Manning says the move to round up data charges from kilobytes to megabytes is a huge jump (there are 1000 kilobytes in a megabyte); the size of the pricing jump made it difficult to carry off.
The problem with Vodafone’s low pricing model is that data prices are falling fast, says Mason. “In any negotiation there needs to be a win/win, but they haven’t given anything. They seem to be grasping at straws, almost buying themselves time as they ask themselves: ‘Where will we get our revenue from? What is the new model?’”
Don’t ask customers
The backlash must have come as a surprise for Vodafone because it surveyed 10,000 customers, and they said they would be accept the proposed changes.
Manning, says the market research has let Vodafone down, and is increasingly under question from corporate leaders. “What people say they will do in surveys and focus groups bears no resemblance to what they actually do because the market research industry has trouble replicating the real buying process,” he says.
Harrison says: “Good marketers never ask consumers directly what they want. People don’t know what they want or need until they have it.”
Instead, clever marketers ask what problems customers need solved, and then introduce products and adapt them and change them as the market responds to them. “If Apple had asked customers what they wanted from their music player, they would have built a smaller cassette player,” Harrison says.
Substitute
Vodafone offers free access to Facebook and Twitter as part of its services, but decided to rescind this freebie at the same time as upping the data charges. While the company’s data hike has been canned, Vodafone is sticking to its guns on free access – it’s over. Was the whole play an ambit claim to end the Facebook and Twitter access?
Harrison doesn’t think so. He says such offers are nudges to get customers over the line. “These extra services are peripheral; they are the nudging tool. Most people will buy the same brand that they have in the past, and the price-sensitive people will go towards lower price carrier. But most people don’t know when they use their phone, or data they use, so in reality they wouldn’t use those free services.
“In the overwhelming amount of information people are provided with when they sign a phone contract, if there is a sign at the point of purchase that says free Facebook, it might get them over the line.”
Unpopular decisions can win the day
There’s a strange thing about people and unpopular decisions: we find it hard to maintain the rage. Says Harrison: “There is a theory around expectations that we all tend to imagine life differently from how it is in reality. A classic example is that a large number of people thought the world would end when we introduced a carbon tax, but then they just absorbed it into their reality. So, if you pursue a decision, over time people get used to it.”
Manning points to the case of Netflix, a DVD and video streaming company that raised its prices last year, and got a big social media backlash, losing 800,000 subscribers. But Netflix held the line and discovered that many of the lost subscribers had signed up for free, and its revenue recovered and customer numbers grew.
Trust is the big issue
Although Vodafone has some wins from its decision reversal, it does risk weakening its links to customers. For one thing, when companies win customers on price, it is the low price and not the brand that wins their loyalty, says Harrison.
Mason says that today’s consumers are looking for authenticity and transparency. Having failed to convincingly communicate the reasons for the price rise to consumers, and then reneging, Vodafone’s leadership is building a picture of a company that lacks transparency and does not have real reasons behind its decisions.
“The big trend is all about consumer trust and authenticity. If people don’t understand the reasons for the decision, it is a bit like the boy who cried wolf. And it is wasn’t; the best thing was to say we made a mistake, but now what we are going to do is the best for the company and for our customers.”
