81B-Slowing a Price Decline with a Low-Priced Product
For the last several years, most landline telephone companies have offered special discount deals to customers who threaten to cut their landline service. But the trickle of customers leaving landline service, and depending solely on cell phones, has turned into a stream.
Verizon believes it has at least a partial answer to slow the customer defection from the landline business. The company is considering introducing a $5 monthly voice plan that would allow customers to receive unlimited calls but dial out only to 911 and Verizon Customer Service. This is a new low price point in the market. This price point compares with the Verizon unlimited nation-wide home phone plans which start at $40 a month.
Verizon is pricing defensively, trying to keep customers from leaving the company for cheaper pastures. In order to develop this defensive pricing plan, Verizon made three choices: the approach to take, the segments to serve, and the components of price to use to serve those segments. For many more examples of these three choices and how they defend both market share and margins, see our new Perspective, “Meeting Falling Prices with Creativity” in the Perspectives section of StrategyStreet.com.
The technology formerly used to make calls on landlines, called ‘analog’, has been replaced with an internet-based version, called an ‘IP network’. Landlines still exist, and you can have a phone line in your home – but the system that underpins it will be digital. Across the telephone network, home phone providers have moved to a digital dialing system.
In 2020, the cheapest landline services without internet include:
- CenturyLink – Basic Home Phone starting at $23.34/mo.*
- Cox – Voice Premier starting at $29.99/mo.*
- Spectrum – Spectrum Voice Basic service starting at $29.99/mo.*
- Verizon Fios – Digital Voice Unlimited Plan starting at $20/mo.*
- Xfinity – Xfinity Voice Local starting at $34.95/mo.*
These telephone companies are offering a Price Leader (Stripper) product Price Point in order to maintain a relationship with a customer who might leave without the low-priced product. In most cases, the telephone company is seeking to maintain a Primary Role with its customer, foreclosing an opportunity to another competitor. See HERE for more explanation on roles with customers.
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