Prepaid Cards and Prepaid Phone – a better alternative to the negative option

In case you did not get it from my last blog post, I do not feel good as a consumer signing up for a service or product under a negative or positive option plan. Without a top notch customer service department and several channel options for notification it is conceivable you can pay for a service you no longer desire in perpetuity. For those of you that agree with this, I think there are some real alternatives to controlling your expenditure and your ability to change your mind. Pre-paid programs were initially introduced and targeted for the credit challenged. I see it today as something more along the lines of also being a great product for customers that want to control what they spend or give family members or others, without the blank check written to the company. I would rather control my outlay and pre-paid is an excellent control device.

How many of you have know about prepaid?
I bet you do not even realize that you use pre-paid all the time, and you find it convenient. I do not remember the last time I used cash at a Starbucks. Do you have a Starbucks card? If you do, you are not unique. Latest estimates are that Starbucks has 16mm plus of active pre-paid cards.

My son recently had his 10th birthday party.
For the first year it seemed that almost all the gifts he received were some form of pre-paid retail cards, including an Amex pre-paid gift card, cards from Sports Authority and of course the obligatory gift cards from Game Stop. If you have never bought one as a gift, I do recommend it. It takes no time to buy and it is both brainless and desirable for the recipient. As a gift donor you simply do not have to think of returns. As a gift recipient you get to select what you realy want.

Watch for Pre-paid phone
In Europe, pre-paid mobile is more the norm than post-paid mobile. In North America, we have had less success with this model. Historically, I believe the failure in North America is more a function of the marketing. When you understand the benefits of pre-paid, you have to believe it is an excellent customer choice. With pre-paid, for a lack of better words, you pay as you play. This is what I like about it. It is great for the credit challenged, which happens to be almost the entire youth market.

A variation of pre-paid is the MVNO market. Most of these product offerings are pre-paid and most are sold thru alternative channels.

A mobile virtual network operator is a company that does not own a licensed frequency spectrum, but resells wireless services under their own brand name, using the network of another mobile phone operator. The first successful MVNO was Virgin Mobile, launched in the United Kingdom in 1999. As interesting as this is model is, there has been a lot of money poured into systems and marketing in the United States and to say the least, it has not caught on like it should.

Discount MVNOs provide cut-price call rates to market segments. Discount MVNOs include Fresh Mobile, MobileWorld and Virgin Mobile. Their strategy is based on cheap prepaid or postpaid pricing plans with basic voice and SMS services. I have two former business associates clients from British Telecom Cellnet that have set up a MVNO with Kroger Stores here in the USA. They are smart guys and they are confident that with their distribution partner they can make this work.

Lifestyle MVNOs focus on specific niche market demographics MVNOs such as Boost Mobile in the US. From the sponsorship, it is clear that Boost Mobile targets the youth market. Their sponsorships include a professional surfing event, the Boost Mobile Pro of Surf. (See ASP World Tour.) In addition, Boost Mobile sponsored a professional skateboard event, the Boost Mobile Pro of Skateboarding, as well as logo-labeled skateboards and accessories. They also sponsor a number of skateboarders. Boost Mobile was purchased by Nextel in 2002 and thus subsequently became Sprint’s property when Nextel and Sprint merged. I love the positioning of this product. You should also check out TYo Mobile, a subsidiary of IDT Corporation (NYSE: IDT), is a wireless communications provider designed specifically for the rapidly growing U.S. Hispanic community.

The largest lifestyle MVNO was a failure. ESPN Mobile was really promoted and invariably customers found other ways to get their social sports media information. As of December 31st, the ESPN Mobile web site states "Because you are a valued Mobile ESPN customer, we'd like to remind you once again that our service will be ending as of December 31st, 2006."

According to JD Power, T-Mobile's pay-as-you-go wireless has the best combination of voice quality, customer service, phone options and flexible rate plans. Its cheapest option is 30 minutes for $10, but minutes expire in 30 days. Verizon is also excellent. I understand T-Mobile wins best in 2 regions in the USA and Verizon ties for first in the 4 other regions. This does not surprise me at all. They are both excellent service providers on the post paid side. Initially pre-paid were substantially higher priced per minute charges than post paid products, yet now I believe the price difference is narrowing. This should really stimulate usage of pre-paid.

