When an operator wanted to get a contract customer tied in for the next two years, the most common tactic was to shout ‘upgrade’ and offer the latest version of smartphone free of charge or at least heavily subsidised. The customer signs up and for the next two years the operator has a ‘loyal’ customer. But like the latest handset designs, loyalty can often be short lived. One year into a contract the customer could view their handset as old, but are powerless to do anything about it as the operator has them tied into a contract for another year. As the customer’s handset slips down the scale from new and cool to old and obsolete, the customer can also slide down the loyalty curve from happy and loyal to couldn’t care less, and on to bordering on hostile.
Using new handsets to gain customer happiness and loyalty is ok in the short term, but the problem is that well before the time the payback period on the handset subsidy is complete the device is regarded as obsolete. So what can operators do about it?
We’re seeing several operators starting to decouple handsets from offers. A customer can sign a separate agreement for a handset – almost like an old hire purchase agreement. The length of the contract can be up to the customer, e.g. 12, 18, 24 months. If the customer wants to upgrade to a new handset, then they can pay the balance off and own the device. They can then enter into a new device contract for the latest and greatest smartphone. Several operators are currently promoting separate device and service contracts as increased freedom for customers to upgrade to a new handset every year. This is typical of the way the industry is moving – more choice for customers and increased upsell opportunities for operators.
By decoupling devices from offers, operators can shift their attention to looking at attributes of offers in order to best keep customers happy and stimulate loyalty. With data centric services, especially with LTE, operators have many more marketing opportunities in offer development. These include application only offers, shared and multi-device offers, premium content bundles, OTT partnerships, Wi-Fi options, speed tiers, upselling data enabled value added services, roaming service passes, data service passes, and many more.
Operators can also collect real-time, context sensitive information on what the customer is using, where they are and how they are using different data services. They also have the best marketing tool to communicate personalised marketing offers – the handset itself.
Having a product catalog integrated with a charging and policy system can enable customer behaviour and usage information to be collected and analysed, so that the right offer, made at the right time can be sent to the customer. Providing relevant, meaningful and timely offers can go a long way to building customer loyalty. As operators struggle with the problem of rapid smartphone obsolescence and customers feeling trapped by long term contracts, then decoupling the device from the offer may be a worthwhile option for operators to consider. This leaves them to concentrate on building customer loyalty using attributes that are within their control, and in many cases enabled by the smart and flexible use of PCC.