Philippine mobile operator Smart Communications has launched a promotion in partnership with Timex Shops and Watch Republic Shops. During the month of June, Smart is offering prepaid customers a 20% discount on Timex watches priced at PHP 3,790 (US $89.33) and above, or a 15% discount on all lower-priced items. Customers must purchase a Smart Prepaid Call & Text Card worth PHP 300 (US $7.07) or PHP 500 (US $11.79) and present it at participating stores in order to receive the discounted watch.

Tarifica’s Take

This is certainly an interesting promotional concept. We assume that Timex and Watch Republic Shops are going to be shouldering much, if not all, of the discount, otherwise there would seem to be little to no upside for the operator. If the retailers are in fact subsidizing the discount, then the plan is clearly a good deal for both sides. The former get more foot traffic in their stores, and while the discount will undoubtedly impact their margins, these sales will likely still be profitable given the typical 50% margin associated with such merchandise. As for Smart, it gets new customers who are drawn in by the watch discount. In the event Smart has to pay for all or a large share of the discount, the advantages for the operator become less clear. It would need to hope that these prepaid subscribers will purchase more cards when their balances run out and/or that they shy away from purchasing the higher end watches that are available. That, in our view, is not a winning proposition. However, we think Smart is “smart” enough to avoid placing itself in such a situation.