Responding to recent media coverage airing the complaints of disgruntled resellers, Paging Network Inc. said these resellers may be upset at the company’s change in strategy, a strategy which among other things includes price increases.
Michael DiMarco, executive vice president of sales for PageNet, confirmed the recent rumors that PageNet was mulling a price hike by noting PageNet will be raising its rates to customers.
“We have made a general move toward profitability. A lot of customers are not paying the rate it takes to get to profitable growth,” he said. “In that process, we’re raising rates.”
DiMarco did not say how much the price increase might be.
Historically, PageNet was the company driving prices down, forcing other carriers to adjust their charges accordingly to stay competitive.
Now that PageNet has voiced its intention to reverse the price-cutting trend and raise prices, other carriers are likely to follow suit.
Officials at PageNet said they feel this change will be a positive one overall for the industry and for their customers. The price-based game left a bad taste in the collective mouth of Wall Street investors, who changed the way they judged paging companies-from the number of paging subscribers each had to the amount of free cash flow they could generate.
This new strategy, DiMarco said, will apply to resellers as well. He said PageNet wants to add value to paging, and with that value higher prices, and will search out resellers who want to aid in this effort.
“If we push our price points up, they’re going to have to push their price points up,” he said, or settle for a lower profit margin.
In the past, many resellers would threaten to switch providers unless their demands for increasingly lower airtime rates were met. Carriers would agree to these demands because resellers were very good at finding customers. Now that customer numbers no longer matter as much as revenue numbers, PageNet hinted that resellers who insist on continuing this practice may find their relationships with the carrier turning sour.
“We’re not succumbing to the price pressures out there,” DiMarco said. “I think you’ll have a segment of the existing resellers today that don’t care about these things,” who will continue to push a price-based model. “Their strategy is not going to be consistent with ours and there’s not going to be a good fit there.” That strategy, he said will be “a going out of business strategy.”
PageNet noted that with this fundamental shift in strategy, the composition of its reseller base will likely change. The company will continue to honor its current resale contracts, but as these expire, PageNet intends to negotiate new terms. As such, DiMarco expects PageNet to have fewer reseller relationships than the almost 9,000 it has now.
Also, PageNet wants to start branding the products sold through resellers. Currently, customers subscribing to service through a reseller usually has no idea what carrier’s airtime they’re using. PageNet wants that to change.
“We want to create brand awareness of PageNet,” DiMarco said. In turn, he said the company will be much more selective about who it allows to distribute its brand and will scrutinize its resellers more in the resale contract negotiation or renegotiation process.
“We want to do business with people that engage in good business practices,” he said, blaming poor business practices for much of the animosity that exists with certain resellers.
For instance, many resellers claim PageNet habitually overbills them. While PageNet admits that it likely overbills its resellers on occasion, the company said resellers who reconcile their bill every month in a timely manner will catch these overcharges sooner and have their accounts credited. But resellers who wait several months to reconcile their bills will find the process of checking the records and approving a credit will take longer or possibly not at all.
This increased scrutiny will include credit checks and a review of the reseller’s marketing strategy. “Who do you intend to sell to and how do you intend to sell?” is a sample question DiMarco gave.
“We’d like to go after a higher quality reseller looking more to partner with PageNet,” DiMarco said.
He defined a quality reseller as one who resells more than just paging services and who has distribution methods that compliment PageNet’s. For instance, Positive Communications Inc. is a Texas wireless reseller with some 100,000 customers on PageNet airtime that has a strong retail distribution channel. PageNet has no distribution channel itself, instead focusing on large business accounts for direct sales. As such, the two strategies complement each other.
“We’re looking for marketing partners more than just a pure vendor-supplier or customer-supplier relationship,” DiMarco said.
