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Each month the IMPDA asks a panel of dealers how they feel about the hottest topics affecting the channel community. This month, our first topic looks at the pressing issue of the credit crunch and how this is impacting on dealers and contract lengths. With house prices falling and the cost of petrol and utilities increasing the mobile industry is not immune to the effects, but just how badly are dealers being affected at this time? Reports suggest that many are finding it hard to even pay the mortgage at the end of each month, so what can dealers do to maintain sales?
Paul Marks, director at FoneFinders and MFonex:
The credit crunch is affecting the industry as people want the largest amount for the least amount of money. Money is very tight which is why the cashback scenario has become so popular. But then again, this has caused problems in itself. People are now finding that having a mobile phone is a luxury; they cannot afford to pay lots of money to have one. We as independent dealers should be able to make mobile phones more affordable without having to use gimmicks like cashbacks. The networks want to make a nice healthy profit as much a we do, but they say they cant afford to cut charges. We are in fear of clawbacks even more in these times.
The good thing about the mobile phone industry is that it is an essential part of everyday life for most people; including consumers and businesses. This means that there is still demand there, and as a company you need to plan your marketing strategies to proactively reach these markets and become competitive.
You need to look at what your competitors offer that you don’t, such as business to business connections, phone insurance, accessories, pay as you go, landline and broadband packages. You also need to look at the processes within your business to make sure that you give your customers the best service and care that is possible. Keep in contact with customers and make sure you don’t miss those renewal dates or add on phones.
Call it a recession or an economic slow down there is no denying the UK is facing a period of financial unease. Affordability is the main factor as are so used to living out of our means that racking up debts is part of our life in the UK. Although I don’t see too many bad connections, there is that fear of claw back even if you have followed the correct procedures. Hopefully, the slow down will be a short term thing, but if it isn’t, then the impact could be that consumers give up their 2nd or 3rd line and have just the one main line. This could have an effect on the manufacturers too, as they may struggle to sell handsets that they have spent millions developing. I hope this meeting with OFCOM regarding Claw backs is fruitful, as it is very harsh to blame the dealer if a customer defaults. My main worry about this credit crunch? Customers defaulting and us poor dealers getting the rough end of the stick for it.
Would a reintroduction of 12 month contracts help both networks and dealers? Should it be time now,
with the threat of recession, for the networks to introduce more affordable plans for consumers,
and to also reintroduce 12 month contracts that allow users to get the latest handsets and help
dealers keep up with connection targets?
The networks have forced 18 month contracts on customers to gain more value for them. But plainly and simply, despite networks trying to make them look good, consumers don’t want the commitment.
As I have said before, networks should be looking at assisting independent dealers with sales. Why can’t they let us have deals which are similar to those given by the networks? I wouldn’t mind losing a little commission if the deals were good and they earned me more sales.
My theory in life is ok, though. We are not earning big amounts of money, but several little amounts still make a lot.
Yes, most definitely I think the time is right to make changes and reintroduce the 12 month contract, giving the customers more choice whilst helping dealers.
Any help that the networks give the dealer can only be of benefit. In today’s tough climate, dealers and networks need to work together. By introducing the 12 month price plan to both consumers and businesses, the market will become more competitive.
Both networks and dealers will benefit greatly through the making available of more competitive price plans to consumers and businesses. A re-introduction of the 12 months price plan would be a huge step forward in helping the dealers.
Any change or help from the networks can only be a good thing and the main people benefiting is the customer, with extra choice and a shorter upgrade time.
I believe as a dealer, we may be in a better situation than most business as churn will help our cash flow. As the networks are low on finances themselves, I wouldn’t be surprised to see their retention budgets also taking a hit, so maybe no new shiny handset for the customer but they might see a slight reduction on their line rental.
Therefore, if the customer wants a new handset, churning maybe the answer, although we might find commissions going down. But it’s something that as a business we will have to plan ahead for. Like Vodafone allowing customers to upgrade a couple of months before their contract is up, the other networks may follow suit.