Cellphone Marketing on a Whole New (Multi-) Level
There’ve been a bunch of interesting new business models floated about to turn the wireless industry on its head, but a new start-up called Solavei has what may be the most radical approach yet.
Like other new startups such as Republic Wireless and FreedomPop, Solavei is what’s known as a mobile virtual network operator, meaning it offers cellular service to customers by buying wholesale access to one of the established wireless carriers.
But Solavei’s business model is more like Amway or Tupperware than anything seen in the tech business.
Solavei’s approach layers aspects of direct sales and affiliate marketing on top of a traditional cellular business.
The company’s product is a simple one. Customers pay a $49 sign-up fee and $49 per month for unlimited talk, text and data on T-Mobile’s nationwide network. Customers can either bring their own unlocked GSM cell phone or pay the full unsubsidized price of one of the three models being sold by Solavei. The models, from HTC and ZTE range from $159 to $500.
Here’s where things get interesting. Solavei relies on its customers to sign up other customers. For every three customers they bring in, they get paid $20. They also stand to benefit when the people they sign up sign up others, and can even make some from sales beyond that. Solavei also promises other one-time bonuses for signing up new customers within one’s first 60 days as a member.
Solavei also says there is an option to be a “member” without getting service for $149 a year. It’s unclear what benefits membership provides beyond the ability to recruit and profit from other members.
While arrangements that pay people just for recruiting other distributors are generally classified as illegal pyramid schemes, those selling actual goods or services can be legal, though the Federal Trade Commission offers some cautionary guidelines on its Web site. Solavei says it has taken steps to ensure that its system fully meets all government regulations.
As for its business model, Solavei insists it is simply removing a key inefficiency in the cell phone business model — the high cost of attracting and retaining customers.
Indeed, beyond the cost of running the network, one of the largest expenses for cell phone companies are the costs related to getting customers, including subsidizing phones and advertising. Solavei says is instead pouring those dollars toward its customers — who are also its sales force.
Indeed, beyond the cost of running the network, one of the largest expenses for cell phone companies are the costs related to getting customers, including subsidizing phones and advertising. Solavei says is instead pouring those dollars toward its customers — who are also its sales force.
“Rather than giving you a free phone, we give you an opportunity,” said CEO Ryan Wuerch.
The company has lined up some big names as investors and advisers and has raised approximately $15 million, according to the company. Its Series B round, currently in progress values the company at $130 million.
According to Wuerch, Solavei has also lined up more than 10,000 initial customers with more than 1,000 preregistrations coming in each day. In the past two weeks, Wuerch said Solavei has begun sending out phones to the first couple hundred customers with an aim to begin nationwide service on Sept. 21.
News Corp.’s Jonathan Miller is among a long list of early investors and advisors, a list that also includes Amazon VP David Limp and former Walmart COO John Rittenhouse. On the staffing side, the company’s head of legal is Rick White an attorney and former U.S. congressman with former T-Mobile executives heading up finance and customer servcice roles. |