Sunday, February 3, 2013

Substantive Switching Credit

I just caught this switching ad from Sprint. I found it through a Facebook ad.  The promise is to receive $400 credit for switching a family plan with 3-5 lines. It reprises a similar $400 effort reported in August 2012. While switching credits are nothing new, the $400 figure is notably high to entice. 

Sprint Switching Ad 

Sprint isn't the only carrier in the switching game for Q1 2013. US Cellular at the end of January launched a $300 switching promotion.   

What is the motivation?

  • Postpaid Penetration - Carriers have long talked about the near saturation of the postpaid marketplace. In this world, organic growth has slowed and the only way to get net additions will be to steal it away from other carriers. 
  • Quarterly (Q1) Performance - Both Sprint and US Cellular have been losing customers at a rapid rate.  Sprint's iDEN customer defections have been a thorn in its side for 3+ years.  US Cellular as a regional carrier has not been effectively competing against Tier 1 competitors despite upgrading to LTE and upgrading its device portfolio.
  • Families are Low-churn & High ARPU-bearing - The promotion grabs 3-5 subscribers and the carrier locks them in for two years. The promotions specifically push customers into smartphones and data plans. Data is the monetary upsell and the sticky value-prop. 
  • Promotion Credit Sunk Marketing Cost - In business, there needs to be promotion to draw interest to your product. Some companies have different tolerances for the cost to acquire a customer.  At the end of the day for Q1, Sprint and US Cellular need to beef up their gross adds.