Pre-paid is great
I believe this market is going to take off. The issuers love it because they get the cash upfront before the actual meter is running. I’m sure there also is some element of spoilage or non usage. On the other hand, consumers love it because they can control their spending and going cashless is really a convenience. If it isn’t already, I think it is going to be a mainstream product for all different kinds of consumers.

Negative and Positive Options – Buyer Beware:

There have been some really great direct marketing companies thru the years. Most of these companies spawned from traditional snail mail. Do you remember Book of the Month Clubs or Columbia House Records? Do you remember how they marketed to you? Were you ever a member?

What is a negative or positive option?
A positive option is a form of continuity or book club marketing technique that requires the customer to take some action prior to each regular merchandise shipment to indicate that the merchandise is wanted. This technique can be much less effective in terms of revenue per customer. A negative-option program, ships the merchandise to the customer unless that customer takes some action to say no. However, customers can usually be recruited more easily for positive-option programs.

Simply put, negative option turns the sales transaction around. Instead of the merchant having to "sell" you a product or service, it starts with the assumption that you’ve already bought it. It’s up to you, the consumer, to contact the merchant and cancel the order if you don’t want to complete the transaction. The Columbia Record Club and various "book-of-the-month" clubs were early pioneers of negative option marketing. The hook was an offer of five or ten books or records for free or at a heavily discounted price.

By accepting the offer, the consumer agreed to "join" the club and receive regular shipments of other books or records at the full price, unless the consumer took the "negative option," telling the company it did not want to receive that month’s offering.

As you might expect, negative option has been abused as its use has become more prevalent. The widespread use of credit cards and the growth of the Internet have fueled that abuse, to the point that federal and state consumer authorities have taken action to stop it. I personally do not feel comfortable buying products that are a negative option. It used to be worse. In the old days, you could only use the telephone to “join the club”. In order to cancel (after a commitment), you had to go to the trouble of writing in and putting the words cancel across a price of paper or the next invoice. It really was highly effective. For me, it pushed the envelope of what is consumer friendly and what is not consumer friendly. A lot of unmotivated people would get automatically billed in perpetuity.

With the web, we have seen the demise of many of these traditional direct mail / direct marketing businesses. Having said that, the negative and positive option is alive and well.

Credit Cards make Negative and Positive Options Much Easier.
With the proliferation of credit cards, negative option is probably growing more than ever. I know that at my gym, LA Fitness, it took me months to finally cancel my family plan. Signing up was no problem. All you had to do is walk into the club and ask about new memberships, and as long as that club is open you can buy a membership. Believe me, they want to sell you. There all over you when you raise your hand. How come companies do not get it? As easy as it is to join LA Fitness it is murder to cancel. At least that was my experience with canceling my family. If you want to cancel the membership, you cannot do so at the club. Why is that? So I called head office. Sorry, you can’t do it over the phone either. What you can do is mail it or fax it in. Why can’t we just speak to someone! By this time I was pretty annoyed. I did fax it in, only to see the charges continue on my credit card. So I called the head office again and they said they never received the fax. I must have forgot to ask for a fax receipt confirmation (who needs a fax anymore?). So I sent in another the fax. You really have to want to quit to be able to opt out. It felt like one of my morning workouts.

It’s Everywhere
I had a friend of mine write a certified letter to the CEO of AOL because he could not get 2 regular monthly charges off his credit card. He was grateful that he was retired and thus had the time to waste on this. He also is a young guy. He told me he could not imagine how an old person could work thru this problem. You would kind of think after losing 10mm or more dial up customers AOL would understand a little about cancellations. Thank goodness for their advertising model and Time Warner. The shareholder lawsuits are flying!

Netflix Rocks!
One of the greatest success stories of ecommerce is Netflix . Their CEO Reed Hastings was recently interviewed on CNBC Television. In the interview one of the hosts mentioned how she received a 12 month gift from a friend. She had to do 2 things to activate her gift. One she needed to register her name as a recipient, and two she needed to give her credit card on her own gift. Here is where the negative option comes in. Once the 12 month gift expires, she must call or write to cancel or she will be automatically billed in perpetuity. Netflix is what is known in the Venture Capital community as a Home Run!. One of its early investors was Mike Schuh. I met Mike when I set up eAssist in 1999. He knew then he had a winner and he understood the importance of customer service and the customer experience.

