Wireless Carriers Struggle to Keep Consumers Loyal

Mobile phone companies face high rates of customer turnover and negligible brand loyalty. Two of the reasons—lack of an emotional connection with customers and promising more than they can deliver—aren’t unique to the wireless carriers. In fact, any marketer of goods that consumers consider to be commodities could fall victim to the same woes.

In its recently released annual Retail Satisfaction Survey, J.D. Power and Associates said that consumers are 46% more likely to change wireless carriers than they were a year ago. Though the survey relates specifically to customer satisfaction in the carriers’ retail outlets, the high number of service switchers demonstrates that as cell phones become more of a commodity, marketing has taken on an outside importance in influencing users’ choices, experts say.

“During the past decade the number of wireless companies has dwindled to a handful of large carriers, and no matter what technology they are offering, the service all appears the same to the consumer,” says Larry Swasey, a senior analyst with Visant Strategies, a Kings Park, NY-based research firm specializing in wireless and other emerging technologies.

J.D. Power gave T-Mobile and Verizon Wireless the best grades as the only carriers to outperform the industry average in a significant way. The pair received particularly high ratings for the price/promotional dimension. “Once something becomes a commodity, you have to dress it up nicely, and that’s what’s happening with cell phones,” Swasey says about the two companies’ aggressive marketing campaigns.

Verizon earned high marks partly by effectively branding itself as having the best network, thanks to its ubiquitous “Can You Hear Me Now?” campaign. “Some people say Cingular is better, but it’s funny: In a category that seems so empirical, perception is reality. Verizon has won that battle,” says Adam Hanft, CEO of Hanft Unlimited, a strategic marketing company with telecom industry clients.

Hanft says that even in a commodity business, a good brand manager does not treat the product as such: “Any business has the potential to be different in a meaningful way.” The wireless carriers are facing massive switching, he continues, because few of them have connected with consumers “in an emotional way.”

Compounding matters, Hanft says, is that carriers have alienated many customers by overpromising the benefits of new technologies such as Internet and video. The over-the-top marketing of new technologies – which the carriers say is necessary to separate themselves from their rivals – has led to an environment where “consumers have very low expectations,” he notes.

Hanft believes that any company in the carriers’ position is better off keeping a low profile, beta-testing new products with small user groups, and then trying to create some buzz, rather than “going out there with tons of millions of dollars plastered all over the retail store. When you look at what’s available, it’s [then] a huge letdown.”