Over the past year, Verizon, AT&T, and T-Mobile have each launched rewards programs. The most recent entry is T-Mobile Tuesdays, an app where T-Mobile customers are given freebies every week, such as a Domino’s Pizza or a Wendy’s Frosty (John, how about some lower-cal options?) and customers can enter to win more substantial prizes. Verizon offers Smart Rewards — customers earn points that can be redeemed for savings on merchandise. AT&T joined an existing rewards program called Plenti, where customers can accumulate points for savings at Plenti partners such as Exxon, Macy’s and Rite Aid. AT&T also introduced AT&T Thanks last week (curious timing), which offers discounts on movie tickets, Live Nation Priority Pre-sale seats, and some unique content for DirecTV customers.
The wireless industry has never had a successful loyalty program. I would argue the current offerings are largely rewards programs and giveaways, not loyalty programs. Smart Rewards and Plenti are basically discount programs where customers have to buy something in order to save, say, 10% on a gift card or a gallon of gas. Of course, this is what T-Mobile CEO John Legere poked at when he introduced T-Mobile Tuesdays, which is more of a giveaway program than a rewards program. In typical ‘Uncarrier’ fashion, TMO Tuesdays is more innovative, edgy, and fun (and a tad gimmicky) than the Verizon and AT&T programs.
Let’s be honest: how many of you Verizon and AT&T customers really use Plenti or Smart Rewards, much less know about them? And do these programs make you loyal in any way to your carrier? T-Mobile’s program might have a bit of an edge in that customers might enjoy entering the weekly sweepstakes for what look like some really fun prizes and trips. I see this as more part of a package of items that make T-Mobile distinct, such as free international roaming and BingeOn, than a loyalty program in and of itself.
It is interesting to me that wireless carriers have never had a true loyalty program, in the vein of airlines, hotels, and some retailers. The average wireless customer spends some $600-800 annually on wireless services and a household can easily spend $2,000 per year. This is a competitive industry, where the name of the game is taking customers from another operator. Reducing churn (or, keeping customers) is a huge priority for the operators. Lowering churn by 10 or 20 basis points has billions of dollars in impact to a large operator. Isn’t it curious operators rarely proactively reward customers for their loyalty or tenure — “thank you for being a customer for five years – we’d like to offer you some free data or a discount on your next device purchase”?
In order to attract or keep customers in this highly competitive industry, I think the operators should consider offering a real loyalty program. What might this look like? It would be more focused on incentives to stay and expand a relationship with a service provider. Points could be accumulated for any of the following:
• Tenure (years of service) with the carrier
• Spend
• Number of devices attached to plan – good incentives to add a tablet, car, etc.
• Adding a family member to a group plan
• Referring a friend
Points, or rewards, could be used for things such as:
• free data
• a discount off a monthly plan
• dollars toward a new device or accessory purchase
• free apps and content
Importantly, this would be a reward for loyalty and spending. For example, how about one GB per month added to your plan for every year of service? The other aspect of this is the program creates positive additional touch points with the customer, whether in the store, online, or through an app. This type of plan is much closer to what airlines, hotels, credit cards, and some retailers offer: “You’re going to fly or stay in a hotel and we would like you to do it with us”.
This could also be an opportunity to offer something differentiated in the small business segment. None of the operators has really nailed an effective small business program. This would be a nice incentive for a business of, say, 5-20 lines to incentivize its employees to select a particular service provider.
I think an effective loyalty program could make a difference in customer retention. It would be interesting to see one of the carriers try it.
“It would be interesting to see one of the carriers try it.”
Don’t hold your breath. Rewarding customer loyalty is closely akin to increasing customer satisfaction. And having customer satisfaction be anything other than zero is so completely antithetical to the fundamental nature, the cultural DNA of the carriers, that they will never be able to bring themselves to do it. You might as well ask them to treat their customers as anything other than an inconvenient form of packaging material around monthly installments of money. Not gonna happen.
I hate to be a cynic, but you are right. When companies build in penalties for loyal disloyal customers in the forms of overage and early termination fees, this shows a culture of “blame the customer first”. Why incentivize when it is easier to penalize? Carriers have never been known for customer service. So a true loyalty program would be against their nature.
Joe
The issue is that on the contrary it’s easier inflate prices for your existing customers, especially because so many don’t compare prices.
In France, we’re seeing “first year at half price” promos left and right, even though contracts have no minimum duration when you bring your own phone and you keep your phone number when you switch providers. The carriers’ hope is that you sign in and stay with them once the discounted year is over; the game for the highly cost-conscious is to switch again before the discounted year is over.
No action whatsoever on the “fidelity plan” side.
Everytime I look at what I can buy with my Verizon points, it’s typically a small discount on inflated prices of merchandise, making the points worthless. It’s more of an insult to our intelligence than a loyalty program.
This subject is not so complicated. Loyalty is most obviously expressed by signing a long-term contract for ongoing service.
Mobile phone companies have typically rewarded that by providing ‘free’ financing (interest) on a new cell phone. That is not a huge reward, but it is something. However, at the end of the contract period, loyal customers who don’t order new phones are treated like strangers: they are changed the same monthly fees as customers who do receive new smartphones. Then execs at the carriers have a party and rejoice that they’ve fleeced their most loyal customers.
If the carriers wanted to reward loyalty, customers who have paid off their phones would automatically receive discounts in their monthly fees. It is both obvious and easy to implement. Carriers aren’t interested in rewarding loyalty — that’s why there are no good royalty programs.
This makes it easy for T-Mobile and others to raid custoners from established carriers.