Vonage Increases Prices
Vonage is raising their rates for the most inexpensive calling plan.
On December 9th, I received an email informing me:
"At Vonage, we're committed to providing exceptional phone service at a great value you can rely on. On December 1, 2008, the price of our Residential Basic 500 Minute Plan increased from $14.99 to $17.991. The new price will be reflected in your February 2009 bill. We're proud that we remain one of the most competitive choices among home phone providers."
When you add the junk fees and taxes, the 14.99 price is actually more than $23 per month. So, this price would push the total well above $26.
For existing customers, the price won't be shown on your February bill (which is actually a bill for January), which means the price will change in January.
I called to cancel and was immediately offered a $4 per month calling plan (@ $.03 per min). I took the $4 plan, but I am probably going to cancel that and switch to Skype ($30 per year) or Unlimited WIFI calling (UMA) on my cell phone ($10 per month).
My rough guesstimate tells me that for each customer that does not cancel, Vonage makes an additional $3 revenue per month (not counting the slightly increased junk fees on the back side). However, for each customer that cancels, Vonage looses $18 (new price). So, for each customer that Vonage looses, it has to retain six customers (or acquire six new ones) at that price to break even.
Meanwhile, the company is still loosing money-- according to the latest 10-Q, Vonage lost $7.8 Million last quarter. I'm guessing that they are trying to push the low end customers to the next more expensive service tier, in spite of the fact that most customers are looking to reduce their expenditures in this economy.
I'll be watching to see if this works because it seems contrary to what little business training I've had -- surprising customers by raising rates in a time of softening demand.
Labels: Tech
