Ready for an Innovative Mobile Network? giffgaff’s Got Your Number (in Scotland, anyway)
November 16, 2009 by Nate Winter
Not a week goes by that I'm not reminded of North America's inferior mobile infrastructure compared to the rest of the world. A travel blog from Europe, a new product review in WIRED, or anyone's notes from Asia all come with an undertone of our mobile system's shortcomings.
This week's reminder? giffgaff, a mobile network available soon in Scotland. According to its marketing, giffgaff is the “people-powered mobile phone community,” which sounds just utopian enough to be empty marketing fluff for any mobile network in the U.S. But giffgaff’s innovative model backs it up by relying on customers for its marketing and customer service in order to keep prices low. Members who refer new customers and offer tech support answers through the giffgaff website can earn free minutes and texts to shrink their bills. The more they help, the more they save.
giffgaff embraced the web 2.0 trend of crowdsourcing in order to lower costs and get customers involved. Bringing that to mobile communication is innovative. But it makes a lot of sense from a branding perspective too because cell phones are social in nature. So giffgaff is taking the fundamental socialness of its core product and creating a branded community around it. The whole thing feels right on as a brand message, but it remains to be seen to what extent customers will participate. And how giffgaff can survive if they don't.
The people-powered aspects of giffgaff are unique, but it has a couple other points of differentiation, such as its sole reliance on unlocked handsets (phones that can be used with any mobile network). giffgaff doesn’t sell phones or have exclusive deals with phone manufacturers. Its service works with any unlocked, SIM card-based phone. So you can use the phone you already have, or buy whichever one you want. Another key difference: giffgaff is an online-only company, which means it won’t have any retail stores of its own. This move, probably an outflow of not selling phones, reduces overhead costs and translates to lower prices.
This focus on unlocked handsets is more common in Europe, but would truly change the mobile category in North America. Since our mobile market emerged, phones and service have been sold in tandem. Early on, this ensured compatibility, as industry standards hadn’t been established. As time wore on, this pairing became part of the business model and a whole strategy of exclusive agreements and deals developed. Europe, on the other hand, has had universal technology standards for years, and with SIM-based phones representing the lion’s share of the market, giffgaff can eschew allegiances with handset manufacturers.
I can't wait for the day that unlocked handsets become the standard in the U.S. Without any phone-network exclusivity agreements (like the one iPhone has with AT&T in the U.S.) or two-year service contracts to hide behind, handset makers will be forced to compete head-to-head on phone features and price. And the same goes for the mobile networks-- they’ll have to compete directly on network features and price. This direct competition wil drive phone and service prices down while customers simply mix and match the phone and network they like the best.
While giffgaff has yet to be seen in action (the service will launch sometime next month), its innovative new business model for mobile shows promise. giffgaff’s embrace of web axioms like transparency, low overhead and community collaboration have met with marketing’s refocus on what’s best for the customer. The result is a mobile network with the potential to shake up the industry far beyond Scotland (and hopefully as far as the U.S.).