Do you realize that Netflix almost bankrupted Blockbuster? Netflix changed the way we watch home movies. They beat the proverbial 2000 pound gorilla, Blockbuster had hundreds if not thousands of bricks and mortar. Netflix executed a perfect strategy by making convenience thru the mail and offering the best customer service. Blockbuster is definitely not dead, they too recently went into the direct to consumer business, as they introduced their Blockbuster Total Access Program (http://www.blockbuster.com/). They will be a formidable competitor as customer can combine the convenience of the mail with the convenience of retail. Yet for me, Netflix will continue to innovate with new services (music downloads) and new products. These guys are too close to their customers to lose!

Offer Easy Service
The best companies using this technique will not make you write in or fax in, they will offer you a menu of choices. I’m sure there is a direct correlation between growth and customer experience and service. That is why Netflix is hitting the cover off the ball and why Columbia House has a membership probably 1/10th of what it used to be. Before you sign up for something automatically ask the question, how do I cancel. I recommend the options should include the telephone, email or the web. Check it out!

There must be millions of consumer complaints about this practice filed every year.
The 11 commandment and 12th commandment for consumers should be:
11. Thou shall make it easy to cancel a product or service
12. Thou shall gain market share thru great customer service.

The consumer has spoken.

Technorati Tags: Customer Service Customer Experience Selling Sales Negative Option

I like to share

Although blogging is still a bit new to me, I am having a lot of fun with it. One of the reasons I am having so much fun is that I love to read and now, I have an outlet to share my thoughts on customer experiences, good business practices and my experiences. This blog is a great way for me to exercise and centralize my compelling need to share those kinds of things in one place.

Now, I've already written about how I believe the customer service world is round. However, I also believe that when it comes to readily available information and the ability to find people who are also passionate about customers and the experiences they deliver, the world has most certainly been flattened. One example can be found with Michael Seaton, who directs the digital marketing at Scotiabank in Canada, and also writes The Client Side Blog.”.

I thought his post titled "Observation on so-called service” was quite telling about the retail-based experience. So today I share by linking you there. I also see he referenced me in a post he wrote a while ago on "Do you ask your customers to do as you say, not as you do?" .

Sharing is good.

Technorati Tags: Customer Service Customer Experience The World is Flat

The Airline Industry: The Leader in Poor Service From the Industry That Invented Customer Loyalty

Would you pay extra to fly your “favorite” airline? I would not pay extra. Many years ago I would have paid extra, yet today I’m motivated by convenience and price. Why is this? It has to do with i) indistinguishable service,, all the airlines have the same poor service, except maybe Southwest where they love their jobs. ii) the fleets, have all caught up. in fact if anything, the new discount airlines have newer plains. Iv) flight attendants are equally nasty

Airlines Invented Customer Loyalty:

What was the first member rewards points program you joined? Was it a hotel chain or a food store? I doubt it. If your like millions of Americans, my guess is that it was an airline mileage program. These programs created widespread loyalty and were designed by very smart people. The airline loyalty programs have been the most successful customer bonding tools known to man, even more successful than MCI's friends and family.

To give you an idea of how influential these programs became, for years the number 1 credit card in Canada was the CIBC Aeroplan Card (s) ) . That was due to the fact that the card linked spending to points for free airline travel on Air Canada, Canada's largest airline. In the United States if you took a look in someone's wallet you would often see a United Mileage Credit Card or a Delta Amex Card., some kind of airline brand related card. Virtually everyone chased airline reward travel.

The beauty of the airline programs were that the both the Airline the consumer won. The airline often had their best customers fly exclusively on their fleet and the consumer received privileges like front of the line, free upgrades and more. I was as proud of my 1K United Status as I was of my Amex Platinum card. So were millions of others, it was a badge of honor.

So Why Don't I Care Any More?

Today, I don't care about my airline mileage program. I really don't and I still travel. I bet you do not care either. So why is that?

Will the level of service flying take off or crash and burn?

