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On average, they take more than 7 percent of what everyone pays for service. Even I, with my “off the grid” pre-paid strategy, can’t avoid the long arm of Mayor Daley and his 10.25 percent sales tax here in Chicago. Ouch…
Tax authorities really love iPhones and Blackberrys. The average Blackberry user pays $6.55 per month in taxes and fees, including universal fund charges. iPhone users pay even more – an average of $7.36 per month. Score one for the little guy though; the rest of us pay an average of $3.96 in taxes each. Averaged across all users, the monthly tax bill comes to $4.36 each. With roughly 250 million wireless users in the United States, that amounts to tax revenues of more than $1billion per month derived from wireless bills alone.
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Wireless customers pay $2.93 per month for nothing in particular. |
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or offering them the same incentives as high value users, likely doesn’t make sense.
All of that said, the 65 percent of coach-class users who send a lot of text messages are an intriguing group. How many of them would spend more and do more with a Blackberry in hand? What percentage of them uses a little data now, but might use a lot more with a better device? Good metrics for carriers to consider might be the percentage of that user segment they’re able to penetrate with Blackberrys or similar devices and what that in turn does to their ARPU and service usage across the board.
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Bottom Line for U.S. Wireless Carriers
Churn remains one of the costliest pains all wireless carriers face. Examinations of customer defections show that the four major carriers are beating the heck out of each other. Two to six percent of each carrier’s customer base defects to competitors every month, and there’s no single reason that drives churn. As a result, there’s no simple solution to the problem – no silver bullet to slay this werewolf. Because of the enormity of it, it probably makes sense to tackle it in bite sized pieces.
Most experts seem to argue that understanding a customer’s lifetime value is a key factor in deciding whether that customer is worth keeping. Newer models are looking at a customer’s social network influence as another important factor. The numbers from Validas’ study show that simple segmentation, based on usage and device, needs to be in the picture. If Blackberry users are so valuable and spend more on everything than everyone else, then it’s worth spending a bit to keep them. There’s not much margin with the folks who only spend an average of about $50 per month. Pushing them all into expensive win-back campaigns,
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It begs some chicken-and-egg questions. Is it simply that folks who spend and use more services gravitate to Blackberrys and iPhones? Or, does having a Blackberry or iPhone in hand increase ARPU overnight? And, when do carriers reach the point of diminishing returns, where everyone who’s going to spend and use more has a high end device? In other words, carriers need to understand what penetration rate for those devices makes sense before they’re just giving expensive handsets to people who only make phone calls. All of that information is hidden in the detail on every wireless bill.
But what do I know? I’m just a loser with a pre-paid phone.
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