By Andrew Berg
Sunday, March 29, 2009
As the economy slumps, it’s no surprise that wireless customers are increasingly opting for no-contract prepaid plans. The trend has ratcheted up competition amongst prepaid carriers in an effort to win over cash-strapped postpaid customers and keep them. One might think that competition revolves solely around offering the best value per minute, but the value of a satisfied customer can never be underestimated.
Wall Street’s early weariness of the pay-as-you go market was largely due to high churn rates among prepaid providers. As a gauge of the kind of competition they’re up against, consider that churn rates for postpaid carriers generally stick right around 2 percent to 3 percent. In the fourth quarter of 2008, MetroPCS 
reported a churn rate of 4.8 percent. Additionally, MetroPCS currently reports a customer base of about 5.4 million subscribers. AT&T Wireless, on the other hand, reports a base of around 77 million subscribers.
That kind of competition is one of the reasons that these smaller carriers are doing everything they can to keep existing customers by offering a comprehensive, end-to-end user experience that is both cost-effective and easy to use. As the economy worsens and the trend toward prepaid continues, small prepaid carriers hope to attract ex-pats from the larger contract-driven postpaid camps. So what’s their strategy?
REDUCING CHURN
One of the unique challenges prepaid carriers face is their customers can walk out the door any time they want. “We have to touch our customers every month,” says Greg Lund, senior manager of corporate communications for Leap. “If they don’t want to pay their bill, they’re not our customer. So it’s very important for us that we offer an easy-to-use platform.”
Kelly Owen St. Julian, vice president of customer management at Boost, notes two levels on which customer satisfaction operates. “First, there’s the physical interaction which includes our handset, Web and direct customer care,” she says. “But then there’s the overall emotional reaction a customer has to their service.”
As prepaid enjoys wider acceptance, the need for easy-to-use, dependable service is a must if carriers are to produce that positive psychological reaction. And carriers are taking the challenge seriously by looking for innovative ways of improving the customer experience.
MetroPCS introduced a unique mobile account management application, myMetro, which now comes standard on all MetroPCS handsets. MyMetro allows customers to check an account balance, pay bills, add money to the MetroPCS prepaid bucket, change rate plans and features and modify account settings.
The new application is popular among MetroPCS users. “We are seeing about 85 percent of our subscribers using the myMetro application,” says Tom Keys, COO of MetroPCS. “The convenience and ease of use are resonating with our customers.”
But while self-care customers are a good thing, and prepaid is fortunate that it generally has a youthful customer base that tends to be tech savvy, there’s still a need to balance the experience with direct contact. “It’s obviously more costly,” says Owen St. Julian, “but we recognize the need for those that just want the assurance of talking to a customer care representative, and that option should always be available to them.”
Owen St. Julian says the technology being used in the interface has a lot to do with a customer’s preference for one type of care or another. “As the technology becomes more sophisticated, you’ll start to see a shift from live care,” she says. She notes plans for the employment of voice recognition software that might appeal to those who don’t currently access their accounts via their handsets.
MIMICKING THE POSTPAID OPTION
Unlimited minutes seem to be one of the easiest ways to make a customer smile. A July 2008 J.D. Power and Associates report that ranks customer service satisfaction among prepaid carriers found that flat-rate service plans with unlimited minutes generate dramatically higher satisfaction levels among prepaid customers than do their per minute cousins.
“Prepaid customers are clearly responding favorably to these unique service plan options, as they provide a cost-effective alternative to traditional price-per-minute plans,” says Kirk Parsons, senior director of Wireless Services at J.D. Power and Associates.
The study also found that satisfaction with the initial activation process varied greatly between customers who subscribe to flat-rate prepaid plans with unlimited minutes and those who pay by the minute. Based on a 1,000-point scale, customers who subscribe to flat-rate plans averaged 862 compared with only 756 among those who pay by the minute.
The study, now in its fourth year, measures customer satisfaction with current prepaid wireless service across seven key factors. In order of importance, they are: call quality (24 percent), company image (19 percent), cost of service (17 percent), account management (15 percent), initial activation (11 percent), service plan options (8 percent), and customer service (6 percent).
MetroPCS ranked No. 1 in the study. “From initial account setup and activation to account management tools and a variety of pricing plans available, MetroPCS provides its customer with important elements that positively impact their daily service experiences,” Parsons says.
The importance of different categories can change over time. “When the industry was much younger, brand image and cost have been the drivers,” Parsons says. As an example, if the number of carriers increased and the customer experience is homogenized by standards, brand could be less important in the future.
In the end, prepaid carriers understand that their service has to be as good if not better than that offered by their postpaid rivals. “People want the best value for their money,” Lund says. “People who have been with the major carriers want more value for their dollar when they come to prepaid. It’s a big thing for customers to be able to enjoy an ease-of-use scenario that gives them control.” As the economy seems to have gone entirely off the leash, the control offered by prepaid may just translate as value.