T-Mobile are offering free texts – for life!
This is currently a specific promotion for customers joining the reward programme during the next month or so and who top up with £10 this month and continue to do this each month thereafter.
However, this is significant because it won’t be long before a competitor responds and free is difficult to beat.
Look at the credit card market and the 0% offers. They basically eroded their own market to the point where almost no one takes out a card anymore without some form of 0% deal, whether this is for balance transfers or retail spend.
Music downloads are another example. Technology outpaced the publishers, providing music when and where people wanted it rather than how the music companies wanted to control it. Once the horse had bolted and people got used to “free”, it has become a difficult thing to undo.
Free texts will go the same way. Once people see SMS less as an individual purchase and more as a service, charging for texts will be dead.
Whilst putting “free” onto something can increase attention and gain new prospects –these don’t necessarily translate into customers. Worse still, if the element of the product or service being given away as free doesn’t support a business model which can be charged for – and more importantly – which customers want to pay for, then this can simply erode marginal revenues for all.
However “free texts” aren’t really the whole story – they are not really free, they are just un-metered within an overall service provision. This means they are becoming more akin to mobile data contracts or home broadband, where within the restrictions of “fair use” and a monthly commitment consumers can basically use as much as they like.
Seth Godin makes an interesting point in his latest blog post when discussing the issues around brands making something free
People look at the free revolution and say, "oh, that could never work. If I gave x, y or z away for free, I'd fail." They're right. They will fail... If they keep the model the same and just give away stuff for free.
So where is T-Mobile going with this?
Well there are two interesting issues within the mobile telco market.
1. Market Saturation – Everyone who wants a mobile has one – there are very few new new customers so brands need to increasingly look at ways to attract customers from other brands and then retain them. Witness the plethora of loyalty programmes being introduced such as Orange Bright Top-Ups or O2 Treats which are looking to reward customers for their continued loyalty.
This new promotion from T-Mobile also works in that it has an attractive proposition - “free texts” – which will attract and acquire customers combined with a lock-in based on losing the benefit if you cease to top-up regularly.
2. Product Saturation – Increasing competition has meant the cost of voice minutes and now texts has been increasingly driven down to the point where customers have more than they need – brands can’t really differentiate in this area any more.
As pointed out in the blog I’m Cellular “As prices fell for a voice minute of use (just as with Long Distance before that), subscribers could afford to purchase more minutes for their dollar, but at a point their demand was sated and they had no desire to consume more. SMS has certainly provided an unexpectedly large increase in data use, but that is, like voice, largely played out.
So the business model has changed and the new growth area has moved on – in this case it’s data – with data predicted to double revenues over the next 5 years.
The blog I’m Cellaur does highlight another potential issue:-
Although (like prepaid) these [flat rate] plans are simple for subscribers to understand, and very attractive in avoiding unpleasant surprises, they invite unrestrained use with no marginal revenues.
So the real issue for T-Mobile will be in how to continue to increase revenues in the future if everything is based on a flat rate fee.
Well when people stop worrying about the cost of the service, they will start to concentrate on what can be delivered across the service.
As we’ve witnessed with the iphone and it’s unlimited data contract – expect a deluge of digital services such as music, applications, location tools, social tools and games.
And for all other brands – the prospect of free unmetered SMS and data opens up a world of possibilities for creating closer relationships with their customers.
Is “free” SMS really game changing and a win-win for all?
I think it could be.
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