Nextel has its reasons

	In response to David Berlind's "Nextel blows customer moments of truth...again " Chris Corcoran writes:

As the owner of Sunset Wireless, an authorized retailer for Cingular Wireless, I own six retail stores selling Cingular phones.

The situation you described happens often in our business. We have figured out a way around it. But first, let me explain the reasoning behind Nextel's (and most other carriers') behavior.

You correctly pointed out that the customer is induced into buying a phone at a lower price due to incentives paid to the agent selling the phone. For example, our company can purchase phone model X for $200 and sell it for $89. This results in a net loss on the sale of $111. However, because this customer is a new subscriber, we receive a commission of $200 (for example), resulting in a profit of $89 on the sale.

Now, let's assume that a customer damages or loses his phone (and doesn't have the insurance) while still under the contract above (which allowed them to buy a $200 cost phone for $89). If that customer walked into my store, I would not be willing (based on the frequency of occurrences) to offer a $200 phone for $89 since we will not receive a commission from the carrier and would end up losing $111 if we did this.

Fix # 1 is offered by the carriers. Cingular has an upgrade program that takes into account the length of time a customer has been with them as well their average monthly bills. In many cases, a customer who loses or damages a phone is eligible for an upgrade. This means the phone company will pay a commission to the agent again (albeit a much smaller one) that would allow the customer to purchase-again-- a phone for $89. In this case, the agent makes about $80 less on the sale due to the lower upgrade commission, but still has a small profit and a happy customer.

Fix # 2 is our own design. If a customer is still not eligible for an upgrade (based on length of service, average size of bills, etc.), then we offer the customer the use of a "loaner phone" programmed with their existing telephone number until they are eligible for an upgrade.

While none of these are perfect, they do work. It is the tradeoff we all have to make (carriers, agents, and customers) in order to allow customers to purchase phones below cost.

If you can think of an alternate solution to the ones above, please let me know and I'll run it by our management team. One solution might be to lower the monthly service charges and eliminate commissions on phones entirely (not good for my business). The trade off here is lower bills vs. a higher initial phone price -- the $200 phone above would have to be sold for $311 to make the same $111 in profit).

Chris Corcoran<
Sunset Companies