Churn Busters: The Changing Face of Customer Relationships
The million-dollar-question: Is this makeover working, or is it just more bluster and carefully crafted subterfuge? In the fourth quarter of 2013, T-Mobile added 869,000 post-paid customers, its best performance in eight years, and a recent BrandIndex report indicates that consumers’ perception of value among wireless service providers has trended away from AT&T to T-Mobile in the past year. But behind the scenes, T-Mobile has made some serious network upgrades as well—more on that later.
Legere explained the Un-Carrier concept in January, 2013. “The philosophy is this. If you look at the pain points that are common across all customers, in general customers in the entire industry are very concerned about the lack of transparency of the billing structure, the unpredictability of their billing, the overages, about the lack of flexibility of the contracts that tie them in, the lack of flexibility of decisions in their devices.”
You get what you pay for?
Another reason why U.S. customers are indifferent: they pay more for mobile broadband service than any other country in the developed world. According to data from the ITU published in 2013, wireless customers in the U.S. pay five times as much for mobile data than their European counterparts, and about 75 percent more than customers in Asia-Pacific (who enjoy the fastest mobile networks on the planet). Not surprisingly, most of the people I interviewed for this article listed price as one of the reasons they would switch to another carrier. Jessica Riddle, an LA-based business manager, for example, commented that "the only way a provider could entice my business is if they provided the same level of service that I currently enjoy with Verizon but for at least 50-70 percent less money."
One-size-fits-several bucket billing plans are also not personalized enough to fit all customers. "I never come close to the minutes they allot me (plus roll-over). Yet, I am at the lowest plan possible," said Seth Abrutyn. "There should be economy plans."
And when it comes to pre-paid, it's like the carriers could care less. "I switched about a year ago to T-mobile pre-paid to save on my monthly costs, thinking there would be no real difference between pre-paid and standard monthly," said Cleveland-based NASA Scientist Chantal Karina. "Boy was I wrong. Since, joining, I have calls that are dropped once or twice a week. To compound issues, the new phone I brought on with the service change has issues with muffling my voice in the handset and over speaker phone. I assume it is software or hardware related with the phone, but I guess could be service connectivity issue."
This is reflected in churn statistics. Pre-paid service providers experience much higher churn than customers on post-paid plans. And while some of this is to be expected based on the ease with which customers can bail out if they hit financial roadblocks, the gulf between 1% and 5% is large and needs some explaining. T-Mobile, for example, has experienced an increase in churn in pre-paid, even as it's successfully added hundreds of thousands of new post-paid customers and reduced its post-paid churn by 80 basis points over the last year. As you can see in figure 1 below, pre-paid customers on T-Mobile's network have certainly not felt the love of its Un-Carrier strategy.
Source: T-Mobile USA, January 2014
These days, pre-paid cannot be an afterthought, and service quality shouldn't differ so dramatically between pre- and post-paid, especially since pre-paid service is now sold by premium brands. Pre-paid service providers who can raise the bar will surely win new customers. In The Customer Experience Index 2013, Forrester Research predicted that, "over the next three years, we'll see more value brands win customers by delivering a high-quality customer experience."
