In 1983, there were about 40 cellular cell sites in the Los Angeles area, with just a few hundred countrywide. Early subscribers lined up to pay whatever the price was for a cellular phone-$2,000 to $3,500 was typical-and the question was not, “How much does it cost?” but, “How soon can I get it?”
Here we are in 1998, and the wireless communications landscape bears no resemblance to that of 15 years ago. Today with personal communications services, enhanced specialized mobile radio and several flavors of digital cellular service, customers are not even asking, “How much?” Instead they’re asking, “How come I have to pay for a phone if I’m going to send you a check every month?”
How times have changed. We used to make a profit on day one with a new cellular customer. Today it takes close to a year just to break even. On top of this, our best customers constantly are being targeted for acquisition because of their higher-than-average loyalty and high airtime use. Thus, we have a challenge that requires our attention.
There are several interesting customer-retention solutions emerging among cellular network operators, local exchange carriers, competitive local exchange carriers and, in some cases, paging companies.
Target marketing
Here we find that experienced sales managers are looking for ways to take advantage of “market segmentation.”
Market segmentation means that if the whole of any market were a tall triangle, the best customers would be at the tip of the triangle. Just under these would be the professionals, and just under those would be the business types. From there, it’s down to the single-line users, and then even further down into the mass market.
Each segment has its own particular characteristics related to churn, airtime use, profitability, vertical market development possibilities, and so on.
By targeting certain segments of your own market, you are able to predict the likely outcome of sales efforts based on known market factors. Forecasting becomes more accurate when you hold marketing efforts accountable for productivity ratios-for example, sales compared with direct sales calls or airtime-per-subscriber compared with the number of new-line retail-sale subscribers who come into your stores.
How you do this is up to you. But to gain market share, improve profitability and retain customers, it’s better to make your results measurements by market-segment profile than by taking the whole of your subscriber base and hoping for the best over time.
One thing is certain: If you attempt to secure more market share by offering further cost/value changes, you only fuel the fires of discontent by telling customers that if it costs less, it must be a better deal.
We are now seeing a large number of customers elect to take prepaid packages, but quickly drop off the books when the airtime runs out or the promotional offers wear thin. In some markets, a number of customers will leave one carrier to go with another just to gain another package of goodies in exchange for their business. We find that the higher market segments tend to subsidize the lower ones because of this.
Sales channel accountability
Sales channel profit-and-loss accountability allows sales managers to focus on making each channel responsible for its own profits-certainly not a new idea, but one whose time is now.
If you were to take your retail, dealer/agent, direct sales and tele-sales channels and compare them, what do you think you would find? Each channel has its own cost of overhead and goods, gross sales, net sales and net profits. What if each distribution channel in your company had to justify its existence by delivering monthly a profit-and-loss statement to the board? Who do you think would deliver proof of the highest efficiency and profitability over time?
Of course, every company is going to answer this in a different way, but isn’t it possible that by requiring each channel to pull its own weight that customers would have to be retained by some channels at a higher rate than others just to stay profitable? Most agree that is the case most of the time.
The problem is that doing something like this just isn’t practical. Besides, if the whole firm earns a profit at the end of the year, this must mean more things got done right than wrong, as the accepted business philosophy goes. So why upset a good thing?
Well, one reason is that we are in the midst of the most accelerated change in telecom history. What looks like a solid marketing program today is likely to succumb, in just a few short months, to marketing influences currently unknown. We’ve seen such changes in markets where PCS has brought new value-to-cost packages to the area. Markets grew, and at the same time, existing customers began questioning whether their standard cellular packages were giving them the value they were seeing others get.
This also presented a lot of confusion, carrier changing and customer-service phones ringing off the hooks. The upshot of all this seems to be a bigger market, but at the same time, a more expensive market-maintenance cost. One customer now costs more to acquire, pays less into the system and is more likely to change carriers if even more competitors come into the market. The end result is a lower profit-per-customer across the board for all competitors.
For those carriers that have a fairly large upper-market segment customer base, subsidies support the expensive, lower-market segment-all the more reason to find a way to hold onto that upper-market segment over time.
Selling away from price points
This technique will go a long way to help retain customers. However, it is important to realize that selling away from price points requires an integrated effort. Marketing, sales and advertising must all synchronize their efforts if there is to be a measurable change in the results achieved over time.
How do you do this? By training all your sales teams to learn to focus the customer’s attention away from price as the key factor in determining with which company to do business. Customers will stay longer with a service provider that shows something other than just a discounted package.
Yes, there are segments of the market to whom discount is king. But they are not, based on experience, the high airtime users you want, and they are not likely to show a lot of loyalty over time to any single service provider.
Value selling means working with all of your sales teams-direct, indirect, agent, dealer, retail and tele-sales-to learn the language of value, or what makes you different than your competitors. This, plus a reasonable price and what I call, “application selling,” will go a long way to stabilize a good segment of your subscriber base.
In seminars conducted with cellular, PCS, ESMR and paging audiences throughout the United States, we’ve found that most sales teams can come up with 50 to 80 such value differentiators in less than 30 minutes. Only four or five of these are required for a transition discussion from price to value. From there, most customers readily accept that good value means, “You get what you pay for.”
Integrated service offerings
This is perhaps the most interesting of the four techniques used today. It amounts to finding services that tie the upper-segment customers to you for a long time. Plans being used include providing business cards to “Premiere Customers”-determined on the basis of certain packaged plans-that contain cellular or paging numbers with other, standard information.
Not every major account customer is going to be moved by this, and that’s why there are so many other venues for the savvy sales professional to explore.
In 1998, you will have the opportunity to make one of the most important decisions of the decade. If you are a cellular operator and you have the chance to become a rese
ller or agent for a satellite telecommunications firm, you may want to take as little time as possible to make the go-
ahead decision on this.
We’ve been hearing about the wonders of satellite communications for years. But this is the year it’s all going to come true on a mass-market, global scale. One big-name satellite service operator is nearly ready for full system testing, with the majority of its satellites now in orbit. There’s no doubt that this company will be calling on key cellular operators to join forces in offering the most exciting new wireless service since 1982, when cellular was first offered to the American public.
Why is this important? Because every major-account customer will have some application need for this type of technology. There are global roamers working with most major firms. Still others will find themselves in places where there is simply no phone other than a satellite phone. When you can offer a service that is truly unique and important to the needs of your best customers, you have, in effect, found a way to integrate your need for customer loyalty with your customer’s need to get a full-service package of communications services with a single bill.
Now add the possibility of global paging, and other satellite services to the mix, and you have found a way to service the larger needs of your best customers, stabilize that segment of your customer base and drive down the retention costs of all your customers.
In this day of endless competition, it’s just the ticket for offering the value to customers they just can’t find with every low-priced leader in the market.
Will Robertson is a motivational speaker and president of Performance Strategies Inc., a communications industry sales and marketing consulting firm. (800) 242-1900.