The reason I do not care is that my privileges and service promise have been hacked away at. This happened as the airlines were challenged to stay in business. I understood those decisions. Now that their cost base has been stabilized by reconfiguring their leases on capital equipment, hedging their gas costs, and controlling their employee cost bases (maintenance, flight service and pilots), the airlines are making money. Making money is good, and I can except the trade off they made for survival, but the service across the industry is the same. It is generally poor, whether you are flying a traditional or discount airline.

Have you ever tried to make a claim with rewards these days? Forget 25k points, forget freedom of travel, and forget hassle free bookings. You need to be really flexible and you have to hope that the other kids are still in school. Expect to stop a couple of times, to not get the date you would prefer, and expect to use more points. Even basic trips are now 40k-50k.

Have you ever seen that Capital One Rewards advertisement (www.capitalone.com). It was aired very heavily at the last winter Olympics. The basic message is use the Capital One card and you won't have the typical hassles that go with rewards!

It is a great campaign clearly well researched with the salient benefit being " More freedom—fly anytime, anywhere, with no blackout dates and if you have had a recent experience". Capital One is a great organization that knows how to hit the spot.

Now that the financials are beginning to suggest the Airlines can get back on their feet and offer better service, we are faced with the next “opportunity”

A Wave of Consolidation:

Have you read about the recent proposed consolidations with the airlines? For instance US Airways upon leaving bankruptcy, formerly Allegany Airlines was taken over by America West and named US Airways. Before the merger can be deemed completed from a service perspective, US Airways and its CEO (former CEO of America West) is making an unsolicited bid for Delta Airlines (/) , currently in Chapter 11. on top of that United is talking to Continental (Northwest may hold this up) and Air Tran is talking to Midwest. Finally, did you hear that Qantas was sold to an Australian and US Private Equity shops?

Will the consumer pay higher travel costs?

With Consolidation service should get even worse, but I do not believe prices will rise substantially. Clearly leading consumer groups would have you believe that the consumer will pay more. One could argue and a viewpoint I agree with is, there will always be another competitor and or discount airline that will crop up and seize the opportunity. So I think the price will remain pretty stable around today's levels. Read about Virgin Airlines / Richard Branson trying to get a foot hold in the USA market. They are a major influence on prices and service and if prices rise and the Government does not like it, all they have to do is relax USA ownership restrictions and the prices will get competitive again. Consolidation is a cycle and for whatever reason, unlike the auto industry, the airline business will always spawn new Airlines when the opportunity is right.

Will the level of service flying take off or crash and burn: Airline Service is invisible.

As I said the price of a ticket will remain stable but the service will reach all time lows.

The service is another matter. Consolidation means the merging of workforces and in the case of the airlines, it means a decrease in the service promise. You bet service decreases!

The Airline Employee hates their Company and hates their job:

Think about the person that is the face of your interaction with the Airline.

Have you ever sensed that an airline employee is disgruntled and does not care about your business? I have been confronted on an airline several times with provocation. And when I speak to other travelers, they share the same horror stories.

My guess is that in virtually every major airline but Southwest, the employees today have:
i. faced losing their job
ii. Retained their job over their peers because of seniority not their performance
iii. Had a drop in salary
iv. Lost their seniority
v. Work longer hours

Today, I find the airlines all the same. Nobody gives you food unless the flight is longer than 4 or 5 hours. Given the quality of the food from the “old days” that may not be so bad, but it is one less service quality and differentiator. All the airlines have a similar food policy so why differentiate? The truth being, I actually prefer paying 5 today and eating something I want then what they used to serve me before. Are you telling me the airlines cannot restore a menu and some selection and throw it in? Sounds to me like a winner! Is someone doing this?

So what happened?

In most industries when consolidation occurs the best employees the A grade one’s leave the industry and find new beginnings, the C' grade employees get fired and the B grade employees consolidate and stay with the Company This usually means at least operational improvements.

Survival of the Least Fit!

In the airline business. The older you are the more safe your job. The people that remain in the airline have gone thru so many ups and downs. They are nasty people that are confrontational. They hate their company and they distrust management. Given what these people have gone thru, it is impossible for them to be consistently pleasant. Your better off hiring a new staff. That cannot happen with these Airlines.

With the recent wave of consolidations now on the "horizon", the service will only get worse. It will be interesting to see if with all the consolidation an Airline will re- define their service as a method of separating themselves from their competition. If they do, will someone please tell me!