Telstra has recently introduced a new pricing strategy, shifting to a flexible, value-based approach. This transition moves away from the traditional CPI-linked model. By adjusting prices based on perceived customer value, Telstra aims to better meet customer needs and respond to market conditions. Ultimately, this strategy seeks to enhance customer satisfaction and increase competitiveness in the market.


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Although the strategy is good in theory, implementing it will not be easy. The risk includes possible discontent among customers due to price hikes. Moreover, the broader context of restructuring efforts, which involves cutting 2,800 jobs, adds complexity. These challenges highlight the importance of effectively managing customer expectations and communication during this transition phase.


In this article, we are going to discuss Telstra’s new flexible pricing strategy. First, we present the shift from CPI-linked to value-based pricing. Then, we delve into the impact on customers and the company’s challenges and opportunities. We argue that clear communication and effective management are key to the success of this strategy.


At Taylor Wells, we believe that with the right pricing approach, Telstra can enhance customer satisfaction and competitiveness. By the end, you will know how Telstra can successfully implement its new flexible pricing strategy and what other businesses can learn from it.



What Is Telstra’s New Flexible Pricing Strategy? Is It Raising Prices?


Telstra is transitioning from a predictable CPI-linked pricing model to a value-based flexible pricing model. The previous model tied price increases to the Consumer Price Index (CPI). This provided predictable but inflexible pricing. Now, Telstra has shifted to a value-based approach to better align prices with the value perceived by customers. This change allows Telstra to adjust prices based on market conditions and customer needs.


Several reasons drive this strategic shift. First, the CPI-linked model doesn’t reflect the actual value delivered to customers. Second, a value-based model offers greater flexibility in responding to market dynamics. Finally, this approach can enhance customer satisfaction by ensuring prices match the perceived value of services.


Customer perception is crucial in this new flexible pricing strategy.


Telstra recognises that understanding customer needs and preferences is key. They plan to use advanced analytics and customer feedback to measure perceived value. For example, if a customer values high-speed internet more, they might pay a premium for faster plans. Conversely, those who value affordability may opt for basic plans at lower prices.


Telstra intends to deliver value by tailoring services to different customer segments. They will collect and analyse data on customer preferences and usage patterns. This data helps Telstra understand what customers value most. Additionally, Telstra will communicate the benefits of its services clearly. This ensures customers understand the value they receive for the price they pay.



Moreover, Telstra will likely use customer satisfaction surveys and feedback tools. These methods help them gauge how well they meet customer expectations. For instance, if customers express high satisfaction with a new service feature, Telstra might highlight this feature in their marketing and pricing strategies.


In essence, Telstra’s shift from a CPI-linked to a value-based pricing model is driven by the need for flexibility and improved customer satisfaction. By focusing on customer perception and utilising advanced analytics, Telstra aims to deliver value and align prices with what customers truly value. This strategic shift positions Telstra to better navigate market dynamics and enhance its competitive edge.


How to Make the Shift to a Value-Based Flexible Pricing Strategy Effective


Telstra’s new flexible pricing strategy impacts different customer segments in various ways. High-value customers, who need premium services, may see price increases. These customers might appreciate faster speeds and better features, justifying higher costs. In contrast, price-sensitive customers might benefit from lower prices on basic services, tailored to their budget.


Potential benefits for consumers include more personalised pricing and better value for money. Customers who prioritise certain features can pay for what they value most. This approach allows Telstra to cater to diverse needs and preferences. Additionally, customers might experience improved service quality, as Telstra aligns prices with value delivery.


flexible pricing


However, there are drawbacks. Price variability could lead to uncertainty and frustration among customers. Some might perceive the changes as unfair, especially if they experience price hikes without understanding the added value. Effective communication will be crucial in addressing these concerns.


The value-based pricing model offers several advantages. Increased flexibility allows Telstra to adapt to market changes swiftly. For example, they can adjust prices based on demand or competitive pressures. This flexibility helps Telstra stay relevant and competitive.


Moreover, better market alignment ensures that prices reflect the actual value provided to customers. This alignment can enhance customer satisfaction and loyalty. However, there are challenges. Accurately measuring perceived value is complex. It requires sophisticated data analytics and customer insights.


