Last week Orange UK announced that it’s restructuring the manner in which it compensates its channel partners (i.e. your local mobile phone store, Carphone Warehouse, that sort of thing).
Previously and like most network operators, Orange provided a bounty to the shop based on the contract value that they’d setup.
So you’d get more money if you sold me an 18 month contract on 80 pounds per month, than you would if I signed up to a 12 month contract on 20 per month.
Well that’s changing for ‘selected’ dealers and distributors. They’re now going to get 10% revenue share for the lifetime of the contract.
Why is this good? Well, if you sell the customer correctly, you’ll get a brilliant revenue payout. But if you sell a dud — if you know you’re selling an incorrect product to a customer (and let’s face it, a LOT of shop sales assistants KNOW this) — then you won’t get such good revenue rewards.
For example, if you manage to convince a customer to swap to an 80 per month deal — when you KNOW that wasn’t quite what they wanted, then you’ll get £8 in revenue next month… before the customer swaps down to a different tariff of say, £20 later on — and then you’ll get £2. Not good.
So sell correctly, that’s what Orange is looking at. And aim to attract the best-value (i.e. high spending) customers.
One of my rubbish hobbies is watching with fascination at how your average mobile phone retailer does business. Since it’s rare to come across a customer without a mobile phone nowadays — the focus is on bringing customers on to your network and aware from a competitor’s network. Churn.
Churn is a total arse. But it’s facilitated directly by the mobile phone shop. There is next to NO value in you walking into a Carphone Warehouse or a Phones4U and saying ‘I’m thinking of getting a new phone’ and NOT swapping network. If you don’t swap, they get next to no reward.
So they’ll swap you. It doesn’t matter what you’re doing or what price plan you’re on… all things being equal, if a shop wants to make a bit of cash, it needs to swap customers from one network to another. And give them the phone they want.
Some sales people are unbiased and genuinely want to help — the majority I’ve witnessed are out for the rewards. And who can blame them?
So if you’re doing 20 quid a month on Vodaafone and you walk into one of these shops, it’ll be highly surprising if you don’t walk out with an Orange, o2 or T-Mobile contract. Particularly if you defer to the ‘knowledge and experience’ of the salesman.
This new strategy by Orange has the potential to at least influence this process. You’ll be rewarded ONLY for swapping high value customers to Orange. Swap everyone-and-their-dog and, well, you might actually get a better revenue pay-out if you swapped them to T-Mobile or somebody else.
And you’ll keep getting 10% revenue from Orange, every month, until the customer leaves Orange or… upgrades.
So you’ll need to make sure you own that customer’s upgrade too.
It’s an interesting change in strategy from Orange. I hope it’s a success for them.