Usage Rate Pricing: An Acceptable Strategy Unless You Are AT&T?

AT&T created a stir among its wireless customers and technology bloggers last week when it announced a two-tier pricing system for its data plans. One plan provides 200 megabytes for $15 a month, while the other plan provides 2 gigabytes of data use for $25 a month. The move to end unlimited data consumption appears to be aimed at easing congestion on ATT’s network. The idea of charging more for a service the more it is used is very reasonable, but if the aim of the new pricing system is to deter heavy data usage it would seem to run counter to what a business wants customers to do: consume.

Usage rate pricing is an effective segmentation strategy. Not all wireless customers have the same needs in terms of phone minutes or data download consumption. However, AT&T seems to be walking a fine line that makes its new pricing system punitive for its heaviest users. Rather than trying to discourage their use of the network, AT&T should engage these customers to determine how it can serve them more effectively. At the same time, it should determine the financial value of these customers to the company and possibly seek other ways to generate revenue from these customers that do not discourage their use of AT&T’s services.

One reaction to the new pricing system has been proclamations by some AT&T customers that they will exit their relationship with the brand as soon as their contracts expire, if not sooner. In AT&T’s judgment, the possibility of this outcome is a risk it is willing to accept. But, is customer alienation and creating negative associations about the brand worth the risk? That is the situation AT&T faces as it waits to see if any of its competitors follow suit with similar pricing strategies.

Bloomberg - "AT&T Sparks User Backlash with End to Unlimited Plans"

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