Monday, April 6, 2015

Best pricing strategy for ISP's and utility companies

Nowadays, the Internet service providers, AT&T or Comcase or any other, and utility companies entice new customers by offering a significantly lower price for the first few months or the first year. After that, it goes up to the regular price. Obviously this pricing model makes newcomers happy and old customers disgruntle. Because every company in the same competitive field does the same, no company wants to drop the new customer incentive plan and maintain a constant price plan. But this strategy goes against the common business sense that loyal customers should be treasured more than the new ones.

I think a better pricing model is a combinatory one that both attracts new customers and accomodates old loyal customers. The way to implement this ideal is to keep the initial price low, for 6 months or a little longer, bring up the price to the regular one, and very importantly, from this point on, continue to lower the price incrementally, at a rate of, say, 5% lower than in the previous month, until it eventually comes down to a level comfortable with both the company and the customer. Wickedly cunning customers can still choose to switch away to another company at the end of the 6-month initial discount period. But many customers probably don't bother to make any change, and will enjoy the loyalty appreciation offered by the company.

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