Are Cell Phone Companies Finally Getting Customer Loyalty Right?
Business Solutions Loyalty and rewards programs can improve customer loyalty and increase profits.
Quick—what was the last thing you said about your cell phone company? Most likely you were complaining about a dropped call or a surprise $350 bill full of roaming charges. We don’t love our mobile providers, but we jump back and forth faster than you can download a new ringtone. Not exactly a promising landscape for rolling out loyalty programs.
And yet, that’s exactly what North American cell phone companies are trying. But can consumers grow to truly love a cell phone provider, and then convert their friends?
European and Asian cell phone use has always been ahead of North America, so it’s not surprising that telcos in those areas tend to get loyalty right. Saturation rates overseas are high, and carriers operate primarily on pre-paid noncontractual service (with correspondingly higher churn rates) and some companies have come up with programs to combat those challenges.
For example, Turkey’s Turkcell offers benefits particularly geared toward surprise-and-delight rewards, like free theater tickets for traveling customers. Turkcell has been able to use the program data in ways that have paid off — for example, pinpointing a segment of customers who previously didn’t appear to be very valuable, but who were actually driving business by having others frequently call or text them.
North America’s telco loyalty history is a bit sketchier, starting with the successful MCI Friends and Family program in the early 1990s. After the Telecommunications Act of 1996 opened up competition in the U.S., the industry spawned several copycat referral programs, airline partnerships and “loyalty” packages that often weren’t much more than bundled benefits that the telcos were already offering customers. Most of those legacy programs died out by the early 2000s.
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To win over a diverse customer base not used to props from their phone company, program directors are experimenting with both segmentation and benefits to hit the right tone. Today’s benefits packages universally include a mix of hard and soft rewards. The telcos are smart to do this. When COLLOQUY has analyzed industry benefit redemption— including discounts, products, accessories and experiences—we find that experiential rewards affect retention rates the most. Customers who redeemed for such rewards showed up to a 10 percent point improvement in customer retention.
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We customers might stay on the line if phone companies can connect to the right segment with a relevant benefit mix. Now that customer retention via loyalty is a key business strategy that Wall Street is tuning in to, it appears that telcos are finally taking loyalty seriously enough to build the type of programs that can keep customers dialing in for more.