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Worse quality, more profit?

Following on from our paradoxical suggestion of free products generate more profit, we can see another potential lesson from outside of telecom on price discrimination based on quality.

According to the combined distribution and ediorial forces of The Register and The Guardian

Universal Music Group is to bring no-frills CDs to the UK in a bid to match the iTunes Music Store’s price point. The scheme targets old, back-catalogue releases rather than new or recent titles. […] Universal will split its CD line-up into three formats. The cheapest series is expected to retail for just under £7. The CDs will ship in a simple card slip cover with no booklet. […] The other two are the standard jewel-case package and a double-pack which bundles as DVD with the CD.

Traditionally VoIP has offered somewhat variable quality over best-effort networks. The alternative is substantial investment to implement QoS and network-based session management. But what if we took a differenet view, and saw such quality issues as a price discrimination virtue, not a technology vice?

In this case we have an opportunity to give away the low-end product to entice customers in for the up-sell to the premium experience, or to cross-sell calls to those that offer higher revenue potential?

Are you missing opportunities to promote access to non-geographic, premium, personal numbering service, freephone or international destinations? How could you re-invent your pricing to encourage users to feel more comforable paying significant roaming or Wi-Fi fees as part of a bigger apparent bundle of value? What sub-prime services could you offer to gain the user’s attention and affection? How does the need to price discriminate affect your IP services vision? Is delivering maximum quality in all circumstances really the right approach?

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