Friday, April 3, 2015

Study finds network operators wrong about customer bill shock assistance

When Pasteur advocated rigorous washing in hospitals by doctors and nurses as a way to fight off infections, particularly during surgical operations, he was scorned. In the nineteenth century, many health professionals believed diseases were spontaneously generated, possibly influenced by the theory of evolution. Later, when it was proved that germs enter living organisms from the environment, hygiene and attention to washing and cleanliness took its position in medical practice.

That was a case where practice and concept (or theory) were mismatched. In such cases, education and public awareness campaigns are powerful tools for bridging the gap.

When the fact and idea doesn't match.
Credit: Charlotte on Flickr
In a similar vein, bill shock prevention could be falling into that class. If you read this Syniverse bill shock prevention document, bill shock prevention has the mobile subscriber in mind. It enables subscribers to set spending and/or usage thresholds based on pre-established policies.

Unfortunately, a recent study has called its economic value into question. The study conducted by Mathew Osborne, an assistant professor of marketing at the University of Toronto Mississauga, and Michael Grubb, an assistant professor of economics of Boston College, argues that the practice might be going contrary to the claims.

Bill shock prevention might be costing subscribers.

By sending timely SMS or email alerts to customers when plan threshold is about to be breached, mobile network operators hope to save their customers' money, make them happier and increase company revenue while protecting themselves against customer churn. It seems that is but a concept.

In reality, such SMS or email alerts induces a secondary behavior on the subscribers. It makes them to decrease their network usage, stop using the plan or switch to a wrong plan. All these makes the cost of usage more expensive for the subscriber.

It is estimated that the average subscriber cost increment when network operators implement bill shock prevention strategies is about $33. Calculate this by the subscriber base of each mobile operator and you’ll understand why this is possibly an externality the society might have to address.

To bridge the gap, subscribers have to be more educated on their plan usage details. They should have access to summaries of past usage, to weekly and monthly usage histories. "Perhaps a better avenue is policy that helps consumers do a better job of forecasting their usage," they posit.

Whatever the case, this externality is not common to network operators only. Utility companies, banking overdrafts and health insurance do fall into this category of mismatches which might have to be addressed.

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