Handset upgrades one path to cutting churn

Mike Jude/Frost & Sullivan
03 Nov 2010

One common characteristic of the wireless market has been a high degree of customer churn. Frost & Sullivan/Stratecast market data suggests that for some carriers, customer churn rates can be as high as 3% annually.

High churn rates can drive up carrier costs while depressing upsell opportunities and service revenue.

This isn't news to wireless operators, and as a result, a fierce competitive dynamic has been driven by the ability to deliver the latest devices for mobile phone upgrades.

Carriers understand that a big attraction for wireless consumers is having access to the latest mobile devices – and subscribers are willing to sign extended service contracts to get them. The cost of subsidizing the mobile device is far less than the cost of churn, it turns out.

Simply providing the consumer with a new phone every other year is no longer enough, however. Most consumers practically live on their mobile phones; using them for far more than two-way voice communications.

It is not unusual for subscribers to use their cell phones as cameras, day-timers, address and contact lists, and in the case of smart phones, as web browsers, navigation devices and many other functions. My favorite is a free application that turns an Android operating system (OS) phone into a multifunction Star Trek Tricorder.

But mobile phone upgrades every two years can create problems for carriers.

If consumers want to upgrade their phones, either to the latest device made by the same manufacturer, or to one by a different manufacturer, they are unlikely to do so if they know that all of their contact information, pictures, etc. will be lost when they transfer to the new phone.

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