Tesco VoIP Puts a New Twist on Customer Loyalty

Sparking the interest of retailers around the globe, UK supermarket chain Tesco announced it will be selling Internet-based phone service and handsets on a pay-as-you-go basis.

Tesco’s move is more than a product announcement; by private labeling a VoIP, or Voice over Internet Protocol, service, Tesco is mining a rich new vein of cross-sell and up-sell opportunities.

Not Just Another Sale

“I have always wondered what is stopping Wal-Mart from becoming the largest carrier in the United States,” said Jon Arnold, VoIP consultant with J Arnold & Associates. “Because VoIP has become such a commodity, there is very little financial downside to this strategy, and it is a very smart marketing and sales tool,” he told CRM Buyer.

For instance, he said, a supermarket could cross-sell products like phone cards, offering a credit on overseas long-distance calls when consumers sign up for the service. It could promote sales by offering a discount on telephone orders. It could do the same for high-demand items at peak times, such as a Christmas ham or turkey, he suggested.

“Private labeling VoIP becomes more than just a customer-loyalty or sales play,” Arnold explained. “It becomes a way to engage customers on a regular basis.”

Commoditizing VoIP

VoIP has been heading down the private-label path ever since November 2004, when the Federal Communications Commission ruled that VoIP providers were not subject to telecom regulations or fees. The result was a steady decline in prices and a commodization of the service.

The demand for international VoIP services, in particular, is growing exponentially, according to figures from Frost & Sullivan. By 2011, 30 percent of the international long-distance demand will shift from switched wireline to VoIP, the firm projected in a recent study.

International long-distance calling can be up to 50 percent cheaper through VoIP, the firm observed, than through the typical bundled plans of circuit-switched telephony services.

Some firms are beginning to use these market dynamics as a way of carving out a new customer base.

“VoIP in its purest form has become a commodity,” Arnold said. “A retailer can almost give it away as a loss leader.”

It is very easy, therefore, to tailor a plan or service to a desired demographic, he noted, pointing to resellers in Florida that are targeting the Hispanic community with VoIP services. “Everybody likes to talk — especially when your family is far away.”