Russian mobile operator Megafon is offering a new tariff line called Connect, which offers customers cash back based on their subscription and roaming expenditures. The rebate will be 10 to 30 percent of monthly spending on services, depending on the duration of use. Initially it is 10 percent and rises to 15 percent after three months, 20 percent after six months, 25 percent after twelve months and 30 percent after 24 months.

Customers will be able to use the rebated funds to purchase goods and services from the operator.   

Tarifica’s Take

We find this offer to be an interesting and, one might say, counterintuitive one that could be quite appealing. In customers’ minds, generally speaking, greater consumption of services is strongly associated with greater charges, so the idea that one gets more money back the more one consumes is counterintuitive, in a positive sense.

The rebates should have the effect of incentivizing people to use more voice and data services, whether at home or abroad, by means of the promise that they will receive greater and greater rebates the more they spend. The further promise to increase the percentages of the rebates over time is intended to retain customers (given that this is apparently a pay-as-you-go tariff), and since the increases are quite substantial, amounting to tripling the rate within the allotted period, the strategy is likely to work.

One point to note is that the rebate seems to come in the form of funds which can only be used to make purchases from Megafon itself, and that could well be perceived as excessively limiting by many consumers. On the other hand, if it were a true “cash” rebate, all it would amount to is a percentage discount on services, which may not be particularly exciting for customers who already are used to changing pricing structures. In a way, the offer of credit toward purchases from the operator may actually be more appealing. Of course, that will depend on the nature of these goods and services. If they consist of value-added services such as streaming entertainment content and extra SIMs or lines, that would probably accomplish the purpose well, because those could likely be purchasable in their entirety with the funds accrued in the short term. Mobile devices would be a harder sell, in that the rebates would only offset the price by a relatively small amount. In general, an operator launching a plan such as this should be sure that the “goods and services” in question represent genuine value for the customer and are affordable.