philippe::niquille | regular niche market thoughts

The word unlimited has worked itself up to a commodity in marketing. The magic word is meant to attract crowds of customers promising the never ending availability and use-as-much-as-you-want of a certain service. Typically such plans are found in product offers by technology firms (the service industry where economies of scale are easier to achieve) such as broadband internet offers or mobile phone plans (especially for youngsters here in Switzerland). But as promising as it may sound to customers, how lucrative is such a product strategy for the businesses themselves? Wouldn’t customers be sucking blood out of companies and never stop?

The answer is a natural balance by self regulation. Let me explain from a customers point of view. Since you agree to pay (mostly a fixed rate) and consume as much of a certain service as you may like you should feel free, wouldn’t you? You decide when, how and in what quantity you use the service. When you first start using the service you may feel very enthusiastic and “overuse” the virtual cap which has been assigned to you by the company (no, they don’t just calculate with unlimited..). But soon enough you will get tired of using it just because you have it at your disposition. You will (!) sooner or later. I’d call the actual amount of consumption your normal quantity you really use. Considering an adequate fixed rate, you’d feel well treated and think you’d at least got your money back. Now this normal usage amount wouldn’t just sky rocket, no. As an example think of mobile phone plans offered by Swisscom for young people aged below 25. After eight o’clock in the evening you may call any fixed-line or Swisscom mobile phone for as long as you want. How many monthly minutes do I use? About one hundred which would normally cost me about one and a half swiss franks. I don’t call people just for the sake of calling them and no, you don’t have thousands of friends, nor do you have the time to keep on sticking with your phone. My normal usage, I could bet, wouldn’t apply to some hyper active teen but as I explained earlier his usage rate wouldn’t be any much higher than mine from a statistical point of view.

So does my concept really apply? Let’s have a look at the service providers side. Of couse, the offer strategy heavily depends upon your specific cost structure and the nature of your service. But usually unlimited plans attract new customers, those increase your revenue and positively influence your costs. Again, think of a mobile service provider offering short message services. What is the cost of a 100 byte text in your gigabyte world? Almost nothing, even after amortisation. What is the resale price to bulk users such as myself with UniSMS? It’s about one fourth of end user prices, still high enough for my service to have an eye on heavy usage. But magically message counts sent through the unlimited offer of my service never sky rocket and only account to about one third of total messages sent (users are allowed to send unlimited messages to buddies registered with the same service). You could now think that users either don’t exactly know which text is free or keep on sending their normal amount of messages no matter how many they could send. You wouldn’t just do something because you can, normally you need a purpose or cause?

What do you think about self regulation of usage?