A follower forwarded this Starlink announcement:
“The Starlink monthly service for residential customers is changing as follows:
$10 increase in areas with limited capacity. New price will be $120/month.
$20 decrease in areas with excess capacity. New price will be $90/month.
As a current customer in an area with limited capacity, your monthly service price will increase to $120/month beginning April 24, 2023. For new customers in your area, the price increase is effective immediately.
If you do not wish to continue service, you can cancel at any time on your account page. Your Starlink hardware can be returned for a full refund within 30 days of purchase, or a partial refund of $250 within 12 months of purchase.
As the SpaceX team launches more satellites to increase capacity, the Starlink team is making continuous network updates to improve performance over time. Thanks for being a customer and for your continued support of Starlink!”
As an engineer, I love this. As a pricing person, not so much. It is simply factual. Every logical mind smiles when realizing this. However, it probably did not make many friends among its customers.
From a pricing strategy perspective, this price change makes a lot of sense. They are simply using yield management techniques which is a form of price segmentation. In areas of heavy usage with limited capacity, they can increase the price. If they lose some customers, they will probably gain more. Assuming they are at maximum capacity in those areas, they just increased their revenue by 9% (10/110), all of which is profit.
In areas of low usage, they are trying to gain subscribers. They probably have evidence that an 18% price decrease will gain more sales than lost profit. They also must believe that their competitors in those areas will not be lowering their prices in response.
Now, let’s talk about their communication. I like that they held off the price increase to their current customers for a few months. However, they could have worded that differently to create some good feelings. Something like, “We appreciate you as a loyal customer. Although the price increase goes into effect immediately, we will hold your price at its current level until April 23, 2023 as a way of saying thank you.”
I would also suggest they write two separate letters. Telling someone their price is going up while letting them know that others will get a price decrease simply rubs salt in the wound. They know which customers get increases, so they could have written a letter to that group talking about the popularity of StarLink and how they need to raise prices to meet demand.
Also, they didn’t blame increasing costs. Blaming the need to increase supply would be similar to increasing costs. They mention more satellites but don’t tie it as a reason for the price increase.
If you look at this from the perspective of a customer receiving lower prices, there is nothing negative about the communication, but it misses an opportunity. They would have built more goodwill had they simply said, “We are thrilled with your loyalty and are happy to be able to lower your price.” I would not have mentioned the excess capacity or the price increase on other subscribers.
I’m guessing this letter was written by an engineer. Maybe StarLink should hire some marketing and pricing people. What did you see in this letter that I missed?
Now, go make an impact!
price, pricing, pricing strategies