A few weeks ago many Canadians were happy to hear that the iPhone was finally coming to Canada. I even wrote a post about the fact that I was thinking of getting one. Getting an iPhone would require me to drop my current carrier, Bell, and go to Rogers.
Well, since this blog is about marketing, I thought the recent updates were blog-worthy. First, some background, courtesy of BCTV and YouTube:
The essence of the above clip is that Rogers is overcharging for the iPhone plan, and people are TICKED OFF!
Now, I realize that the purpose of every business is to make money. But there is more than one way to do that, in every business. In fact, there are three ways to do that.
1. You sell to more people.
2. You sell more products to the same people.
3. You sell more expensive products to the same people.
Clearly, Rogers is subscribing to #3. Now, in many businesses it makes a lot of sense to raise the price of your product. I’ve heard a lot of good internet marketers saying that by and large people should be charging more for the info products they sell online, and I think they’re right. There is a degree to which the market is elastic enough to accept the increase, and still respond positively.
However, in the case of Rogers, they are clearly going about this the wrong way. They have over judged the elasticity of the market, and they’re squeezing it for every bleeding red cent they can get.
Now, consider what we know:
1. Rogers knows that they have a monopoly on the iPhone. They happen to be the only carrier in Canada that is technologically capable of running it on their network, so for the foreseeable future, nobody can compete.
2. The iPhone is being hailed (whether you agree or not) as the phone that is revolutionizing the marketplace. It is changing the way people interact with their phones, their computers, yadda yadda yadda. Basically it is tremendously anticipated.
3. Did I mention no one can compete?
Okay, so Rogers can go about their marketing strategy a couple of ways. They can jack the price up really high, banking on the fact that a ton of people REALLY REALLY REALLY want this phone and they’ll pay anything to have it. Assuming people didn’t mind the prices, they would hopefully gain new customers coming over for the iPhone.
Unfortunately, some marketing bonehead totally over estimated the market’s price elasticity on this one, and they’ve crossed the line. Way crossed it. So much to the point that you saw in the video clip, where long time customers are now talking of buying out of their contracts just to get away from Rogers!!! WOW! Party foul!
So instead of gaining new customers, Rogers is LOSING customers! On top of that, they’re losing them by the thousands. If you checkout www.ruinediphone.com you will see that the petition is up to 43,910 (July 6 9pm) and growing steadily. That is 10,000 more than yesterday. So even if they had calculated on losing some customers by hiking the price, I don’t think anyone considered the incredible bad press they’re attracting right now!
Now, consider a second way they could have gone about this. Knowing they had an upcoming monopoly on an incredibly highly anticipated product, they could have come out with some killer rate plan, geared towards JUST the iPhone, and released this with a huge media splash. The media would have been overwhelmingly in favour of it, and they likely would have picked up thousands of NEW customers. We’re talking a lot of three year contracts here. Out of every thousand, I’m sure at least some would hang around beyond their contracts for round two.
So you tell me, which way do YOU think is better?