 36 month contract period. Ofcom issued guidance outlawing these in 2011, believing that these long deals were effectively handcuffing consumers. However, the reality is that high end smartphones are now incredibly expensive -an iPhone XS will set you back over a grand, for example. For most consumers, long contract periods are the only way these devices take on any semblance of affordability. For example, even putting £400 down up front and signing up to a 36 month contract would still require a £50 plus monthly tariff for an iPhone XS Max on O2’s custom plans.
Secondly, O2 have built on their prior Refresh plans which have de-coupled device and airtime costs, making it immediately apparent to consumers how much of their monthly plan is being spent on their airtime vs. their shiny new device. This push to offer greater transparency in tariffing has been debated for some time with initiatives such as Jump! from T Mobile in the US getting a lot of traction. SIM only deals have also become common place as consumers look to ebay and Gumtree etc . as a way to buy devices more cheaply and not be committed to a high ongoing cost.
Finally, and critically, what O2 is offering is the ability to tweak pre-existing talkplans rather than consumers having to build from scratch. More like having the trousers taken up on an off the peg suit than a fully tailored, made to measure from Saville Row! The consumer interface is simple and leads with suggested plans rather than you being daunted with too much choice on first click. However, as a result, it’s hard to see whether this offers a significant increase in customer experience over the ‘quiz-like ‘ interfaces employed by the likes of EE.
In a market that has become too dominated by devices, it is refreshing to see one of the big three lead with a genuine tariff innovation. Whether it succeeds longer term will be interesting to monitor. The market is unrecognisable since Orange Your Plan failed to make an impact all those years ago; the demise of Phones4U has reduced the washing machine of churn and the improvements in the customer experience offered by digital channels means it’s now far simpler to make the dynamics of tariff customisation feel appealing.
However, whether the desire to tweak/ customise is broad enough consumer needs remains to be seen. In other markets such as travel, we have actually seen a resurgence in package deals as some consumers have become overwhelmed with the array of choices open to them; ABTA reported a 7% year on year increase in package holidays in 2017 and this is still (just) the preferred way for Brits to take their summer break. Is the greater transparency and control offered by the likes of O2 Custom Plans really addressing a need or rather a symptom of the fact we don’t trust mobile operators to recommend a perfect package for us?
Surely a more appealing proposition would be genuine personalisation? If handset costs are de-coupled from the talkplan, mobile operators could use the rich mine of data they have on each of their subscribers and simply charge them the cheapest possible price. However, whilst the brand benefits of this are clear, the financial case is far from obvious – mobile operators are making too much money from customers being on tariffs which are not right for them.
Therein lies the challenge- whilst every operator knows the insight (i.e. ‘consumers feel they are getting ripped off somewhere along the line’), with the high Capex costs of investing in network infrastructure they simply cannot risk the revenue dilution. Perhaps one day an MVNO with a different cost structure might be able to offer this kind of OTT disruption but, in the meantime, any plan which offers greater transparency is a step along the road…