I know a non-profit assosication (Npo) who wants to save money by switching telephone carriers. They are finding at ways of cutting costs so they concentrated some of their attempt on telephony. By reviewing the itemized bills, they calculated they could save up to 25% by switching.
While investigating this, it was determined that this Npo still had one year left on their aid agreement. You see, 2 years ago, the Npo signed a three-year aid trade with this telephony provider with a heavy penalty for early termination.
Apparently, 2 years ago, the telephony provider dangled the 10% cost savings to this Npo in order to derive a ageement for 3 years. If you were a telecommunications provider, how motivated would your firm be if you could derive a new 3-year ageement by gift your clients a 10% discount? Especially in an business where innovation will continue to drive down provider operational costs. Even if the client decides to halt the aid trade after 2 years, the provider would recoup a year's worth of fees. It appears the provider has done their homework together with the early termination fee into this new contract.
Hence, as a Npo, you are essentially stuck for 1 more year of service; otherwise, pay a year's worth of fees. In retrospect for the Npo, things might now be clearer why your provider was so anxious to renegotiate. They may have framed this negotiation as a win-win although in may come to be clear the win was in the direction of the provider. At the time of signing this agreement, I'm sure the client (Npo) felt good about renegotiating to save about 10% on their monthly fee. What they didn't fully think or anticipate was the high cost of cancelling during the 3 years.
Moving forward, knowing what the client knows, even if their current telephony provider offered a 25% or 40% reduction instead of the original 10%, do you think this client will sign someone else aid trade with this provider? What about recommending this seller to other Npos? How will they express their brand if asked about their value proposition with telephony?
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