Time Warner's latest plans for its AOL subsidiary are curious for their abandonment of marketing management principles. As I understand the plan, they are considering giving the entire AOL package, including email, free, to anyone with a high speed connection, just like yahoo, msn, and google.
On one hand, this may seem like a recognition that AOL really offers little of value for which people will pay, when the aforementioned alternatives are available.
However, AOL does earn revenue from users, despite the alternatives. Some people probably have both- an AOL account for which they pay, and use as an ISP, as well as free email accounts with one or more of the other providers.
Is it really smart to paint all of your customers with the same brush, and offer any of them who have their own access a 100% discount on the service? Are there not any user segments who will remain with AOL on a paying basis? Since they have that $2B of annual revenue already, why prematurely and voluntarily refund much of it? Why not raise prices on the most primitive, dial-up users, and maintain prices on those who, for whatever reason, still don't move their high-speed accessed accounts elsewhere?
Thinking back to my prior post, about Wal-Mart's foray into financial services, it seems that Time Warner is taking the opposite tack. Whereas Wal-Mart focuses on how to segment its customers, and better serve them through that understanding, Time Warner seems to be going the opposite way. They just lump most of their customer base into one bucket, and give their service to those people. Whomever they are. AOL isn't even talking about, say, developing customer profiles to use in making offers of reduced priced services to those most likely to leave AOL.
I think this reinforces the view that AOL is mismanaged, and Time Warner is compounding the problem with another layer of inept management on top of the online unit.
Carl Icahn, please call home......
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