Wheres the Money in Wireless? Session Identifies Compensation Components

Todays session will discuss how making money on wireless is a moving target. While there are some traditional models offered by the larger operators that are still in force, there are increasing efforts by carriers, resellers and master agents to make being a business-to-business wireless dealer more lucrative with residual commission plans, value-added services and even cost avoidance.

To begin with, compensation from the sales of wireless services has differed historically from other telecom service sales. For example, most operators dont commission dealers on a percentage basis. Instead, they pay fixed compensation upfront. The upside of this model, says panelist John Horn, national director for T-Mobile USA, is it would take many years on the same-size sale in the VoIP world or ATM or frame relay to make the kind of money theyre going to make upfront in a wireless sale.

Some carriers do have contracts with residual commissions. Mark Estill, national channel development manager for indirect channel marketing at Sprint Nextel says it offers fixed compensation in upfront and residual formats, as well as combinations of the two. The company is working on unifying the contracts developed by Sprint and Nextel prior to their merger, and expects to introduce those in several months.

Compensation models also vary by geographic market, adds Mitch McCoy, vice president of marketing for master agency American Wireless. For example, if a carrier is slow on sales in a certain area, it might offer more spiffs to its partners in that region than it does in another.

As a master agent, American Wireless offers its agents several compensation components: commission, co-op, residual and, sometimes, net present value, which front-loads money for the dealer but does not come with a residual.

Sometimes an agent can combine the options or choose one over the others, depending on the agents contract and the carrier in question.

American Wireless pays commission on service plans. The co-op program is a monetary incentive a carrier sometimes pays per activation, depending on the service plan. Once a dealer has accrued a certain amount of co-op dollars, he or she can use that money for advertising. American Wireless and the carrier must approve the ad campaigns, which come with strict guidelines. Finally, the length and type of residuals vary according to each carrier and market.

Wireless resellers also are emerging and breaking some of the long-held compensation models. Coast to Coast Cellular Inc., which is expanding its business-to-business agent program nationwide, is one such company. Saul Glosser, Coast to Coasts vice president of sales, says the program is different from what wireless dealers might be accustomed to. Rather than provide an off-the-shelf calling plan, Coast to Coast Cellular analyzes its customers usage to create a custom plan.

This way they are not purchasing minutes or packages that they cannot use, Glosser says, noting that Coast to Coast generally offers savings from 10 percent to 40 percent less than what most companies would pay with a major carrier. Agents earn a residual commission of up to 20 percent on recurring charges as long as the customer remains on Coast to Coasts service. That means if they are there for 10 years, you are getting a residual commission for 10 years, says Glosser.

Another key difference with wireless sales, says T-Mobiles Horn, is wireless dealers should expect to lose money when selling a cell phone. No one in this industry makes money on devices except for the manufacturers themselves, Horn explains. The way to make up for those losses is to get buyers to upgrade service plans and purchase accessories. The higher the monthly service plan the higher the commission, bottom line, says Horn. So, if an agent lands an enterprise account with 500 users, he or she stands to cash in.

American Wireless McCoy agrees. He says while there are not huge margins on selling devices, those sales can lead to add-on sales that do net big money. There are three such opportunities, he says, and they include bill analysis; order and inventory management; and mobile applications and integration. McCoy says wireless dealers should integrate applications that help their clients improve production and efficiency. For example, in addition to cellular services, American Wireless specializes in satellite. McCoy says adding a GPS component to a companys lineup of wireless services can, for example, help managers determine how long one of their engineers is at a clients job site, and bill that client accordingly.

By the time this year is over, it will not be uncommon to see mobile applications that people can use in the field, McCoy says.

Horn also encourages wireless dealers to offer value-added applications, such as stock quotes for customers interested in finance or Multiple Listing Service data for customers in real estate. Many operators will help partners identify applications that can be rolled out to vertical industries, he says.

Another major difference between selling mobile services and landline services when it comes to total compensation is the cost of maintaining inventory. Operators often require agents to purchase phones and subsidize the sales of handsets to end users. While agents doing this could earn a larger commission, they must outlay significant capital to purchase the phones and risk keeping stock on hand that may become obsolete, says Glosser.

Glosser says this is not the case for agents working with Coast to Coast.

We stock all makes and models and your customer just picks from our stock. We also carry all the accessories for those customers, he says.

Coast to Coast also takes care of customer service calls on a 24/7 basis, and customers can log on to a Web site to view their invoices online.

Master agents also frequently help dealers avoid this cost. American Wireless, for instance, lets its subagents choose whether to stock inventory or have the master agent do it.

Agents also can avoid costs by choosing supportive carriers that offer easy activations, effective product promotions, and sales and marketing assistance, says Horn.

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