Airtel Nigeria has introduced a new service called Bid and Get that will function as a type of reverse auction in which the lowest bidder is the winner. The customer who submits the lowest unique bid wins the right to purchase the item up for auction that day for NGN 100 (US $0.62), irrespective of the actual retail price. Such items will range from top of the line communications devices, like iPhones and iPads, to household electronics gadgets and other desirable “goodies.” Bids must be sent via Airtel SMS at a charge of NGN 10 (US $0.06) per message.
Although it might be considered a little gimmicky, we think this new service could be very profitable for the operator and represents the kind of creative approach that other operators should seek to emulate. Bid and Get, which is more like a raffle or a for-profit lottery than an auction, should prove to be fun for customers, and for that we believe Airtel should be commended. The idea of making a low bid has psychology on its side, and no matter how much any customer ends up offering in the quest for a unique bid, there is no risk of having to pay any more than the nominal sum of NGN 100 in the event he/she is the winning bidder.
In terms of the economics of the promotion, if only 10,000 customers were to submit bids on a given day, the resulting SMS charges would be enough to cover the cost of a high end smartphone or mid-tier tablet. Now, considering that Airtel has over 20 million subscribers, we expect a considerably larger number than 10,000 per day to participate. In fact, if even a modest percentage of customers submit bids on a daily basis, the service stands to generate tens of millions of (US) dollars in ultra high margin revenue annually. In the event Bid and Get becomes very popular, the revenue and profit attributable to it could easily reach into the hundreds of millions. The concept – unusual and perhaps whimsical though it may be – could actually make a good deal of sense for operators around the world, provided they can structure it in a way that meets regulatory requirements, particularly in countries that have stricter regulations than Nigeria’s, especially as regards contests.