T-Mobile, AT&T, and other wireless carriers continue to offer deals aimed at enticing customers of rival networks to jump ship. T-Mobile’s latest offer, dubbed Un-Carrier 4.0, includes its willingness to offer customers up to $350 to cover early termination fees and up to $300 for trading in their phones.
T-Mobile CFO Braxton Carter justifies the offers in a recent interview with CNET where he explains that the wireless carrier calculated the real estimated costs it would need to shell out to acquire rival customers.
Carter says that in most cases the early termination fees (ETFs) it would have to pay to entice customers to join T-Mobile would average about $150 per subscriber.
This is partly because T-Mobile estimates that most of the customers it would be courting would be deep into the lives of their respective contracts, resulting in somewhat lower ETFs.
As wireless carriers continue to be aggressive with ETF offers, big data analytics can help them determine the anticipated costs of such programs, the level of profitability they can expect to attain from different customer segments, along with the types of customers they are most likely to attract with these programs.
For example, getting family plan subscribers to switch can be an uphill battle, according to a recent study of mobile consumers conducted by research firm Strategy Analytics. In fact, just 11% of family plan subscribers are likely to churn, compared to 28% of individual subscribers, the firm notes.
For its part, T-Mobile is willing to pay “every cent of a family’s ETF,” according to T-Mobile CMO Mike Sievert. A family of four that switches from AT&T to T-Mobile could save $1,880 over two years, he says.
T-Mobile claims the strategy is working well. The company added 1.645 million customers in the fourth quarter of 2013 compared to 1.023 million customers in the third quarter and a loss of 32,000 customers in the fourth quarter of 2012, according to T-Mobile president and CEO John Legere.
Although pricing is driving many customers to switch carriers, it’s not the only factor that influences customer churn.
Many wireless customers don’t like being bound to contracts, which is something that T-Mobile and other players have eliminated. Meanwhile, service quality may be a guiding factor for other customers who are either satisfied or dissatisfied with their current carriers.
Predictive analytics can also be used to help leaders of a wireless carrier to identify customers that may be at risk of defecting to a competitor and determine the type of proactive actions that are most likely to prevent them from leaving.
For instance, a high-value wireless customer who expresses dissatisfaction with the carrier’s pricing during a customer service interaction could be presented with an offer based on an analysis of his usage as well as comparable offers that have been made to similar customers that have resulted in high levels of retention.
The analysis could include the anticipated level of profitability an accepted offer would generate for the carrier versus the cost of losing the customer outright.