Pricing is always a key factor to a product’s success. With the explosion of over-the-top/internet-enabled mobile messaging services, this is truer than ever with many of these services being marketed or perceived as “free”. In order for a new service such as (Rich Communication Services or RCS) to succeed, pricing must be clear and predictable. As the first few launches commence in Spain, the US and Germany, the pressure is on to find which model works best not only for the operator, but more importantly, for the consumer.sms campaign
There appears to be three variations of pricing models employed by operators so far. We explore the pros and cons of each:
Make it completely free – The very first joyn launches, in Spain by and , were positioned as beta services, completely free of charge during the introduction period. There are no service charges and not even data consumption is charged. This is always a good approach to stimulate uptake of new services, typically revisited as soon as a sufficient user base is ‘hooked.’ Downsides of this approach however are that it is not economically viable to support joyn for roaming users, and that the value of the Rich Communication services may not be articulated sufficiently; users need to be aware of this to understand the true worth of the level of service being offered. If this model is to continue after the beta version, operators may struggle to cover some costs and account for capacity, such as data intensive video services.
Charge as part of a data bundle – In Germany, has taken a slightly different approach, charging the data consumed for joyn services from the user’s data bundles from day one. This small inconsistency should be harmless, as consumers will see only one of the two approaches. Slight confusion may arise, however, from the fact that in the third joyn launch in Spain by , charges for joyn data consumption has been applied by the operator against user’s regular data bundle. Similarly , who are developing the US market for joyn on their own by providing joyn to its LTE users, is applying regular charging for joyn data consumption. This is the simplest approach, which is also the case in terms of implementation, but as with the first pricing model, the true value of the joyn service needs to be established to differentiate itself from other existing services, especially those which are perceived as free such as WhatsApp, iMessage and Skype.
Associate with existing service pricing – in Germany is taking a more sophisticated approach in , associating the price for joyn chat with the price for an SMS, picture sharing with that of MMS, and live video sharing with the (per-minute) price of voice calling. In most of T-Mobile’s current plans, joyn chat and picture sharing turn out free of charge but this is giving them room to maneuver in optimising joyn margins, and clearly attributes value to the joyn services. Also, by associating joyn services with existing operator services, T-Mobile nicely leverage their reputation of quality and trust, which is a key differentiator compared with OTT players. A free of charge introduction period is in place as an incentive for T-Mobile users to try and get addicted to the joyn services initially, but there is a risk that users end up discouraged to to continue usage by the relative complexity of the model.
In order to develop the market in an orchestrated manner, consistency, clarity and simplicity of pricing models should be the goal. We will continue to keep a close eye on how these models, and any alternatives introduced in upcoming joyn launches develop, and most essentially, how they are accepted by consumers. However, in all this, maintaining customer loyalty must remain key!