Tuesday, December 06, 2005

Your core, my loss leader

My boss just returned from the Centrica North America Strategy presentation, during which it was mentioned in passing that the company is offering new gas customers in Ontario five hours of long distance calls each month for free just for signing up. So here's a company giving away the core product of a 35% margin industry to bolster its own 5% margin core business. Any telcos fancy giving away gas?

UPDATE: Wow, Canadians love a bit of attention! A surprising number of readers from north of the border have written in with responses to this post. The best so far is this one, which portrays a slightly different view to that promulgated by Centrica:

"Just for fun, I called Direct Energy and after being transferred three time within Direct Energy’s customer service help desk, they finally asked me to call Rogers Telecom directly…which I did.

As it turns out, you have to subscribe to Rogers' home phone service for $29 CDN in order to get the free minutes and one free service (e.g, call display). At current rates, you can subscribe to a local home phone service from Bell for about $20-23 CDN + $6-8 for the feature. Therefore, Rogers is really using the LD as a simple means of acquiring the customer. While the offer sounds great, it does come at a
price of switching service providers."

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