Wireless Users Aren’t a Loyal Bunch

Compelling offers and targeted branding campaigns could win over customers looking for wireless Internet products and services, a study by ConStat found.

Two-thirds of those planning to purchase wireless Internet services in the next 12 months are uncommitted to a specific device or service provider. ConStat’s research found that existing brand relationships are vulnerable, with current wireless device owners willing to abandon their current phones, personal digital assistants and/or switch service providers if the right offer comes along.

“This prevailing attitude helps demonstrate the lack of product and service differentiation in the marketplace,” said Brian Kirby, senior partner of ConStat. “It creates huge opportunities for new players as well as incumbents in the wireless Internet and data services industry.”

ConStat’s findings are based on responses from 1,700 current users of wireless Internet products and services and 1,400 individuals who intend to purchase within the next 12 months. Approximately 60 percent of current users and buyers are considering up to four types of units, including phones, PDAs, phone/PDA combinations and laptops for use in conjunction with wireless Internet services. While major companies such as Nokia and Palm still have leadership positions in brand awareness and brand preference, their positions may be vulnerable.

“We see that newer entrants such as Kyocera and Sony are making in-roads,” Kirby said. “For example, while overall awareness for Kyocera as a phone/PDA manufacturer is under 10 percent, the company’s ability to convert browsers into buyers is very strong. Approximately half of those aware of Kyocera would get a Kyocera device if they were to buy today.”

Among young adults (18 to 24), those planning to purchase a PDA to access the wireless Internet prefer the Handspring brand. Among service providers, the study found a strong preference for the No. 3 wireless carrier, AT&T Wireless Services. It leads the No. 2, Cingular, by a two-to-one margin.

The ability of service providers to attract wireless Internet subscribers will hinge on the appeal of rate plans, ConStat found. As new buyers enter the marketplace, the price of recurring service is more of an adoption barrier than the price of the device.

“Given buyers’ lack of experience with wireless Internet services, the device is simply a gateway at this point,” Kirby said. “User skepticism is about applications and the service’s ability to meet customer needs for a reasonable recurring price.”

Even wireless voice customers have a habit of changing their provider. A churn study 34,000 wireless users in the top 35 U.S. markets by Telephia and Harris Interactive found that carriers need to employ targeted segment marketing as part of their strategic customer retention efforts.

Young adults (age 18 to 24), who have increasingly attracted the attention of wireless carrier marketing campaigns, show churn risk percentages that vary substantially depending on the user’s service provider. Telephia found that 22 percent of young adults nationwide pose a high churn risk (“high risk”) to carriers. However, the percentage of young adults at high risk to churn ranged widely among carriers (from 15 percent to 37 percent). Other age segments that Telephia studied showed lower overall churn risk than young adults, but risk levels again ranged considerably among carriers.

The striking range of churn risk for all age groups found in the study suggests that carriers should develop segment-based programs to reduce churn that consider the unique circumstances of their own customer base relative to their competition rather than employing broader, “catch all” marketing efforts.

“As the industry increases its focus on reducing churn and increasing profitability, it is looking for new and innovative ways to retain customers – a much less expensive proposition than acquiring new ones,” said Mick Mullagh, CEO of Telephia. “Carriers need to combine a sophisticated understanding of their own high-risk customer segments with competitive, market-level information on satisfaction, churn rates, perceived and actual network performance and other key variables to create a comprehensive and effective model with which to manage churn.”

The study asked all young adult users who had switched providers in the last year what incentives would have motivated them to remain with their carrier, as well as which had been offered. The biggest difference between incentives offered and those desired was for an account credit: 43 percent of those offered an incentive to stay were offered an account credit, but only 13 percent described that as a motivating incentive to remain with their carrier. Another large disparity appeared for the offer of a more flexible service plan. While carriers proposed that to only 7 percent of young adults, considerably more (18 percent) reported that as a motivating incentive.

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