Straight Talk. We even saw that affect the stocks of a few prepaid carriers earlier in the week, though the market appears to have corrected itself. There might not be a price war after all. In fact, according to Sue Marek of FierceWireless, it’s not very likely. In a well-reasoned and sourced post, Marek takes down the claims which struck fear in the hearts of carriers earlier in the week. While she makes a number of points, including the margins for wireless resellers like Tracfone, parent company of Straight Talk, she really hits it on the head when it comes to marketing costs. She has a quote from Ken Hyers, senior analyst with Technology Business Research: “If marketing is a huge segment of your cost, you can’t keep going lower in price and still advertise.” That should affect Boost Mobile, MetroPCS, and Cricket, all of which advertise rather aggressively, more than Tracfone, which uses its Wal-Mart distribution as its main marketing ploy. Then again, Tracfone is at a disadvantage when it comes to billing and customer service. They need their own call centers and billing systems, while Boost can rely on its parent company, Sprint. In fact, because. This may actually hurt Metro and Cricket a bit more, since they need their own systems, customer service reps, and marketing budget, while Tracfone and Boost are propped up in one area. Again, the market seems to have corrected itself, and things are moving back to normal. We’ll see in six months, when Verizon will reevaluate the Straight Talk deal, what long-term effects this will have on the industry.]]>
Posted in Prepaid Services
Good article Joe. Methinks the price war is slowing down or at least stabilizing.
$45 is really much less then $50. I’d still say that for unlimited plans, $50 remains the benchmark (Kajeet launched a trial unlimited talk/text at that point early this week).
For per minute plants, I’d say the benchmark is 10 cents a minute. With the price wars heating up around the unlimiteds, the per minute stuff is kind of getting overlooked.
In this economy (that term is rapidly becoming cliche, but then again cliche is just the truth being repeated), certain terms like price cuts, no extra charge, free and unlimited all are big selling points with consumers.
Peter I wouldn’t say that the benchmark for minutes is 10cents because the other Straight talk offer which is not mentioned in this article is 1000 minutes, 1000 texts/mms and 30m of data for $30 per month. When you calculate that it works out to 2 cents per minute, 1 cent per text and the data is free, now that’s way cheaper than your benchmark and a better offer than any contract is giving.
The benchmark needs to be thought in business terms.
10 cents is the benchmark for pay as you go plan rates; the consumer draw is merely that rate and typically an occasional user or one that does not want to shell out for more.
However, in the $30 per month context, the rate diminishes, yes. But the upside for the seller is that they get a monthly sum from you. The $30 customer is more valued that a $0.10 customer in terms of revenue. The seller is rewarding the user with a lower per minute rate for taking a larger commitment.
This is no different than in postpaid plans where lower plans (e.g., $30) are more expensive per minute than more expensive plans.
Ten cents is the benchmark for per minute rate rollover type plans, not heavy minutes that disappear at the end of a 30 day cycle plan. Don’t confuse the two. Net10 set the standard, Boost Mobile copied it on their Pay Go plan and most of the other Big prepaids have some variation of it: Virgin Mobile’s $20 pack buys 200 minutes at $20 or 10 cpm, Att has a 10 cpm option (after you pay a buck for daily access), Tmobile prepaid allows 10 cpm if you buy 100 bucks or a thousand minutes at once, Verizon has 10cpm after you pay 99 cents a daily access much like Att.
The argument about a lower benchmark holds no water considering that non conditional 10cpm flatrates don’t exist for most of the biggies. You either have to buy a lot of minutes or you have to pay some kind of access fee to get to them. 10 cpm is a good deal and an easy watermark to remember. Att and Verizon still charge 25 cpm for their non access fee flat rate, Tmobile and Tracone charge 33 cpm on their lowest priced cards. Compared to that, a dime is a bargain.