SAVE | EMAIL | PRINT | MOST POPULAR |  RSS | | REPRINT
|
Hold the Phone: Is the Incentive Market Ready for Smartphones?
April 04, 2007
By William Flanagan
Ask any budding business titan or corporate raider what his most important tool is, and he's likely to tell you it's his cell phone. More phone models today are crossing the line from functional tool to aspirational objet du desir. But take a look at most corporate incentive merchandise catalogs, and you'll find a startling absence of phones. Why is that?
According to Mike Horn of Chicago–based Hinda Incentives, cell phones are, at first glance, a solid item to include in incentive programs. "More cell phones are sold than any other personal handheld product," he says. The problem is that most mobile phones are bundled with a service agreement to a particular carrier, and carriers make their profit from the cost of monthly service. "Although the product is exciting, the people who are selling those products really don't care about the product; they care about the service."
Dialing Doubts
According to Horn, the myriad choices of pay plans and price offerings from carriers limit their attractiveness to incentive merchandise providers. At issue is that the retail price of the phone, which, as anyone with a cell phone knows, can be heavily discounted and even included free, is based on the calling plan the user chooses. So, while a phone from a carrier could be discounted 100 percent, an incentive merchandise provider would be locked into offering that same phone to clients at the retail price point.
"In the cell phone business various carriers control everything that goes on, and there are all these subsidies that reduce the price of the products," says Horn. "For instance, if we take a deluxe new phone, that product might, in true value, be worth, $299 at retail. The carriers will take that $299 value and say to [the consumer], 'If you do a two-year program with me at this certain level, I'll give you that phone for free.' Now, I can't do that. I'm precluded by certain regulations with the tax laws as well as by the subsidies. So it's a very difficult thing for an incentive company to deal with."
That sentiment is echoed by Andrew Hodges, vice president of product management for Richmond, Va.–based Affinion Loyalty Group. "On the cell phone side, with the iPhone excluded, the biggest issue that we run into is that the subsidy from the service providers is so huge, the perceived value or the traditional process for a consumer to acquire a phone just doesn't make sense to a rewards program." Affinion, like Hinda, investigated the potential of including phones in programs, but the incentive market doesn't seem to be attractive to the manufacturers or the service providers. "We've approached two of the providers to see if we could be a distribution point for them and port those deals over to us, but they haven't shown any interest to date."
But there are some developments that may change the rules of the game slightly. Prepaid phones may be attractive to incentive merchandisers because they can sell and promote the whole product and maintain control over the cost and the overall reward value. "These phones are pre-loaded by a carrier, and they're sold as a complete one-stop deal," says Horn. "We carry a phone called Firefly, which is aimed at kids. It's got three direct-dial numbers [such as] mom, dad, 911, and it's preloaded with a hundred minutes. That's the kind of product we can put into a program."
Additionally, the use of SIMM (Single In-line Memory Module) cards may add another incentive-friendly wrinkle to the mix. With a SIMM card users are able to switch all of their internal data out of one phone and into a new phone. "In the old days [the carriers] used to have to program [the user's phone]," says Horn. "Now I can take my SIMM card out of my Motorola and put it into another Motorola, and I'm golden. I don't need the carrier to do anything. The use of SIMM cards is going to make it easier for us to place a product."
Smart Call?
Smartphones, such as the Palm One Treo, may be the most attractive to potential incentive award winners (and their employers) because they have the most features, including useful tools like the ability to tap into the company intranet or access e-mail remotely. But they suffer from two problems that chase incentive providers away: The first is the subsidy problem, the other is the high price point. "Now you're talking about a $500 or $600 retail value," says Horn. Affinion's Hodges adds a third obstacle, how to follow-through with service. "I think consumers would be perplexed as to how to actually go out and get a service provider after they have a phone in their hands," he says. "They could be in a situation where they're paying activation fees or some kind of premium or sign-up fee just because they're walking in off the street with a phone."
Apple's recently announced iPhone—which is creating huge buzz although it won't be released to the consumer market until at least June—might have the cache to break through these barriers. Says Horn, "That's a product we could sell whatever the value is because it's unique, it's different, it's limited and people want it. A lot of what happens is around the sizzle of the product, and if we can access that kind of excitement in a product, we can represent it as a value."
But the company is not ready to offer the product in the incentive channel. As of press time, Incentive Concepts, exclusive distributor of the iPod in the incentive channel, did not have the iPhone in its lineup. Horn received confirmation of that from Apple despite his belief that it's an obvious incentive winner. "I asked immediately, and [Apple] made it very clear to me that the iPhone will not be available through any channels, at least in the beginning. They're going to go through Cingular, their own Apple store and a few power retailers." Though he hasn't given up on the idea of including smartphones in Hinda's product mix, Horn confesses the obstacles are considerable: "We're exploring ways to use [phones], but it's really hard because of the carrier deal. The carrier has always been the stumbling block."
|
SAVE | EMAIL | PRINT | MOST POPULAR | RSS |
|
|
| Back to Marketing Index |
|
|
