Today’s volatile wireless telecommunications market compares to a Roman sports arena with every service provider in hand-to-hand combat-fate hanging in the balance. It doesn’t take a despotic emperor to know who gets the “thumbs up” or the “thumbs down.”
The winners will be those who stand out from the crowd of lookalikes by minimizing customer turnover and maximizing profits. The losers will be those voice-only wireless providers that don’t differentiate themselves. In fact, their fate is sealed.
To break from the crowd and carve out market share that will assure longevity, voice-only service providers should prioritize two new initiatives. They need to offer wireless data services to increase per-minute use. They also need to recommend that device manufacturers incorporate handset software that provides on-screen branding opportunities and applications to encourage airtime usage. Services and branding act as insurance to prevent profit loss due to the rise in competition and on-going customer churn. Such strategies are more important than ever.
A few years ago, carrier differentiation was not an issue. Telecommunications carriers with long-standing ties to business and consumers provided wireless service as a matter of course. The Sprints and AT&Ts of the world had a firm grip on the market. Their logos printed on monthly billing statements were all the branding efforts needed. While they were rare, newcomers entered the picture occasionally to leverage their independence and agility and earned a piece of the market.
With typically only two carriers providing wireless service in any given region, price structure and coverage area were sufficient to differentiate carriers. Consumers could easily do comparison shopping to pick the carrier with the package right for their lifestyles or business needs.
The evolving market
Those days are gone. Today, most regions bulge with five or more providers on a variety of networks ranging from analog cellular to digital cellular or personal communications services. All carriers are competing on similar price and service plans.
Meanwhile, the heavy competition has caused prices to drop 25 percent in the past year, to as low as 10 cents to 15 cents a minute. Per-minute charges also are expected to slope downward by some 50 percent more during the next three years. Carriers have switched to competing less on basement-level rates and more on offering an inordinate number of service plans to lock in customers.
Jacksonville, Fla., stands out as an example of existing market conditions. Nearly two years ago, this medium-sized market was served by two cellular carriers. That number has jumped to six carriers, with a seventh set to enter the fray. With these new market conditions, wireless rates have fallen an average of 46 percent. The outlook for survival depends on carriers either stealing customers, merging their businesses, or thinking creatively and enlarging the market by appealing to customers in new ways.
Across the nation, the results of such a market scenario as typified in Jacksonville is that Carrier ABC looks like Carrier XYZ. In the consumer’s mind, if there is no difference, there’s no abiding loyalty to one carrier or the other. Therefore, as cents-off savings or flashy calling packages fly by, customers exercise their transitory rights and take flight, too.
In fact, according to Andersen Consulting, one in four customers worldwide and one in three in the United States switches service providers annually, resulting in a loss in carrier revenues of $4 billion annually on the two continents. Meanwhile, reducing churn by one percentage point can save carriers $150 million yearly.
Pinning their hopes on emerging digital cellular networks offers carriers few distinctions either. The fact is that many carriers (and along with them their competitors) are switching to digital service. According to Merrill Lynch, the market will see an estimated 14-percent increase in digital infrastructure equipment every year through 2002. Since so many operators are switching, migrating to digital networks will do little to differentiate carriers in the long-run.
Carriers come away with few blocks with which to build a solid business platform.
What’s in a name?
Service providers can take certain steps to ensure they stand out from the crowd. Instead of blending into the wireless communications background, they should first offer customers wireless devices that brand their service and offer more than voice.
On-screen branding is a revolutionary new way to connect with the user. Typically, carriers work with device OEMs to brand the shell of the device, but innovations in applications sitting on top of the phone’s operating systems can put a service provider’s logo or greeting on the valuable block of real estate most often in a user’s line of sight.
Imagine the marketing advantages a service provider gleans when a customer activates a connection or performs a function and sees a brand. Those seconds of interfacing between the customer and the brand (be it a logo, icon or greeting) go a long way in reminding the customer who is providing the quality service they have come to expect. Those seconds can separate one service provider from another as customers connect with a familiarity they appreciate.
Branding also leads to name recognition, which leads to customer preference. For the carrier, that spells customer retention. No strategy of delivering customer relations to ward off churn should be without the component of on-screen branding. With branding, a service provider becomes the consumer’s business partner or day-to-day assistant.
Such benefits are a direct result of choosing the right operating system. Service providers should pick device manufacturers that prioritize quality graphical user interface capabilities when shopping for operating systems. It is the operating system that determines the functionality of a handset, and it is an operating system’s GUI that creates familiarity and frequent use by consumers, thanks to the branding possibility.
Some handsets deny carriers any possibility for branding. This strips carriers of an invaluable marketing tool and hands the advantage to operating system developers or manufacturers instead. Here’s a tip for carriers: It need not be this way.
As the key player in the delivery of wireless services to consumers, carriers can require that the devices they choose brand their services. This new way of thinking requires certain pre-existing conditions, however.
Carriers will have to choose OEMs that work with operating systems which come complete with GUIs. The market has matured to a place in which that is no longer a rarity; in fact, some operating system developers specialize in highly flexible GUIs. If OEMs want a carrier’s millions of dollars in business, the manufacturer will meet the request.
A second alternative is to add branding capabilities with software planted on top of a manufacturer’s preferred operating system. This can be accomplished with only a small ROM and RAM requirement. This approach allows for a carrier’s preferred manufacturer to deliver branding without having to forklift its operating system of choice.
Delivering data
Branding is job one in differentiating a carrier from its competitors. Next come the advantages voice-only carriers will realize when they decide to offer wireless data services. It’s an idea whose time has come, whose benefits are increasingly obvious.
“The wireless data market is very important,” said Becky Diercks, wireless telecommunications director with Business Research Group, Newton, Mass. “One of the few ways carriers can survive the threat of the glut of service providers, and just as important, a glut of capacity, is to pay attention to the future of data services. Being successful in offering useful data services is
one of the ways carriers can recoup their investments in licenses and infrastructure.”
Carriers sho
uld heed the forecasts of how consumers will turn to data services in coming years. According to BRG, the number of consumers tapping into services like Internet/intranet access, email and data subscription for news-in-brief headlines and stock quotes will double yearly through 2001. Since average monthly wireless bills have dropped by more than one-half in the past 10 years, wireless data service provision is expected to comprise a $100 billion market in 10 years through more per-minute usage.
This trend could make voice-only carriers big winners, but only if they seize the opportunity and revise business plans to make wireless data services a welcome reality for their customers.
Delivering data services has added benefits to carriers. Just as car owners seek out trusted repair shops to deliver quality service time after time throughout the life of their cars, wireless consumers uploading data services will build new bonds with carriers that traditional two-party wireless phone provisioning never could. The “repeat business” column just grew exponentially.
Pack mortality
Being one of five or so service providers in a market isn’t easy when the only playing pieces a carrier seems to have are cents-off price structures and standard coverage areas. Carriers do have the luxury now, however, of taking logical steps to better their market share.
Continued concentration on price and coverage must give way to better means of carrier differentiation. Carriers need to convince device users of their reliability and day in, day out delivery of much-needed services.
A two-pronged approach for the future, comprising branding and wireless data services provision) will go a long way in ensuring a new day of unflappable consumer loyalty.
Geoworks President David Thatcher focuses on ensuring overall company performance. Thatcher has nearly 20 years of experience in high-tech companies such as Pacific Data Products, Peregrine Systems, The McKinley Group and Diba.
