3G lock-in versus loyalty - report
October 19, 2004
According to European wireless analyst Emma McClune, early consumer 3G launches are a dangerous marketing trend in the wireless market. Eighteen month and two-year contracts are back in fashion, demonstrating the industry's painful realization that consumer loyalty in the wireless market is at an all-time low.
New consumer 3G launches seek to lock consumers into long-term contracts in exchange for cheap handsets, driving customer acquisition costs to new heights
In her new report entitled 'Loyalty versus Lock-in', McClune warns operators of the dangers of attempting to fetter the whimsical consumer market without a renewed focus on service innovation. "Lock-in could be the dog that returns to bite the wireless industry."
McClune states "Operators are wrong to think the loyalty problem stops right there, or that they've solved the riddle of consumer infidelity entirely. A locked-in base of unhappy customers will certainly churn at the end of a contractual term, and unless operators continue to add value for their longer contract customers, they will loose them. Having bound 3G customers to them, operators must now endeavour to be loveable. If there was no brand loyalty at the beginning of the contractual relationship, operators have to ensure there is by the end."
"The focus must return to services. Operators must treat their longer term subscribers as VIPs, giving them 'gold' status privileges and treatment. Longer term subscribers deserve a better class of customer support, priority provision of new services and promotions and incentives to re-subscribe. All this won't be cheap, but then the prospect of mass 3G churn in the mid- term is a sobering thought."
Addressing operators' market strategies, McClune affirms "Having locked the customer in, operators should look to remove other barriers which limit consumer freedom of choice. Operators should open up their walled gardens of content to outside provider, since the real threat of extraneous content to operators' existing content revenues is, in fact, quite minimal. In terms of data revenues, content is still struggling to make its mark, and at this stage in the market it is more important to drive usage of mobile content - any mobile content - than to monopolize, and potentially stunt, users' tiny mobile content spend. Users may accept a longer contract in exchange for a cheap handset deal, but a limited walled garden of content comes with no redeeming benefits."
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