As someone that has had a Verizon phone of one sort or another since 1998, and someone that has sold the Verizon line against all the other providers, I think I have a decent understanding of how the company works in many ways.
I’ll have to admit, however, that this has me stumped, as the company has been lowering the amount of the discount gotten with New Every Two, and so dropping it completely only saves the company small amounts of money compared to the ire it will bring from long time customers.
I can remember selling Verizon phones before the New Every Two initiative came into being. It was aimed at keeping churn down, as many people were completely incensed that new customers could get better deals on phones than they could – seeing the higher price upon upgrade as a betrayal – and, in effect, it was.
I remember causing churn myself, as it was better to keep the customer by causing churn than standing on the company line and seeing the customer walk to another vendor, simply because of a few dollars. Sometimes it was more than just a few, but always it was because of that betrayal. One example was taking a husband and wife that were ending a two year contract under the husband’s name and letting that contract end, then selling the couple two new phones, under the wife’s name, and beginning a new account.
The only downside at that time was that people could not keep their phone numbers, as it was before the FCC ruling in 2003 that allowed all phone numbers to be portable.
Lots of people did this, as sometimes, depending on the new phones chosen, a couple of hundred dollars were involved.
Now the difference is not as great we are told, and from what I’ve seen, it is true, but the problem will remain for many that it will “stick in the craw” to be paying more for a new set of phones and a contract than someone that sails over from being dissatisfied with AT&T or Sprint.
The stories being told in several places are stating that all of this is because of the coming of iPhone to Verizon, but that is a very lame excuse, since there are other smart phones which are also expensive, and until now there has been New Every Two for everyone.
I do wonder how many current customers will eventually rebel – I say eventually because we are told that the current customers will receive one more round of New Every Two discounts, then its all over. For new customers, it was over at the end of business today. Those who signed up today will get in on one round of New Every Two, and that will be it for them.
PC World also had this to say –
That means that Big Red customers could use their $30 to $50 discount on an iPhone 4 in February or any other device in the future.
Verizon has altered the promo rates of the program in the past, likely due to the arrival of highly-discounted smartphones. A FAQ on its website says customers who subscribed before February 15, 2009 got a $50 to $100 discount.
It’s no secret that carriers take a hit when selling smartphones, but recoup the costs with monthly service. Verizon is probably backing off the plan to prevent losses from people upgrading early. It will also ensure the CDMA iPhone is sold for the same price as the rival AT&T version — $199.99 for the 16GB flavor and $299.99 for the 32GB.
The problem, from where I stand, is that some more transparency is going to be needed before the current crop of customers will be satisfied. As one of that group, I feel that the cost of smart phones is being reported on the high side, perhaps quoting single unit pricing, when in fact Verizon buys in the millions of units. I know this was the case when I was in the inner circle, and I see it as being no different today.
We must also remember that there are more and more smart phones being offered, and fewer and fewer “feature” phones. The push is strong for every customer to get a smart phone, which mans higher bills, and more profit, because with each smart phone is a data plan tethered to it.
Ivan Seidenberg is a greedy guy. I’ve seen the man on Charlie Rose and it is clear that he believes that we aren’t paying enough for wireless service, and that he wants every person that can hold one to have a Verizon cell phone…a smart phone…with a data plan. He also wants to end any sort of unlimited plans, because there’s not enough profit in it.
Now I know it is the job of every CEO to maximize profits – so all you budding economists need not drop a comment about that – but I also know that there is a point at which the customer stands and says, “No more”.
That point has not been reached just yet, but each small push on the average customer will push long time customers into changing providers (T-Mobile and Sprint are improving their networks!) and cause those who must stay to drop their plans to the lowest which meets their minimum needs. It will cause the customers considering Verizon to more seriously evaluate whether they need the extra coverage that the Verizon network provides.
Though not mentioned in the article quoted from, another article stated the opinion that Verizon will not be easily swayed into a retreat of price increases, as T-Mobile recently was – and that opinion is probably correct. Verizon, both Seidenberg and the rest of the corporate structure are stubborn, and it would take a mass exodus for them to begin to take notice.
By making the special upgrade pricing continue to work one more time for many, they avoid that mass exit, and can perhaps work some other discounts or added benefits in, to take the place of the New Every Two discount.
Perhaps some will acquiesce to the changes, but I’m certain that many long time customers, having been through several iterations of New Every Two upgrades, will become less than happy when they get to the point where it has disappeared, or morphed into something less than the discount that was promised as part of the reward for being a loyal Verizon customer, all those years ago.