Since writing my post about Sprint’s interesting spin on the family plan on Tuesday, I’ve received a bunch of comments about how similar Sprint’s(s s) Framily program is to the business model of Solavei, a virtual operator that adopts the same group marketing techniques as Amway to sell its service.
Those comparisons are definitely apt. By allowing customers to collectively accrue discounts by inviting others into their “Framily,” Sprint is turning its subscriber base into recruiters, which mimics Solavei’s core business model. But there are some big differences in how the two programs work, which hopefully will allow Sprint to avoid the rather nasty reputation Solavei has developed.
How Solavei works
Solavei is basically turning its customers into entrepreneurs — or spam marketers, depending on how you look at it. As a mobile virtual network operator (MVNO), Solavei is basically repackaging and reselling T-Mobile’s(s tmus) data and voices in plans ranging in price from $39 to $69 a month. But for every new customer a Solavei member recruits and keeps on the network, he or she gets $5 a month in cash.
Solavei isn’t a true multilevel marketer in the exact same sense as Amway in that members don’t earn money form their recruits’ recruits or their recruits’ recruits’ recruits and so forth. But there doesn’t seem to be any limit to the number of customers a Solavei member can recruit to that single tier — and thus no limit to the amount of income they can earn each month.
Consequently a lot of Solavei customers have used the program to set up side businesses. Many of them have opened what amounts to online storefronts (an example). Solavei even hosts sales contests for its more ambitious recruiters. And of course, this model has created a world of spam.
When Solavei first launched last year, my Twitter account and the comment boards on my Gigaom posts were hit with a barrage of marketing marketing pitches from over-enthusiastic Solavei members. Since then Solavei has reined in many of its most aggressive recruiters, but we’re still regularly deleting Solavei third-party marketing spam from our comments sections.
I find such tactics distasteful, to say the least, and I’m sure many of you agree with me (don’t get my colleague Kevin Tofel started). But a lot of people have embraced the model. Solavei is now well past 100,000 members, which is pretty good for a boutique MVNO.
How Framily works
Framily is a kind of group plan, but instead of sharing buckets of gigabytes, minutes or messages, all members share in a group discount. Since that discount is $5 off your monthly bill for every member beyond the first, that’s a big incentive to both recruit and join a Framily group. It can easily rack up to hundreds of dollars a year in savings per member.
The incentive structure is similar to Solavei’s but the big difference is there’s a limit to the discounts you can get, $30 per person. That means there’s no benefit to anyone once a Framily Plan grows beyond seven members (there’s an upper limit of 10 people on the same plan, as well).
Nobody is going to make a business out of Framily. And the incentives just aren’t there for anyone to engage in some of multilevel marketing’s worst practices. No one is going to go knocking on your door like the Avon Lady, and no new acquaintance of yours is going to invite you to see an “inspirational speaker.”
Sure, I anticipate Framily might produce some uncomfortable scenarios — that annoying cousin that constantly pesters you to become a seventh for his Framily group — but nothing like the abuses we see from Solavei’s self-appointed sales force.
Why Framily might work
I think Framily is quite smart — though the name is pretty stupid, it’s definitely sticks in your head. Sprint’s been in the doldrums years dealing with bad merger decisions and network missteps. Since its acquisition of Nextel, it’s seen its share of U.S. mobile subscriber market shrink from 22 percent to 17 percent. Now that its major investment from SoftBank has closed, Sprint’s financial house finally is in order. It’s time to start growing again.
Framily certainly isn’t a magic bullet, but it seems to me an ingenious way to supplement Sprint’s own direct marketing efforts. While a nuclear family will probably already be on the same family plan with a unified bill, Framily targets extended families, couples who haven’t yet merged expenses and even roommates. It’s a good way for Sprint to lure in new customers while incurring few acquisition costs
So yes, Sprint is copying Solavei and Amway. There’s no doubt about that. But it definitely seems to be borrowing the best aspects of the MVNO’s marketing model, while sidestepping the darker elements.