Posted by: peterhact | April 7, 2010

New behavior – Chopping and Changing

How many times have you changed your ISP / Phone Provider in the past year? and your insurer, health insurance provider, energy company etc? Me? not once. and I won’t. why? well, I worked out that all the time spent mucking around with different providers only costs me money when I have to join and lose my waiting period, no claims bonus, voicemail settings, email address, and continuous power without dirty feed and brownouts, and i was better off with the old provider…

There was a recent article regarding TPG, and an excess charge. The deal sounded, to me, to be too good to be true,  and guess what? it was. I have spoken to Telstra when i have a problem, and they have sorted it out for me. I am upfront when I explain that payday is next week, and they have waived the admin fee for me. the datapack plan I am on is tailored for an iphone, my voice calls are set up to minimise costs, my home phone, my internet and mobile are all bundled….

This seems to be the same with the ICT industry, but it is far, far worse. A new player comes into the market, and starts making noise. They usually come from Sydney, and they approach the Canberra market as if they are back in Sydney – customer service isn’t the main focus, they try to buy the business. This is usually the case when they aren’t employing locals, and the rot sets in straight away. They gain business, new clients leaping on board, and they run their pricing really, really low. This goes on for a while, till Sydney Head office says “why are you running so low on margins?” and then the new player finds that, as they raise their prices, the clients start jumping back to the old resellers – and the old resellers can afford to cut their margins slightly, but not so they cut their own throats…

Many clients give up on jumping between resellers. They stop looking at price as the main focus and concentrate on the important things – service, support, advice, and they stay where they are. So what does this do to the market? it stagnates. Resellers spend all their time fighting the price war, and lose the value add business. They don’t have any differentiation from the incumbent, they cannot hope to win the business without dropping profit.

There is a vicious cycle, and the only winner is the end user. Companies fold, leave and don’t come back. And the remaining resellers have to scrape to survive. If the focus is shifted from price to value, then the resellers can concentrate on doing their best for the clients, and the industry gets a chance to expand and breathe.

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