Is It Loyalty Or Lock-In?
By Mike Masnick, Fri May 27 22:00:00 GMT 2005

A new study shows that businesses are loyal to their mobile service provider. However, is it really loyalty, or are they simply locked in?


A few weeks ago, The American Customer Satisfaction Index showed that people were increasingly dissatisfied with their mobile phone service. Combined with the availability of wireless local number portability, and you might think that loyalty to mobile operators would be on the decline. However, a new study is trumpeting just how loyal mobile phone business customers are. When you look at the details, the discrepancies aren't that hard to explain. First off, only 46% of customers were deemed as "truly" loyal. That's less than half -- so it seems as though there still are plenty of questions about loyalty.

The analysis from the company running the study seems to focus on the fact that wireless services are "new" -- and because they seem futuristic, customers give them a free pass on bad service. At this point, though, that seems unlikely. Mobile phone service has been around long enough, and as that other study shows, people don't seem to have a problem expressing their dissatisfaction with mobile service providers. A much more likely explanation is that these are business customers being studied, not individual consumers. As a business, the switching costs are much higher. A new provider would mean replacing all of the existing handsets with new handsets and training employees on the new system -- all of which might scare off some companies. On top of that, pile on the programs operators are putting in place to lock in customers to long term contracts, and it seems that customer lock-in may explain the data much more than any real "loyalty."

While the study compares the loyalty rates of business mobile subscribers to telephone and broadband subscribers, that's quite different. In most cases, switching out those providers and substituting another one has much lower switching costs -- and in almost every case, it never touches anything the employees do directly. There may be some disruption of service, but employees don't have to get a new computer if the company's broadband provider is changed. That alone, could account for the higher "loyalty" within business customers. Of course, this doesn't mean that operators should be happy to sit still. Things do change over time, and the fact that plenty of business customers really do appear to want to switch means that there's plenty of work mobile operators need to do. Cheering that they're better than broadband or landline phone service providers is a small victory in the grand scheme of things if their customers are just going to keep churning in the long run.