There is also the risk of customer backlash. If customers feel they are being charged unfairly, it could damage Telstra’s reputation. Transparent communication and clear value demonstration are essential to mitigate this risk.


How Telstra Can Make Their New Pricing Strategy Work


Telstra’s success with its new value-based pricing strategy hinges on several critical factors. Here are three key suggestions to ensure effectiveness.


Importance of Clear Communication with Customers 


Clear communication is vital. Telstra must explain the reasons behind the pricing changes and how customers will benefit. Transparency helps manage expectations and reduces uncertainty. For example, if a customer’s plan increases in price, Telstra should detail the added value, such as faster speeds or better coverage. Use multiple channels like email, social media, and customer service to disseminate this information. Providing detailed FAQs and holding informational webinars can also help clarify the changes and address concerns.



Strategies for Maintaining Customer Trust and Satisfaction 


Maintaining customer trust and satisfaction is crucial. Telstra should engage with customers regularly to gather feedback and understand their needs. Implementing a robust customer feedback loop allows the company to adjust services based on real-time input.


For instance, if customers express dissatisfaction with a new price point, Telstra can investigate the issue and make necessary adjustments. Offering personalised discounts or promotions to loyal customers can also help retain trust and satisfaction. Additionally, providing exceptional customer service ensures that any issues or questions are resolved promptly, reinforcing trust.


Recommendations for Effective Implementation and Ongoing Management


Effective implementation and ongoing management are essential for the success of the new strategy. Telstra should establish a dedicated pricing team to oversee the transition. This team should use advanced analytics to continually assess and adjust pricing based on market trends and customer behaviour.


For instance, regular analysis can help identify which services are most valued by different segments and adjust prices accordingly. Additionally, setting up pilot programs before a full rollout can help identify potential issues and refine the approach.


Ongoing training for customer service representatives is also important. They should be well-informed about the new pricing strategy and equipped to handle customer inquiries effectively. Regular performance reviews and adjustments based on feedback and market conditions will ensure that the strategy remains relevant and effective.



Implications of Telstra’s Price Changes and Flexible Pricing Strategy


Telstra faces internal challenges with its new strategy, including restructuring and cultural shifts. Laying off 2,800 employees may impact morale and execution. However, there are opportunities for improved market positioning and customer satisfaction. Flexible pricing can better meet customer needs, enhancing loyalty and competitiveness.


A robust pricing team is crucial for managing value-based pricing. This team analyses data, sets prices, and monitors market trends. Essential skills include data analysis, market research, and strategic thinking. A strong pricing team ensures prices reflect customer value and market conditions.


Our findings show that with the right set-up and pricing team in place, incremental earnings gains can begin to occur in less than 12 weeks. After 6 months, the team can capture at least 1.0-3.25% more margin using better price management processes. After 9-12 months, businesses often generate between 7-11% additional margin each year as they identify more complex and previously unrealised opportunities, efficiencies, and risks.


Commercial capability must be embedded across the organisation. Integrating commercial awareness helps align all departments with pricing and value delivery. This cohesive approach ensures consistent messaging and value propositions. Benefits include better decision-making, increased efficiency, and enhanced customer satisfaction. Embedding commercial capability supports Telstra’s overall strategic goals and drives success.


Our findings show that when a business builds and embeds commercial capability across the business; bolstering its internal pricing skills and capabilities to build a sustainable pricing system, it can generate at least 3-10% additional margin each year while protecting hard-earned revenue and volume. This is at least a 30-60% profit improvement straight to the bottom line.


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Bottom Line


Telstra’s new value-based pricing strategy shifts away from CPI-linked models to better align prices with customer-perceived value. This change can enhance customer satisfaction and market responsiveness, despite internal challenges and potential customer uncertainty. Value-based pricing is crucial in today’s dynamic market as it allows businesses to adapt to changing conditions and customer needs. Other businesses should consider similar strategic shifts to improve customer value and remain competitive. Embracing flexible, customer-focused pricing strategies can lead to greater success and market positioning.


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