Not Everyone Hates Contracts
Editor’s Note: This is the third post of a three-part blog series that examines how changes in the wireless industry have led to commoditization and what carriers must do to truly differentiate. Register for our December 17 Telecom Brand Love webinar now.
The past two years have brought a seismic shift in the US wireless telecom industry. Market Strategies has been writing about how this once highly differentiated marketplace has been transforming into a sea of beige, making it difficult for customers to differentiate between providers. T-Mobile is doing a brilliant job delivering on its brand promise to customers, but other carriers seem to be following suit instead of honoring their own brand promise. By jumping on the no-contract, one-size-fits-all bandwagon, carriers may be missing an opportunity to understand the generational and lifetime value differences of their own customers.
Each brand needs to have the courage of its convictions if they hope to attain/retain long-term differentiation. But, it never hurts to be backed by sound research: the most recent wave of our self-funded Brand Love study confirms—once again—that there are large segments of customers who still prefer contracts (which, by the way, happen to be lucrative).
Consider the following index from our findings, where the more negative the number, the stronger the preference for contracts and vice versa:
As you can see, these data reveal that Verizon and AT&T customers are more likely to prefer contracts. This is why it’s so surprising that in August, Verizon announced that it will no longer offer contracts to new customers. And, AT&T recently eliminated contracts in reseller and big box retail locations and is rumored to be considering doing the same in company-owned retail and online locations.
T-Mobile’s assertion that contracts are unfair has driven this shift, but, according to Brand Love, these assertions simply do not hold up for everyone. To be clear, our Brand Love research shows that T-Mobile’s target audience loves the idea of no-contract plans, but the same isn’t necessarily true for the other carriers. In fact, the target premium customers for AT&T and Verizon—those with high-lifetime values and high average revenue per user—overwhelmingly prefer contracts. T-Mobile is making decisions that resonate with its base, but this base is not representative of the entire universe.
One size does not fit all.
What’s right for T-Mobile isn’t necessarily right for all carriers; in fact, it may be a missed opportunity to fall in line with T-Mobile’s world view. By doing so, other carriers are diminishing the differentiation between providers and turning wireless telecommunications into a commodity. And with all commodities, the only differentiator can be price, which will clearly favor T-Mobile as it is the most attractive value brand.
To survive and, hopefully, thrive, carriers need to be true to their own brand promise, resisting the urge to follow a one-size-fits-all strategy. Like a moth to a flame, the attraction is hard to resist, but the consequences of not resisting can be dire.
To hear more findings about the shift away from contracts and its unintended consequences, please view our on-demand webinar, Telecom Brand Love: Reversing the Trend Towards Commoditization. For the other posts in this series, read Why do dissatisfied customers stay with their wireless carrier? and To Contract or Not to Contract.