Vonage Charging for Replacement of defective Router

Posts: 2257 · Posted: Wed Aug 01, 2007 10:27 am Post subject:

If you can find the device for $40 at CompUSA, and that is the real price (no "new customer" rebates), then you can buy it and log on to your web account and activate it with your existing account, then move your account over to the new device.

If that's reflective of a "new customer" rebate, then $40 is probably not what you'll pay unless you cancel your current account and sign up for a new one.

Vonage's policies are dumb, I agree - if you've been a customer long enough to be out of the "cancellation fee" period, then they've made their money on your device and should offer you a significant discount on a new one if you agree to sign up for another couple of years.

However, when the cell companies give you a new phone on renewal, they expect $175-200 if you decide to cancel early. That makes Vonage's $40 look downright CHEAP. Wink

I'd pick up a decent router, then make a case to Vonage to give you a PAP2 or other minimal adapter. That's an easier sell to the cancellation department, and you don't have as much dependence on the Vonage gear. Either that, or pick up a decent router and a PAP2 retail. You're still out the $100, but you have no ongoing commitment to Vonage, and you have a better router than the ones they offer.

Posts: 448 · Posted: Wed Aug 01, 2007 11:08 am Post subject:

Let's not overlook that we can buy these adapters for around $50-60 from just about any online electronics merchant, and that's consumer/retail pricing.

Vonage buys in such large quantities at the wholesale level, it wouldn't surprise me if their unit cost was $25-35 (possibly a little less) which is why it's so amazing they would rather pi$$ off a good long-term customer and risk losing all that future income, than to part with a cheap adapter to save the account.

Posts: 2257 · Posted: Wed Aug 01, 2007 12:28 pm Post subject:

Very true, at least for the PAP. The WRTP54G and the other integrated router/VoIP combos are averaging around $100, last I checked (if you don't take advantage of any rebates).

Still, I could easily see Vonage at least offering the device at or near cost, or offering you a free one if you agree to pay for it if you cancel service within a reasonable amount of time (enough time for them to make up for the income loss of shelling out the device, for example).

Posts: 448 · Posted: Wed Aug 01, 2007 1:34 pm Post subject:

I agree.

If the reports are accurate, they spend nearly $280 to acquire each new customer which IMO is insane for a $25/mo. account. Glad I'm not an investor.

It clearly illustrates how critical long term customers are to their survivability. High churn is fatal. It also illustrates how stupid they are with their customer service. They need to be kissing our butts and making us feel welcome and cozy, not frustrating us with ghetto-level support that barely speaks English and is powerless to resolve problems.

I also believe the high acquisition cost explains why their committment is 2 years, when the other major players have no such committment and no termination fees (as long as you return the adapter).

Posts: 2257 · Posted: Wed Aug 01, 2007 2:13 pm Post subject:

Well, keep in mind that some of that cost is "fixed" cost - advertising. In fact, I'd venture to guess that MOST of that cost is advertising.

Kinda sad that they messed up the referral program so badly by offering better deals to the retailers, but then again it's tough to try and compete with your major distribution chain.

I think Vonage needs to stop most or all of their advertising, spend about a month's worth of that expense on bringing some new features (call routing on a model like GrandCentral's, for example), and then turn inward and try to keep their current customer base from bailing.

A very good friend gave me a PAP2T (unlocked) recently, and I've been looking at a combination of 1.5 cent a minute outbound calling, unlimited inbound calling, and a free front end like GrandCentral, and wondering "what am I paying $30 a month for again"? And I'm a pretty loyal Vonage customer who has been absolutely thrilled with their service for over two years.

Posts: 448 · Posted: Wed Aug 01, 2007 2:35 pm Post subject:

Whether the balance sheet reflects them as fixed costs or not, I think we agree their advertising budget is waaaay out of control. They're trying to grow too much, too fast. Maybe there's a method to their madness, in the form of "pile on a few million subscribers now, and worry about profitability later". If they succeed, they've got an instant "big phone company". If they fail, they have a large portfolio of customers to sell off to the highest bidder. I doubt we'll see Vonage fail overnight like Sun Rocket did.

At the same time, however, I think they're spending way too much time on acquisition and too little time on retention.... and by that, I mean retention "the right way". Not by badgering customers, not by fighting them and putting them on hold for 20 minutes (hoping they'll give up) when they try to cancel, not by locking people in to 2 year agreements, not by holding huge disconnect fees over their heads, but by giving them such good service they don't WANT to go anywhere else. On that concept, Vonage is a spectacular failure in my eyes.

Vonage started out doing so many things right. Now I think it went to their heads.

If you think acquiring customers is expensive, consider the cost of losing customers. And after all, it's the long-term customers that are the bread and butter of any company.

Posts: 2257 · Posted: Wed Aug 01, 2007 2:59 pm Post subject:

I agree in very large part. I think Vonage's biggest claim to fame was that they were among the first, if not THE first, to make Voip as simple and accessible as it is. After all, navigating in the setup screens of my PAP2 really shows me how complex it is. Thankfully, most of the default settings work, and I've learned a thing or two about Voip helping others here... but there are HUNDREDS of fields on this thing!

Vonage, as has been observed before, is the AOL of Voip. They were among the first to create a market for consumer Voip, they put a lot of work into making it simple to use, and now their competitors are walking the path they had to bushwhack through....

Still, if they would cut back on the money hemorrhaging and make the service itself more attractive... that would be very smart.