Like the Bat Signal lighting up the night sky over Gotham City, Spectrum recently unveiled a $14.99 beacon price for Internet service. But the way the company did it may raise some eyebrows.
Pricing Strategy Basics
A tried-and-true pricing strategy for subscription telecom services usually goes by some version of the same, straightforward template:
- Good > Better > Best
- Small > Medium > Large
- Beacon > Landing Point > Showcase
Marketing regularly leads with the lowest price point to “make the phones ring” and generate online sales traffic. At the same time, providers tout the features of the high-end service as representative of what a customer can get. For example, a typical message for internet service features prices as low as… and speeds as high as a gigabit.
Once drawn into a transaction, the sales process (ideally) matches the customer to the appropriate level of service at the “right” price for the customer. Buyers and sellers know all the steps to this dance.
Beacons Shine Bright
Consumer culture trains us to pay attention to beacon offers, because pricing provides the basic framework for value perception. Even affluent consumers for whom a +$10/month price difference doesn’t stress the family budget pay attention to the price/value framed by the beacon offer.
Lowering a beacon price impacts all stakeholders:
- Provider’s margins shrink; product may become a loss-leader
- Competitors must determine if the new price constitutes a threat
- Consumers re-evaluate the value proposition of their current service based on the new price in the market
From ELP to Internet Assist
Prior to its acquisition by Charter, Time Warner Cable launched a low-end, $15 Everyday Low Price 3 Mbps internet service aimed at wooing DSL customers who ignored cable's increasingly superior speed proposition over legacy telco technology. Sale of that product was discontinued prior to the completion of the Charter-TWC transaction. Since then, Spectrum deployed its traditional $29.99 internet price (when bundled) as its beacon.
Similar to other providers, Spectrum offers Internet Assist, a 30 Mbps service priced affordably at $15 for low-income customers who meet specific program requirements (e.g. families who participate in the National School Lunch Program.)
In certain markets, the Spectrum website features $14.99 Internet - both standalone and as a component of a bundle. The Internet Assist program requirements are not mentioned in the online buy flow.
Telogical tracks product and price data on a daily basis, but special programs like Internet Assist-- unavailable to a general market customer-- are typically set to the side.
Spectrum may have changed the game by putting this relatively-robust 30 Mbps internet offering in front of general market customers. Whether the company limits availability of the beacon service after hooking the sale (which would be a dubious marketing practice), or if Spectrum has simply broadened the availability of this low-priced service, the fact remains that competing internet providers must consider the threat of a $15 service with plenty of bandwidth to support typical usage patterns.
Expect customers to re-frame their expectations based on this price/speed combination. A new beacon is lighting up the night sky.
Scatterplot: 60 Mbps (or less) Internet Service Pricing
This chart plots Internet introductory prices (y-axis) and download speeds (x-axis) as of July 17, 2018. Data includes national and regional providers of cable, fiber, and DSL services anonymized for illustration. Note the position of Spectrum Internet Assist relative to the market.
At Telogical, we’re always studying the competitive landscape. If you have a topic you’d like to discuss with us, please reach out. We look forward to working with you.