Eighteen years ago in June I took out my first cellphone contract. This June I cancelled the contract. When I look at how much I’ve paid over almost two decades, I can see what a brilliant business model the cellphone companies have in this country.
But for the consumer like me it’s a different story. I won’t even use the word customer because the relationship with a cellphone company is close to zero. Though you benefit from a cellphone, it’s still a grudge purchase.
The cellphone company shackles you into a two-year contract. They charge a premium price for the cellphone unit and load it with a hire purchase interest rate. This is only the beginning. You are charged for voice, SMSs and data.
You may say that the voice, SMSs and data are variable costs but the cellphone companies bundle your variable costs together with the hire purchase costs so they are guaranteed to receive a fixed recurring sum from you every month. When you go over this limit whether it is voice or data you get charged more and the cellphone company scores.
Over the 18-year period that I have had cellphone contracts, the value of what I have paid would be about the same for a motor vehicle, ski boat, timeshare, an entire school education at a not-too-shabby school and a university degree. It’s amazing how a communication tool which we didn’t have up until the early 90s takes such a huge chunk out of our monthly income.
Yet for the cellphone companies what an amazing revenue model. They get revenue from selling you the cellphone unit, interest from the hire purchase agreement, voice costs and data costs. Four revenue streams. Plus with people using their cell phones more to access the Internet data has in some instances overtaken voice.
You may not be able to entice your customers to give you four revenue streams but it’s a good idea to look at the cellphone companies and how they have implemented their revenue model that gives them so much when you are looking to find a source of recurring income for your business.